Louisiana Treasurer John M. Schroder Sr. said Friday that the state will see at least a $300 million surplus from its 2018 fiscal year budget but won’t know until “early next week” where the “extra” money comes from.
“We don’t really have a whole lot of details on that,” Schroder told Watchdog.org. “What we do know is we have extra money in our account.”
Schroder said the state ended the fiscal year on June 30 with a cash balance of about $400 million, but that includes unpaid obligations and “carry-forwards” that can extend for months into the new fiscal year.
However, he said, when all is accounted for, the state should close the books on fiscal 2018 with a surplus that exceeds $300 million.
Gov. John Bel Edwards' office confirmed Friday that Louisiana has a surplus, but cautioned how much it will be won’t be certain until mid-October.
Schroder’s announcement prompted a “wait-and-see” response from House Appropriations Committee Chairman Cameron Henry, R-Metairie, who said he needed more information on where, exactly, the surplus comes from.
Henry told Watchdog.org that if it the surplus “is sales tax-driven,” then Democratic Gov. Edwards’ administration most likely “had a pretty good idea” about it and withheld those projections while lobbying for a half-cent extension of an expiring 1 cent sales tax to bridge what was billed as a $648 million fiscal 2019 revenue shortfall.
Ultimately, after three special sessions, lawmakers agreed to a .45 extension of the 1 cent retiring sales tax for seven years to generate a projected $463 million in annual supplemental revenues.
The late-June compromise was less than the $648 million Edwards wanted to raise with a half-cent extension and about $100 million more than House Republicans thought was necessary to fund basic government obligations.
Henry said if the surplus was generated by unanticipated increases in corporate and income taxes, “we have to take a different tone” because that would be good news for the state’s economic outlook.
House Republican Caucus Chairman Rep. Lance Harris, R-Alexandria, told Watchdog.org he is also awaiting details on what, exactly, the surplus entails, noting, “it’s all just speculation until we get the final numbers.”
Nevertheless, he said, Schroder’s announcement justifies why many Republicans in the House were dubious of Edwards’ dire projections of a “fiscal cliff” revenue shortfall that the governor initially claimed to be as steep as $1.5 billion.
Edwards' administration threatened to close nursing homes and displace thousands of senior citizens, among other draconian cuts, if a tax increase wasn't approved by lawmakers.
“What this tells me is the conservative House Republicans were very much right to question the governor’s need for more taxes,” he said. “This bears out what we were saying, that there wasn’t a $1.5 billion deficit.”
Daniel Erspamer, CEO of the free market Pelican Institute, said it's clear that the threats were exaggerated.
"Through three special legislative sessions in this year alone, we were told Louisiana is in dire financial straits and that tax increases were the only answer to solving our budget woes," Erspamer told Watchdog.org. "The tax hikes passed, and we now know that the situation wasn't so dire after all."
Erspamer said Louisiana's elected officials must now make the tough decisions to improve the state's economic future.
"It is decision time in Louisiana: do we want a larger government or a stronger economy? As the size of our government further expands, jobs and residents flee to the flourishing economies of our neighboring states," he said. "We must now turn our focus to prioritizing spending and making fundamental changes to our state. The status quo of government growth is simply unsustainable and only hurts our state's working families, job seekers, and taxpayers."
Henry said lawmakers are at a disadvantage because they must adopt a new fiscal year budget effective July 1 each year before the current one expires on June 30, often working with projections provided by state officials directed by the governor’s office.
“It becomes frustrating for (legislative) members to have to wait and see” what that surplus will be and where it will come from, Henry said, especially since they don’t have access to all the information they need during the budget process.
“I have always said that the biggest debate is not Republicans versus Democrats, it is about the information and about who controls the information,” he said.
The executive branch has information legislators don’t have access to, Henry added, and it is a source of enduring frustration – and friction – between the executive and legislative branches.
“We are at the mercy of the administration,” Henry said. “I would be disappointed to learn the administration withheld this information. [If so,] that frustration level will go up.”
Schroder, a Republican who served as a state representative from Covington for a decade before defeating Democratic New Orleans lawyer Derrick Edwards in a 2017 election to fill the remaining two years of now-U.S. Sen. John Kennedy’s term as state treasurer, said he opposed extending the sales tax.
“Having a surplus is a good thing, but not if it comes on the backs of taxpayers,” he said. “This is another reason why we should have never raised taxes.”
Louisiana's Constitution stipulates that surplus dollars from previous budgets can only be spent on one-time expenses, like debt payments, construction work and "rainy day" fund deposits.
Schroder said a significant percentage of the surplus should be used to replenish the state’s "rainy day" fund, which is money set aside to be used when additional revenues are needed to fund state operations.
In 2017, lawmakers extracted $99 million for the fund to help plug a $300 million mid-year revenue shortfall. Most of that money has not been returned, Schroder said.
“It is like making your house payment with a credit card,” he said. “If you take $99 million out, you need to put $99 million back in.”
What Schroder fears, however, is that much of the surplus will be absorbed with little oversight into construction projects as part of the “capital overlay process.”
The projects are already essentially approved each year with the adoption of House Bill 2 but not all are funded or fully funded. If money comes available, it is then up to the Division of Administration, whose leader is chosen by the governor, to allocate monies to whatever proposals are ranked the highest, without input from lawmakers.
“I don’t trust the capital outlay process,” Schroder said. “What we really, really need is to build our rainy day account.”
Edwards was criticized in June for line-item vetoing a number of construction projects in Republican districts.