Louisiana’s public university systems and officials have been told to brace for a possible $250 million budget deficit ahead of next year’s fiscal forecast, largely because of the expiration of a state sales tax.
The news came last week in the annual Board of Regents budget hearing where board members and higher education officials stressed that such a budgetary shortfall could lead to layoffs, a decline in enrollment, the shuttering of some campuses and a significant loss of funds toward student financial aid.
“It’s not just an exercise, this could be a reality. We asked every system to be in store for $250 million cuts,” said Regent and Finance Committee Chair Blake David at the hearing on Sept. 24.
The projected quarter-billion deficit in higher education would only be one slice to a larger $700 million statewide deficit which Gov. Jeff Landry said at a Tuesday news conference could balloon up to $1.5 billion.
The sales tax, which was passed as a temporary solution to a budget crisis years ago, is set to expire in July 2025. It ticks up the state sales tax by an across-the-board 0.45% and brings in hundreds of millions annually. Louisiana has the highest sales tax in the country.
Landry said at the Tuesday news conference that he’d call in the legislature for a special session in November with the goal of fixing a “failing tax system.”
“We’ve seen this dance before,” Landry said. “Every time there’s a budget shortfall, because of constitutional obstructions, this legislature’s only two places that they can cut are only higher education and healthcare. And if we do not address this problem now, chances are it will get worse. If we fail to implement tax reform, every step we take forward in progress will end up two steps back.”
Landry’s plan also includes lowering corporate tax rates but makes up for that lost revenue with changes to business exemptions. Landry said the plan is to “lower tax rates and expand the base.”
Landry said that there’s a goal of reducing, if not completely eliminating the state income tax by 2030.
Secretary of Revenue Richard Nelson said the deficit created by reducing the state income tax would be made up by applying a sales tax to items that are currently exempt. He listed examples, which he said were luxuries such as dog grooming and lobbying.
State Commissioner of Education Kim Hunter Reed told the Reveille that higher education lacking these funds poses a significant impact on students but emphasized that higher education funds have yet to be cut – a worst case scenario that’s not yet out of the question.
“This is not how you build an excellent Louisiana,” Reed said. “You’re not going to cut your way to excellence.”
Higher education and health care are unprotected areas of the Louisiana budget, which is why this worry has materialized.
Reed said all four university systems in Louisiana report to the Board of Regents, a state agency that oversees all public higher education systems, an increase in enrollment. Broadly, she said, they feared a significant reduction in funds could hamper the growth and development of these students, who are the future of Louisiana’s workforce.
Reed said at the Regents budget hearing that higher education should not be underrated for the way it positively affects Louisiana’s community; she said it has created better taxpayers.
“We’re not just a financial responsibility of the state to support. We’re a financial contributor to the state,” she said.
State Commissioner of Administration Taylor Barras said he has to present the executive budget, the overall budget that funds the state’s entire operations, to the state legislature one way or another come February.
Barras said this shouldn’t necessarily be coming as a shock. He said the sales tax is “the second largest bucket of revenue we have.”
“There’ll be some tough decisions, no doubt,” Barras said.
He spoke of hopes that discussions were amicable. Perhaps the testimonies of higher education institutions would speak to lawmakers that working through these cuts isn’t easy and there’s a lot at stake.

How LSU is effected

University spokesperson Zach Labbé said in a statement that LSU officials are in talks with the Board of Regents, the state legislature, governor’s office and the Division of Administration regarding the anticipated $250 million budgetary shortfall for next fiscal year.
The bulk of the university’s funding comes from student tuition, around 80%, Labbe said. The remaining 20% is from the state. He said the university is exploring alternative revenue streams, like online programs, to supplement any possible budgetary shortfalls.
“We are identifying areas where we can reduce redundancies and gain efficiencies without impacting faculty and staff positions,” Labbé said.
LSU officials are playing out several scenarios, Labbé said.
“Disinvestment at this time will significantly hurt our research efforts which impacts our ability to attract researchers and students,” LSU President William F. Tate IV told the Regents at the budget hearing. “It would hinder our ability to attract other investments. It would limit our capacity for delivering time and services to students”
He said that LSU currently generates the state a $6.1 billion return on investment and he didn’t like the idea of risking that number decreasing, but that higher education budget cuts would likely tip the scale.
LSU wouldn’t place as high as it currently does on national rankings, Tate said, without the state’s funding.

How LOSFA is effected

The Louisiana Office of Student Financial Aid told the Board of Regents that it could expect to lose lots of its funding, potentially reducing scholarship amounts by around 20%. This amounts to over $50 million in lost scholarship funds, charts at the budget hearing show. LOSFA includes programs like TOPS, Go Grant, Patriot Scholarship, Go Youth Challenge and the Regional Contract.
“Who’s it going to affect?” said Sujuan Boutte, the executive director of LOSFA. “The National Guard is not going to be happy because Patriot [Scholarship] is a big recruiting tool for them. Schools are going to have less financial aid to offer students who are already overburdened and students will have less financial aid available.”
Boutte said LOSFA already operates with minimal administrative oversight, in an effort to maximize funds it can award, meaning that cuts would have wide-reaching effects to the office’s staff and its ability to outreach.

What the other university systems said

Across the board, higher education officials urged that higher education was an investment to the state. Money input to those systems output a greater return on investment to the state, both in terms of productivity and tax dollars.
“There’s no place to cut that won’t hurt,” said Southern University President Dennis Shields at the Regents budget hearing. “It seems to me, it’s a manufactured crisis. It’s simply the state making choices to spend its money somewhere else.”
For Southern, faculty and staff would no doubt have to be laid off, Shields said. Around 60% of Southern’s budget goes toward its people, he added. There’s no place to eliminate excess spending toward travel or supply.
In some projects, like Southern’s infrastructure, state funds have been pivotal in building the momentum for the university to qualify for federal grants, Shields said. That’s going to be a lot harder without the state funds, he said.
He said that without the backing of programs like TOPS, Southern – a Historically Black University – will presumably have difficulty recruiting prospective Black students. They’ll probably turn somewhere else without the backing of those funds, Shields said.
“It’s not if, but when they happen,” said Louisiana Community and Technical College System President Monty Sullivan of the possible cuts. “Because I believe they will.”
Sullivan spoke of having to navigate similar higher education budget cuts from 2008 through 2014. He said tuitions had to double and he had to lay off roughly 1,500 employees because of the cuts.
He called it a “curse.” He said such a process changes people.
During those years, he said, the LCTCS bore more weight than other state systems in terms of having to make sacrifices. He said 700 programs were cut and 16 colleges were merged into 12.
Sullivan said he trusts the legislature and the governor’s office to solve this problem and provide solutions, but is wary that cuts will still need to be made. He said it’s going to be an uphill battle if the system is to support its growing numbers of enrolled students all the way to graduation
“What I ask of this body is to put your dollars where your priorities are,” he said.
CEO of the University of Louisiana System Rick Galloit told the board the possible $250 million cuts hover over institutions that are already financially fragile.
He expects those colleges will have to dip into their monetary reserves.
“The cuts would be devastating to all nine of our institutions,” Gallot said. “Dare I say the state.”

Other key takeaways

On Wednesday, Sept. 25, the Board of Regents has also given its blessing for management boards to act on a new law that enables public higher education institutions to set the cost of specific majors, especially those that are of higher cost to the institution.
Misti Cordell became the chair of the Board of Regents about two weeks ago. She was appointed by Landry, and about a week later, Vice Chair T. Jay Seale III resigned, calling the appointment “illegal.”