How big is Louisiana’s budget deficit next year? It depends on teacher pay. • Louisiana Illuminator

Louisiana’s official state budget deficit estimate for the next fiscal year has shrunk from $558.8 million to $338.9 million, but mostly because stipends for school teachers and support staff have been left out of the more recent calculation. 

The $338.9 million projection assumes Gov. Jeff Landry and state lawmakers will not renew a $2,000 stipend for public school teachers and $1,000 for school support staff that they have received for the past two years. In the current budget cycle, the stipends cost a total of $199 million.

It also doesn’t factor in money for differential pay bumps for teachers with hard-to-fill jobs in math, science and at schools serving predominantly low-income families. Funding for tutoring programs state Education Superintendent Cade Brumley supports has also been excluded.

If those extra schools expenses are added back, the budget deficit for the fiscal year that starts July 1, 2025, is much higher — $587 million — state budget director Ternisa Hutchinson said at a legislative budget hearing Friday.

Legislative leaders indicated they will still look at renewing the teachers pay stipend, even if it isn’t part of the official budget estimate.

“Those items will factor into budget discussions moving forward,” according to a press release sent out from House Speaker Phillip DeVillier, R-Eunice, and Senate President Cameron Henry, R-Metairie, after Friday’s budget meeting.

State budget officials had to leave the education programs out of their projection by law because legislators chose to fund them on a temporary basis this year, Hutchinson said. Anticipating a budget shortfall, lawmakers have been reluctant to turn the stipends into permanent raises, which would make them harder to cut if needed. 

But the omission also affects estimates for state budget deficits in future years, Hutchinson said.

Without the teacher stipend and other education programs, deficits for budget cycles 2026-27 and 2027-28 are expected to be $370 million and $508.3 million, respectively. If that spending is included, however, the estimates jump to $617 million and $755 million.

Next year’s financial shortfall is largely attributed to Louisiana lawmakers voting in 2018 to automatically cut the state sales tax 0.45% on July 1, 2025. The reduction, which will leave the state sales tax rate at 4%, will cost the state $445 million in the next budget cycle. 

DeVillier doesn’t believe there’s enough support from lawmakers to keep the sales tax rate at 4.45%. Two-thirds of legislators in both chambers would have to approve doing so. The conservative House of Representatives is unlikely to vote that way, he has said in recent interviews. 

There are other actions lawmakers could take besides budget cuts to significantly shrink the shortfall however.

The legislators could divert $340 million in vehicle sales tax revenue currently dedicated to transportation projects back into the state general fund, which mostly pays for public higher education, health care and prisons. This would give lawmakers more flexibility to handle the shortfall. 

Until a few years ago, vehicle sales tax receipts went into the general fund anyway. Legislators passed a law to siphon it off for transportation projects in 2021.

Lawmakers could also continue a 2% tax on business utilities that is supposed to be eliminated in July 2025. If they kept the tax, it would generate $220 million that could be counted against the deficit, according to estimates provided by Louisiana Department of Revenue Secretary Richard Nelson.

Legislators could also remove state spending increases factored into the budget for inflation, which total $34 million.

DeVillier said next year’s budget gap projection takes all of three of the aforementioned tax and spending measures into account.

“But we have options that can be considered that will balance the budget, including finding efficiencies in government and creating a more predictable tax structure for the state,” he said.