BATON ROUGE, La. (BRPROUD) – Heading into an election year there is one topic that could sway everything but isn’t always at the top of mind — the state budget. Lawmakers will have to weigh how to balance the budget as a potential fiscal cliff is looming.

This next legislative session is in a fiscal year. There will be a number of bills looking to reform the state’s tax code. But some are pushing legislators to look ahead to help avoid a fiscal cliff that could potentially be here in just a couple of years.

In 2016 a one-cent sales tax was implemented to help fund the $2 billion deficit the state was facing as Governor John Bel Edwards took office. It was later reduced in 2018 to a half-cent and given a sunset date of 2025. As the half-cent sales tax nears its end some of the vehicle tax revenue will be diverted from the general fund and put into an infrastructure construction account. There is expected to be a gap in the budget projected to be around $800 million, according to the LA Budget Project, that will need to be filled or lawmakers face a risk of cuts.

“We have huge gaps right now in our state budget in a good budget year. So just imagine the trouble we’re going to be in if we go and do the same old, same old and start cutting revenue and hope and try to balance the budget on a wing and a prayer,” said Jan Moller, executive director of the LA Budget Project.

Some groups and politicians believe the legislature needs to act in this next session to set up laws to avoid a fiscal cliff like what the state saw eight years ago.

“Really what the focus should be is on replacing this revenue that’s being lost through the fiscal cliff and they need to replace it in a way that doesn’t increase the tax burden on low and moderate-income families,” Moller said.

The state has had hundreds of millions of dollars in surplus and excess money. This is in part to the major influx of federal dollars being flushed through the state in response to the COVID-19 pandemic and the multiple hurricanes that have rocked the coast. Economists have projected a major slowdown of the boom economy around the 2025 benchmark. Without the surpluses, the state has enjoyed in recent years and the tax shift, some are growing nervous.

“Sometimes this cliff talk can be exaggerated to a certain extent… the last couple of years with COVID the economy has been really tough for small business, really tough for big business, and really tough for families in Louisiana. All three of those different entities have had to make tough cuts, tough decisions the last couple of years. Governments have got to do their fair share,” said Stephen Waguespack, president & CEO of the Louisiana Association of Business and Industry.

Without renewing the half-cent sales tax, LA Budget Project suggests cutting back on tax credits and exemptions. LABI agrees they should be looked at for potential changes. He also emphasized that those kinds of changes are not simple tasks, but they are worth a conversation. 

Waguespack believes the focus should be on how to grow the economy to bring more jobs to the state and find safe ways to alter the tax code to reduce some of the burdens. He also said the budget is in a good place now to wait and evaluate how the economy looks in 2025 to address where the holes could potentially be.

“The budget’s fine. Quite frankly, there isn’t really a challenge with the budget right now. And in 2025, well, some taxes have a sunset on them. They can make that decision at that point in time, whether the economy has grown to allow those to roll off or where they need to continue those taxes,” Waguespack said.

Many also agree education has to be addressed to help with a wide variety of issues across the state. Waguespack said more people need to get a quality education in order to attract business and industry here as well as retain workers in the state.

Moller said the budget will play a major role in the next election because whatever is done, or not done, in this next legislative session will have major impacts on the next administration and legislature.