Louisiana Budget: Spending, Tax Overhaul, and Federal Risks

Louisiana’s state budget for fiscal year 2027 totals roughly $47 billion in operating funds and took effect July 1, 2026, after the legislature passed a largely flat spending plan in June.¹ It is the second full budget under Governor Jeff Landry, who took office in January 2024, and it was shaped by a sweeping 2024 tax overhaul, rising prison costs, an unresolved teacher pay fight, and growing uncertainty over federal money.

Where the Money Goes

Healthcare dominates. In the governor’s proposal, health spending reached $23.6 billion, or 45% of all funds. K-12 education accounted for $6.5 billion, higher education for $3.5 billion, and public safety and corrections for $2.1 billion. Debt service and other obligations consumed another $3.5 billion.²

Of the state general fund specifically, which is the $12.6 billion lawmakers have the most control over, education takes 43.8%, human resources 29.8%, public safety 13.7%, general government 9.8%, and business and infrastructure 2%.³

Corrections

The state prison system received roughly $100 million more than the prior year.⁴ That includes $17.5 million to expand the Louisiana State Penitentiary at Angola along with 150 new correctional officer positions, $15.2 million for a new juvenile facility in Vernon Parish, and $18.6 million to raise prison guard pay by $3 an hour.⁵ Another $14.3 million covers rising offender medical costs, and the per diem paid to sheriffs for housing state adult offenders locally rises from $26.39 to $29.39. The budget funds 1,109 State Trooper positions and 215 replacement vehicles.²

Higher Education and Workforce

Higher education funding grew by $150 million in the final budget, including a $56 million formula increase for the Board of Regents.¹ The M.J. Foster Promise Program, which pays for adults to pursue short-term credentials in high-demand fields, received $14.5 million.² Even so, Louisiana’s per-student higher education appropriation sits at $6,771 per full-time equivalent student, about 56% of the national average and down 32.5% since 1980.⁶

The Office of Workforce Development is funded at more than $200 million, with another $31 million going to the Office of Business Workforce Solutions.¹ The High Impact Jobs Program received $75 million to subsidize high-wage job creation.² Early childhood education got $78 million, below the $87 million advocates sought.⁷ Child welfare modernization received $12.1 million, and foster care board rates and adoption subsidies rose by $12.3 million.⁵

Where the Money Comes From

The December 2025 Revenue Estimating Conference projected state general fund revenues of $12.62 billion for FY 2027, up from a revised $12.51 billion in FY 2026.⁸ That projection, driven mostly by higher natural gas severance taxes and gains in personal income tax collections, erased earlier fears of a budget gap and left lawmakers roughly $870 million in combined surplus going in. After constitutional deposits into the rainy day fund and unfunded retirement debt, about $581 million was free for one-time spending.⁵

Then the picture dimmed. In May 2026, the Revenue Estimating Conference lowered its forecast by more than $200 million across two fiscal years: $113 million for the current year and $104 million for FY 2027. Weaker individual and corporate income tax collections following the 2024 rate changes were the main driver, with sales tax receipts running about 2.5% below forecast.⁹ Lawmakers trimmed the final budget to match.

The revenue mix behind those numbers: personal income and sales taxes supply 63% of state collections, corporate taxes 8%, gambling taxes 6%, and oil and gas taxes just 2%.⁸

The 2024 Tax Overhaul

In a November 2024 special session, lawmakers replaced Louisiana’s graduated individual income tax with a flat 3% rate, the second-lowest in the nation, effective January 1, 2025.¹⁰ The standard deduction tripled to $12,500 for single filers and $25,000 for joint filers, and the retirement income exemption for those 65 and older doubled to $12,000.¹¹ On the business side, the franchise tax was repealed effective January 1, 2026, eliminating a line that produced roughly $570 million in its final year.¹² The corporate income tax was flattened to 5.5%.¹³

To offset income tax cuts projected at $1.1 billion in the first budget year and $1.3 billion the following year, lawmakers raised the state sales tax from 4.45% to 5% through 2029, dropping to 4.75% in 2030. They taxed digital goods, including streaming services, apps, and online games. And they diverted $280 million in vehicle sales taxes, previously earmarked for transportation, into the general fund for two years.¹³ Annual film tax credit caps dropped from $180 million to $125 million, and historic rehabilitation and research credits were newly capped. The net effect was a reduction of roughly $49 million in state general fund revenue.¹²

Teacher Pay Is Still Unresolved

Public school teachers received $2,000 stipends and support staff $1,000 stipends for three straight years, funded through one-time money. The FY 2027 budget as passed did not include those stipends, which left educators facing an effective pay cut.⁴

A constitutional amendment that would have made the raises permanent by dissolving education trust funds and directing nearly $2 billion toward retirement debt failed at the polls in May 2026.¹⁴ On June 2, 2026, Governor Landry issued an executive order proposing to redirect $168 million from the Minimum Foundation Program, which funds K-12 public school operations, to pay for another year of stipends.¹⁵ The legislature approved the plan on June 24, 2026, by a 76-vote House majority and a 37-1 Senate vote.

School superintendents opposed the shift, warning of budget hardships and program cuts in their districts. A lawsuit filed in Baton Rouge challenges the governor’s authority to redirect MFP money, and a judge issued a temporary restraining order blocking the plan pending further hearings.¹⁵ A 15-member MFP task force has been created to develop a plan for permanent raises.¹⁴

Who Else Got Raises

Seven of Governor Landry’s 14 cabinet secretaries received salary increases of $22,000 to $25,000 effective July 1, 2026. Since Landry took office, 12 of his 14 cabinet members have received raises, with nine of those at $20,000 or more.¹⁶

District, appellate, and Supreme Court judges received increases of up to $12,000. Forest fire personnel received a $10,000 raise, and election workers and prosecutors also received more money.⁴ Starting in 2028, legislators will be eligible for $1,000 per month in Baton Rouge housing expenses on top of existing daily reimbursements and travel.¹⁶

Federal Money Is the Biggest Variable

Federal dollars make up roughly half of Louisiana’s total state budget. For fiscal year 2022, Louisiana reported the highest percentage of revenue from federal funds in the country, at 50.5%.¹⁷ For FY 2025, federal receipts totaled roughly $24 billion of a $48 billion spending plan, flowing primarily to highways, education, healthcare, social services, and disaster recovery.¹⁸

Medicaid

Medicaid is the single largest piece of the budget. The governor’s proposed healthcare budget for FY 2027 was $21.4 billion, with $19 billion for Medicaid alone, of which $14.2 billion was expected to come from the federal government.¹⁹ Rising prescription drug costs, sicker enrollees, constitutionally required nursing home rate increases totaling $105 million, and $258 million to lift physician reimbursement to 85% of Medicare levels have all driven spending up.

At the federal level, H.R. 1, a budget reconciliation law enacted in 2025, cuts federal Medicaid spending by nearly $1 trillion over ten years. For Louisiana, that means new work reporting requirements for Medicaid expansion enrollees starting December 31, 2026, eligibility renewals every six months instead of annually, and a phase-down of the cap on Medicaid provider taxes from 6% to 3.5% by 2032. Because Louisiana uses provider taxes to draw federal matching funds, the state will lose on both sides. Estimated coverage losses exceed 190,000 people.²⁰

Separately, the federal Department of Government Efficiency listed $55.8 million in cuts to 11 federal grants to the Louisiana Department of Health, targeting mental health and substance use programs. The state has been reviewing whether affected programs can be shifted to other funding.²¹

SNAP

The same federal law shifts significant SNAP costs onto states for the first time. Starting October 2026, the federal share of SNAP administrative costs drops from 50% to 25%, creating an immediate $42.3 million annual obligation for Louisiana. Starting October 2027, states with payment error rates above 6% must cover 5% of all SNAP benefits. Louisiana’s current error rate of 7.61% would trigger an estimated $95 million annual liability, and total annual costs once all provisions take effect are projected at roughly $151 million.²²

Reserves, Debt, and What Comes Next

Louisiana’s Budget Stabilization Fund, the state’s rainy day account, exceeds $1 billion. Combined with the Revenue Stabilization Trust Fund, the state held nearly $3.8 billion in reserves as of late 2025. Earlier in 2026, lawmakers diverted $717 million from the Revenue Stabilization Trust Fund for infrastructure, education, and water and sewer improvements. Tapping the rainy day fund requires a two-thirds legislative vote and is capped at one-third of the balance per two-year period. Governor Landry has proposed merging the two funds and raising the cap to 7.5% of total state revenue, roughly $3 billion, through a constitutional amendment.²³

The near-term position is stable. The longer view is not. A five-year baseline presented in January 2026 projects shortfalls in fiscal years 2028, 2029, and 2030.² The full revenue impact of the 2024 tax overhaul is still coming into focus, as the May 2026 downgrade showed, and federal Medicaid and SNAP changes land in waves starting in late 2026. The Public Affairs Research Council of Louisiana has recommended focusing surplus money on debt reduction and one-time infrastructure rather than expanding ongoing programs.⁸

1
New Orleans CityBusiness. Louisiana Construction Budget and Higher Education
2
Louisiana Division of Administration. FY27 Executive Budget Overview
3
NASBO. Louisiana Budget
4
Louisiana Illuminator. 2026 Legislative Session Winners and Losers
5
Louisiana Legislative Fiscal Office. FY 27 Analysis of HB 1 Original
6
SHEEO. Louisiana State Profile
7
WBRZ. Legislative Session Ends as Louisiana’s $47B Budget Passes
8
Public Affairs Research Council of Louisiana. No Budget Grinches This Year
9
New Orleans CityBusiness. Louisiana Revenue Forecast Budget Cuts
10
Louisiana Department of Revenue. Individual Income Tax Rates and Brackets
11
Office of the Governor, State of Louisiana. Governor Announces Historic Tax Relief
12
Louisiana Illuminator. No Chance of Louisiana Nixing Its Income Tax
13
Public Affairs Research Council of Louisiana. Overhauling Louisiana’s Tax Structure
14
Shreveport Times. Legislators Approve Louisiana Teacher Stipends
15
Louisiana Illuminator. Landry Teacher Stipend
16
Louisiana Illuminator. Louisiana Lawmakers Give Raises to Some of Landry’s Cabinet
17
Pew Research. Record Federal Grants to States
18
Louisiana Division of Administration. State Budget FY26
19
Louisiana Illuminator. Louisiana Medicaid Set to Grow Under Landry
20
Invest Louisiana. Federal Megabill Jeopardizes Access to Health Care and Food
21
WWNO. DOGE Website Shows $55M in Cuts to Louisiana Department of Health
22
Invest Louisiana. Louisiana’s SNAP Collision
23
Public Affairs Research Council of Louisiana. Savings Account Shuffle