Gov. Jeff Landry’s top budget and tax officials presented a plan for the coming fiscal year to a joint committee of the Legislature on Thursday, despite growing uncertainty over how potential federal funding cuts could affect the state's finances.
With more than 50% of Louisiana’s budget relying on federal funds, potential cuts by the federal government to higher education, healthcare and infrastructure funding could create significant financial gaps for the state. Lawmakers also remain uncertain about budget items tied to the outcome of a state-wide vote in March over Constitutional Amendment 2, which was approved by the Legislature last November.
If voters pass the amendment on March 29, it would free up additional funding, allowing lawmakers to continue funding the $2,000 teacher stipend, which is currently not accounted for in the 2025-2026 budget.
Rep. Jason Hughes, D-New Orleans, questioned Landry officials about their commitment to securing the teacher pay raise should Amendment 2 fail to pass.
“I think it would be the governor's intent to fully fund those parishes that are coming up short based on that calculation, and certainty work with the parishes to figure that out,” said Taylor Barras, Landry’s commissioner of administration,
“It is hard to go to the public and ask for a teacher pay raise if, indeed, not everyone is getting one,” Barras said.
Alongside the uncertainty of federal funding cuts and Amendment 2, Barras briefly acknowledged a potential $196 million deficit for fiscal year 2028-2029. However, with ongoing fiscal challenges dominating the budget discussion for fiscal 2025-2026, lawmakers showed little concern over the long-term shortfall.
Despite these uncertainties, the budget includes key allocations for Medicaid reimbursement rate increases and education funding. This includes support for the Minimum Foundation Program, which provides block grants to school districts based on need, and the LA Gator Scholarship Program, which funds education accounts for K-12 students to access tutoring, tuition assistance, and online learning.
The budget also allocates funding to the Office of Juvenile Justice to cover costs at the Jetson Center for Youth, located near Baton Rouge, including the addition of 44 beds and associated medical expenses. Additionally, $4.1 million is earmarked to address overtime costs within the office.
Landry’s budget plan sets aside possible excess funding to be allocated to shortfalls in juvenile justice and corrections, continuing the Legislature's commitment to juvenile justice reform.
“I just want to make sure everyone understands what the Jetson facility is and how important it is,” Sen. Heather Cloud (R-Turkey Creek), said. “A key part of the tiered system is an intake facility. Prior to that legislation, we were just taking juveniles in after they were adjudicated from court, and they were just going to wherever and whatever facility had open bed space, Cloud said.
“That meant we had some low-level juveniles that maybe hadn’t committed a series of crimes and maybe had different needs. And so the intake facility is the best part of what we are doing. We’ll take them in, get a good understanding of their situation, and then put them in the proper facility,” Cloud said.
This budget proposal follows a major overhaul of Louisiana’s tax system in 2024, that included significant tax cuts. The changes include a 3% flat personal income tax in 2025, reductions in corporate taxes and a temporary sales tax hike to 5% to offset revenue losses. As a result, Louisiana now has the highest combined state and local sales tax rate in the nation at 10.6%. Additionally, the corporate franchise tax will be fully eliminated by 2026, with some business tax credits set to expire in 2025.
To secure support for these changes, lawmakers combined the income tax rate cut with the sales tax increase to prevent a projected billion-dollar revenue shortfall.
