Watchdog cautions against reliance on federal aid
(Editor’s note This investigative story is part of an occasional series examining increases in state spending over several years and determining what taxpayers’ money is being used for by state elected officials.)
Louisiana’s annual budgets swelled more than 71% over the past decade, ticking up year after year under a Democratic governor who expanded Medicaid and led the state through the COVID crisis.
While the pace of spending slowed under a Republican governor elected two years ago, the bottom line keeps growing, an analysis of state records by The Center Square found.
Louisiana’s funding increased more than 27% during the peak pandemic years from 2019 to 2022. But since 2023, the budgets went up an additional 14% after COVID abated.
Budget watchdogs blame Louisiana’s heavy reliance on federal dollars, calling the trajectory “unsustainable” and warning of a “fiscal cliff” if Washington ever tightens the spigot. At worst, they say, it could lead to a statewide financial crisis similar to the one facing New Orleans – a massive deficit blamed partly on delayed FEMA payments for post-Hurricane Katrina road repairs.
“That growing dependence on federal money can be dangerous,” said Erin Bendily, a former assistant superintendent for the Louisiana Department of Education and now a policy expert at the Pelican Institute for Public Policy. “But when we look at state funds only, we also see increases that we believe are not sustainable for Louisiana taxpayers.”
The Center Square examined Louisiana’s total appropriated spending each year, which includes money for all three branches of government, infrastructure and local project spending, and the gargantuan portion from the federal government made up mostly of Medicaid funds.
The state’s current budget, signed by Gov. Jeff Landry in June, has Louisiana’s total spending at more than $53.5 billion – a nearly 5% increase over the total when his predecessor, Democrat John Bel Edwards, left office in 2024. In the current budget, federal money totals $23.7 billion, or 44.3%.
Across the last 10 budgets – which cover both terms of the Edwards administration and first two years of Landry – the increase in Louisiana’s funding is more than double the rate of inflation.
“That is mostly being driven by federal funds, and that is almost certainly unsustainable,” said Steven Procopio, president of the Public Affairs Research Council of Louisiana.
Louisiana’s federal dependency has long been tied to disaster relief for hurricanes, floods and COVID-19. But the infusion accelerated when Edwards, on his first day in office in 2016, signed an executive order expanding Medicaid. The poorer a state, the higher the federal Medicaid contribution, and Louisiana currently has one of the nation’s highest poverty rates, topped only by Puerto Rico, according to 2023 census data.
Annual budget increases averaged 7.6% during the Edwards years, but the biggest single-year jump came amid the pandemic between fiscal years 2020 and 2021, when total budgeted spending increased almost 15%. That included an 18.9% increase to the Department of Health, which administers Medicaid.
The Health Department makes up 43% of the current state budget. Of the $23 billion appropriated for Health, $16.4 billion comes from the feds.
“The biggest concern I have about the sustainability of our budget is, at some point, the federal government will start making some changes,” Procopio said. “And that’s either going to affect citizens through their services, or it’s going to affect the states, as some of what the federal government’s paying for will be moved over to them.”
Another budget and tax expert pushed back on The Center Square’s use of total budget numbers to gauge fiscal responsibility.
“Most of this growth is in health care,” said Jan Moller, executive director of Invest in Louisiana. “Louisiana bought something very important with that, which is health care coverage for people who didn’t have it before.”
Moller said it’s the annual state general fund that matters most to Louisianans, a figure whose growth has lagged inflation over the past decade – rising 27% from about $9.6 billion in fiscal year 2017 to the current level of $12.2 billion.
“I would argue that Louisiana has been quite conservative in its budgeting in the part of the budget that it controls that is funded by taxes and fees paid by Louisiana citizens,” Moller said. “It has been keeping pace with the economy, more or less.”
In that time period, state general funds to the state Department of Health rose from $2.8 billion in fiscal year 2017 to nearly $3.2 billion in 2026 – a 13% increase.
State general funds to the state Department of Education went from $3.5 billion in 2017 to more than $4.2 billion in 2026 – a 20.6% increase.
Louisiana finished the last fiscal year with a $577 million surplus. It also managed to reduce this year’s general fund by 2.3% compared to last year.
Landry’s first year in office even saw a 2.6% decrease to the total state budget that includes federal funds, though the sum went back up 7.8% for the current year.
Residents expect to see tax relief this year. In late 2024, the governor called a special legislative session to overhaul the tax system, which resulted in flattening personal and corporate income tax rates, repealing the corporate franchise tax and increasing the sales tax rate, among other changes.
In a video address to Louisianans unveiling this year’s budget, the governor pointed to his own DOGE-like efforts to rein in spending – creating a new government efficiency task force and appointing a Fiscal Responsibility czar to review government expenditures.
The governor’s office did not respond to interview requests from The Center Square.
“This budget was built on the goal of flat funding for this fiscal year when compared to last year,” Landry said in the video. “It continues the trend of decreasing the overall amount of money that we spend. This is a tremendous step forward for fiscal responsibility.”
The Pelican Institute, however, alleges that the state budget remains loaded with fat, pointing to nearly $100 million in surplus funds being spent on 612 line items for local projects. Among them: private museums, community centers, neighborhood associations, fraternity and sorority groups, a sports hall of fame foundation, an art gallery, a dance company, and various churches and ministries.
“If you know anything about Louisiana politics and Louisiana history, you know that old habits die hard,” Bendily said. “Local leaders come to Baton Rouge and kiss the ring and get their projects funded.”