Jeremy Alford and David Jacobs: Smaller government footprint likely for La.

As his administration was working on the next big budget proposal last month, Gov. Jeff Landry issued an executive order directing department heads to find savings for the upcoming fiscal year. The directive was one of many early signals that the Landry administration is in a unique position to deliver on the Republican principle of shrinking government.
While decreasing the footprint of government would no doubt play well for Landry on national conservative stages, his administration may have little choice but to implement spending reductions in future years, politically advantageous or not.
According to Landry’s executive order, there’s an anticipated $64 million deficit for the 2024-2025 fiscal year, and another drop off possibly as steep as $558 million for the next. The governor referred to the larger figure as a “fiscal cliff” in his executive order.
That means the real headaches will start to surface next calendar year unless solutions are found now.
Taxes feature prominently in this conversation, starting with the 2025 expiration of a temporary .45 cent state sales tax, which will coincide with the reimplementation of a number of special sales tax breaks. Making the temporary sales tax portion permanent could be interpreted as a tax increase by conservatives, but longtime political observers believe this term may offer an opportunity for the Legislature to act differently on taxes. For example, Landry’s key policy players are already calling for the phase-out of income taxes. 
“If you’re going to repeal the income tax, that’s $4.5 billion (lost),” said Senate President Cameron Henry. “You have to replace that money with something else. You can’t just cut and hope, and the governor understands that.”
A shift like that likely would have to be enacted over multiple sessions, not all at once. There is some bipartisan appetite for renewing the temporary sales tax, particularly if it could be paired with eliminating some of the state’s myriad tax credits and exemptions.
To be sure, past tax votes may not be the best guide for this term. Additional federal money in recent years has freed up the general fund for other purposes, and the loss of those dollars has forced some lawmakers to reassess taxation, according to Appropriations Chair Jack McFarland.
Much of the state’s revenue is effectively spent by statutory or constitutional mandate before lawmakers ever get to the Capitol. Giving the Legislature more spending leeway could be an avenue to address the situation.
And that brings us back to department-level ideas for saving money, which secretaries and agency heads must submit to the Landry Administration by Feb. 9. Landry has asked for general expenditure reviews, contract evaluations, staffing audits and more.
So what should we expect?
Lawmakers have long complained about the revenue-heavy Health Department and the operation of the state’s Medicaid program. New Health Secretary Ralph Abraham shares similar opinions, and recently told lawmakers to expect a “somewhat of a seismic change in the way we operate.”
Chatter also persists about structural changes at Louisiana Economic Development, and Landry supporters are looking to Transportation Secretary Joe Donahue to make the tough decisions at his department, which is quite large.
In what would be another aggressive step to shrink the footprint of government, Landry signed an executive order recently calling for recommendations for consolidating and reorganizing four major Louisiana departments and agencies including the Department of Natural Resources, the Coastal Protection and Restoration Authority, the Oil-Spill Coordinator’s Office and the Office of State Lands.
Taking all of this a step further, Chairman McFarland argued some current government functions could be ripe for privatization — and that conversation, in particular, could be part of the usually routine process of reauthorizing state agencies.
“I do think there are opportunities — not just with privatization — to structurally change how an agency is made up, rather than just rubber-stamping another authorization for an agency,” said McFarland.
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