Analysis: Louisiana government spending ranks close to the middle among states

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When it comes to government spending, Louisiana generally ranks pretty close to the middle of the pack among states, according to a new Legislative Fiscal Office analysis.

To get a sense of the “size” of Louisiana’s state government compared to others across the country, Greg Albrecht, the fiscal office’s chief economist, didn’t just look at total dollars spent. States with larger economies and populations tend to spend more than smaller states, of course.

“Since state effort expenditures are financed by extracting revenue from the state economy, the more interesting metric is the ratio of state effort expenditures to the size of the economy,” he writes.

In 2018, the most recent year examined, Louisiana’s spending of state dollars was the equivalent of 6.6 percent of its gross domestic product, which measures the total value of goods produced and services provided. That’s below the national average and 16th-lowest in the country. But when both state and federal dollars are included, the ratio rises to 11.9 percent, which was the 19th-highest. The ranking change reflects the state’s disproportionate share of federal dollars, especially for the years after hurricanes Katrina and Rita in 2005, Albrecht says.

As a whole, states spend about 7 percent of their economies’ size when only counting state effort, and about 10 percent when federal dollars are included. Louisiana’s state effort over the past several years likewise amounts to about 7 percent on average but around 11 to 12 percent overall, Albrecht says.

So while there are variations as conditions change in Louisiana and other states, Albrecht says Louisiana tends to rank in the bottom third to middle third of states on a state-funded basis, and in the middle third of states on a state-plus-federally-funded basis.

“None of the discussion above suggests what the correct or optimum size of government should be,” he says.

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