Louisiana Gov. Jeff Landry (John Ballance/The Advocate, Pool)
Gov. Jeff Landry’s recent tax overhaul will erase Louisiana’s budget deficit that was expected to be just shy of $600 million and threatened funding for health care services and higher education.
Louisiana’s Revenue Estimating Conference panel adopted new projections Thursday morning that show the state’s funding for most government services in the next fiscal year won’t experience a dramatic drop off as initially expected.
The rosier financial estimates can be attributed to a higher state sales tax rate that will offset individual income and corporate tax cuts taking effect Jan. 1.
The state’s current budget was built on a $12.1 billion general fund, which is the main source of state dollars for K-12 schools, public higher education, prisons and health care. The new forecast has the same fund balance for next fiscal year, starting July 1, sitting at $12.1 billion.
Landry’s tax plan, passed by the Louisiana Legislature in November, cuts individual income and corporate taxes by $1.2 billion in the next fiscal year, according to the latest revenue projections. But that reduction is offset by a boost of $1.3 billion in sales tax collections, largely thanks to an increase in the general sales tax rate from 4.45% to 5%.
The projected deficit that was previously expected next year was largely driven by the state’s plan to reduce the sales tax rate permanently to 4%. Landry decided to raise the rate and cut individual and corporate income taxes instead.
The increase in revenue means that health care services as well as public colleges and universities should no longer be on the chopping block for drastic reductions.
This is a developing story. Please check back with us for more details later.