Revenue forecast signals flat growth; state officials urge "stand‑still" budgets and project prioritization

Listen to the most recent Revenue Estimating Conference (REC) and state budget officials: revenue growth has steadied after the pandemic surge, and Louisiana is likely to "coast" rather than produce large new surpluses. Greg Albrecht, the REC economist with the Legislative Fiscal Office, told the Board of Regents finance committee on Sept. 24 that state payroll employment has largely returned to its pre‑COVID level and that, absent a large influx of population or labor‑force participation gains, "we're not gonna burst through 2,000,000 and just keep climbing." He said private sector and government employment dynamics and long‑run declines in extraction revenues change how the state must plan its budgets.

Barra: prepare for "stand‑still" budgets

Commissioner Tamara Barra (Commissioner of Administration) framed the practical implication for agencies and higher education: the REC snapshot shows modest growth ahead and less recurring federal support. Barra said agencies should prepare a baseline "stand‑still" budget and identify one to three highest‑priority additions they would seek if revenues improve. "Stand still with the opportunity to talk about what you think your top 3 priorities are," she told regents, adding that capital priorities tied to clear economic development or student outcomes are likeliest to gain support.

Why it matters

The REC numbers matter because Louisiana's state general fund is sensitive to payroll, wages and corporate activity (sales and income account for the largest shares). Federal pandemic aid and excess savings inflated collections in recent years; Albrecht and Barra warned that those forces largely have passed and that long‑run tax composition changes (more reliance on sales taxes, less on mineral revenue and franchise/corporate taxes) reduce revenue responsiveness. Barra highlighted the state's budget stabilization and a revenue stabilization fund but noted deposits and withdrawals from those reserves have been unusual in recent years and are not a guaranteed source for recurring needs.

Key points from the hearing

- REC baseline and labor: Greg Albrecht said Louisiana has regained most jobs lost to COVID but is near a structural employment ceiling and will likely see modest sub‑1% growth. He emphasized declines in mining and lagging recovery across several higher‑paying sectors.

- Federal pullback: Albrecht and Barra both noted the large role pandemic federal transfers played in past collections; those inflows are gone and cannot be relied on for recurring spending.

- Tax structure risk: The REC view is that Louisiana now depends more on sales tax share and less on corporate and mineral revenue, reducing elasticity. "We'll be left with more sales tax, which is typically not as responsive," Albrecht said.

- Reserve tools and timing: Barra explained the timing and uses for the executive budget: November 1 agency submissions, a December REC update, and an April REC that typically matters more to the final appropriations cycle. She noted the revenue stabilization fund has been used for large one‑time withdrawals and that its refill prospects are smaller than recent years.

- Implementation guidance for higher education: Barra urged college and university leaders to: (1) prepare stand‑still budgets, (2) submit a ranked short list (three highest priorities) for capital and programmatic asks, and (3) work with Office of Facility Planning on deferred maintenance and demolition/replace tradeoffs where new construction creates duplicative operating costs.

What officials recommended regents and institutions do now

- Treat the FY26 budget as likely constrained; submit a baseline stand‑still request and a short set of prioritized asks.

- Prepare contingency scenarios for modest revenue dips (3'5 year horizon) and for upside if REC collections surprise to the positive.

- Expect the REC meeting cadence (Dec/Apr) to be the key decision points and plan submissions accordingly.

Ending

REC economists and the administration framed the near‑term outlook as steady but vulnerable: modest growth is possible, but structural limits on employment, changing tax shares and diminishing federal pandemic supports mean higher education should favor conservatism plus a short list of priorities tied to workforce or deferred maintenance. "If you have 3 pertinent projects that need to happen on your campus, we're asking that we do a standstill review of the budget, certainly include those 3 projects that are most important to you," Barra told regents. The Board of Regents and system leaders left the hearing with clear instruction to focus planning on priorities and efficiency.