The good news is Louisiana appears to have enough revenues to cover continuation costs in state government for the next fiscal year, 2025-26. The bad news is the costs remain too high and a net tax increase had to cover these.

That was the unstated conclusion accepted by the state's Revenue Estimating Conference at its typically-held December meeting. Its last May meeting had the body adopt a general fund revenue estimate of $11.7 billion, a drop from the predicted just under $12.1 billion for this fiscal year attributed to the expiration of a 2016/18 added 0.45 percent sales tax.

As it turned out, the FY 2025 figure ended up just a bit higher. Yet the FY 2026 forecast came in nearly $450 million higher, thanks to the special session of the Legislature last month where both tax law changes that cut income taxes and eliminated the franchise tax while retaining the 0.45 percent extra sales tax and adding 0.55 percent more (dropping 0.25 percent in a few years) as well as redirecting vehicle taxes, estimated at $280 million annually, that year and the year after away from capital outlay and into the general fund.

While this means no headaches for policy-makers next spring in deciding where to cut in balancing a budget, it also means no deciding where to cut. In essence, an overall tax increase occurred. Granted, it occurred in a way that promises greater economic growth in a tide that lifts all boats to prod higher revenue growth, but it still removes more money than it should - indeed, the equivalent of the entire 1 percent spread from the sales tax level at the start of 2016 - from the state's economy, rather than cutting out low priority, if not needless, spending.

The worst thing this declaration could do would be to make policy-makers forget that Louisiana state government needs downsizing and to stop that progress. Even as overall taxes grew, at the margins some right-sizing progress at this session did occur on the revenue side. For example, the wasteful earned income tax credit's total payout will fall since rates went down, and the even more wasteful Motion Picture Investors tax credit was shaved slightly in potential payout.

Fiscal system efficiency also took a small step forward by bringing some digitized products under state sales tax jurisdiction. As the sales tax net broadens, systems tend to generate more revenues than even somewhat higher rates but with a narrower set of taxable activities. As well, the inventory tax kickback scheme could lose its depressive impact: a session product entices parishes to eliminate that tax that the law allows payors to pass that levy on to the state, creating the incentive for some parishes that do so to gain a competitive advantage over others that don't, which then those may find themselves less competitive unless they also ditch the tax, which the state encourages by promising a one-time payoff (funded from a reduced state savings account).

The key here is within the grace period to FY 2028 with the vehicle taxes flowing in and to FY 2030 until the sales tax loses 0.25 percent to hope revenues disproportionately increase and efficiency changes together make unneeded this $600 million. However, the real goal must be to drop off the other 0.75 percent of sales tax and to wipe out all income taxes, a stated goal of the Republican Gov. Jeff Landry Administration.

Broadening sales taxes alone seems unlikely to provide enough cover to make these move, so spending cuts must become part of this equation. In that vein, Landry recently announced a cost-cutting task force that could bridge this gap.

That's the whole point, not to have ended the special session with policy-makers congratulating themselves and considering the matter closed with the projected deficit now history, but conceptualizing it as a small first step (with the next being voters approving an omnibus amendment Mar. 29 to make the final mandatory constitutional adjustments for the whole thing to work) towards shrinking state government's fiscal impact. Because without that as a goal even if years away, all that happened at the session and all that the REC confirmed was overall taxes went higher to keep bloated government.