Fiscal cliffs are what happen when a government commits to permanent spending from a non-permanent revenue source. When the source runs out, the spending does not stop by itself — it becomes a problem the next Legislature has to solve. Louisiana has lived through several fiscal cliffs in the past twenty years, the most recent in 2015–2018. Each has produced budget crises that consumed a full legislative session or more, imposed real costs on real programs, and undermined public confidence in the state's fiscal management. Amendment 3 is structured to produce another one. This paper explains why — and what "year ten" looks like if it passes.
A fiscal cliff has three components:
Amendment 3 has all three components. The spending commitment is the $2,250 / $1,125 permanent raise, which becomes part of the salary schedule and continues forever. The revenue source is the actuarial savings from the $2 billion TRSL paydown, which diminishes over time as the UAAL is eventually amortized. The mismatch is the point at which the salary-schedule commitment exceeds the actuarial-gain contribution. The Fiscal Office did not predict exactly when that mismatch begins to bind, but it confirmed that it will.
In 2016, the Louisiana Legislature passed a "clean penny" sales tax — a temporary one-cent increase in the state sales-tax rate, scheduled to expire on June 30, 2018. The revenue from the clean penny was used to close a fiscal-year budget gap and, implicitly, to fund ongoing expenditures that were not reduced. As the 2018 expiration approached, it became clear that allowing the clean penny to expire would produce an approximately $1 billion budget hole.
The 2018 Legislature convened three special sessions to address the cliff. The final resolution was a half-cent "bridge penny" — a reduction from one cent to half a cent, phased down over multiple years — plus a grab-bag of smaller revenue measures. The entire 2018 legislative calendar was dominated by the cliff. Deep cuts were proposed and in some cases implemented across higher education, corrections, and health services. Public confidence in Louisiana's fiscal management was damaged for years afterward.
The lesson of the clean penny cliff is not that temporary taxes are always bad. It is that legislatures that spend temporary revenue as though it were permanent produce fiscal crises. Amendment 3 is structured to repeat that pattern, with the non-permanent revenue source being a one-time asset liquidation rather than a temporary tax.
The federal government's response to the COVID-19 pandemic included a temporary increase in the federal share of Medicaid funding (the "enhanced FMAP"). Louisiana used the enhanced match to fund Medicaid operations at a higher level than it would have been able to sustain on the pre-pandemic federal match. When the enhanced FMAP phased out in 2023, Louisiana faced a structural Medicaid funding gap that required legislative action. The gap has been managed so far, but it is a continuing pressure on the Department of Health and Hospitals' budget. This is a milder cliff than the 2015–2018 version, but it is an ongoing reminder that temporary federal largesse cannot be treated as permanent state revenue.
In late 2025, East Baton Rouge voters rejected all three "Thrive EBR" tax-rededication proposals. The City-Parish entered 2026 with a $21 million deficit and implemented approximately 11% cuts across most departments, plus a 33% reduction in staff in some offices. The Thrive cliff was smaller than the clean penny cliff, but it is a local illustration of the same pattern: a government that had committed to expenditures on the assumption of renewed dedicated revenue, and was forced to retrench when the assumption proved wrong.
Projecting the exact shape of a fiscal cliff from a pension paydown requires assumptions about TRSL's investment returns, payroll growth, the discount rate used to value the UAAL, and the rate at which the Legislature adjusts district pension-contribution rates. The Legislative Fiscal Office's inability to quantify the net fiscal impact reflects the reality that small changes in any of these assumptions produce large changes in the long-run outcome. What can be described with reasonable confidence is the general shape.
In the first several years after the 2026 liquidation, the combination of (a) the direct reduction in TRSL's UAAL, (b) the investment returns TRSL generates on the remaining assets including the $2 billion infusion, and (c) the MFP backstop written into Amendment 3 will be sufficient to fund the permanent raises and absorb the $68 million annual loss of trust-fund distributions. Districts will experience modestly lower pension-contribution rates. Teachers will see the raise in their paychecks beginning in the 2026–2027 school year. The public narrative will be favorable. Proponents will cite the early years as vindication of the mechanism.
As the amortization schedule progresses, the annual reduction in district pension contributions begins to shrink. Simultaneously, (a) Louisiana teacher payroll grows (either through natural step-scale progression, through inflation-indexed adjustments, or through additional raises the Legislature may choose to provide), (b) the $2,250 / $1,125 raise itself becomes a larger absolute cost as it compounds with salary growth, and (c) the $68 million in lost trust-fund distributions continues to compound in present-value terms. The net position gradually deteriorates. The MFP backstop — the provision that requires the state to cover any shortfall out of General Fund — begins to be triggered with increasing frequency. This appears as a line item in the MFP appropriation, growing year over year, typically unexplained in press coverage because it is presented as an ordinary MFP update.
Somewhere between year 10 and year 15 — the Fiscal Office could not say exactly when — the mathematics stop working. The actuarial savings are exhausted or have become too small to offset the now-substantial permanent obligation. The MFP backstop must absorb the full cost of the raise going forward. At this point, the Legislature faces a choice that is both fiscal and political:
The trajectory from here depends on the Legislature's fiscal discipline and the state's broader revenue picture. A favorable oil-price environment or a period of sustained economic growth would make the cliff easier to paper over. An unfavorable environment — recession, oil-price decline, disaster recovery, or another external shock — would make it harder.
Cliffs in Louisiana have tended to produce the same distributional pattern. The categories of spending that are cut first are:
Notably, the programs currently funded by the EEF and LEQTF — early childhood education, academic-improvement grants, endowed professorships, graduate-student support — are not constitutionally protected under the post-Amendment 3 architecture. They revert to General Fund line items that compete with everything else, and they are vulnerable to cuts at the first cliff.
Amendment 3 is not the first time a state has attempted to fund ongoing compensation from a one-time asset sale. Kansas, in 2017, briefly attempted to fund a judicial pay increase through privatization revenue; the mechanism failed within two years. New Jersey, over multiple administrations, has attempted to fund pension contributions with proceeds from asset sales and tobacco-settlement securitizations, producing one of the worst-funded state pension systems in the country. Illinois has a long history of borrowing against anticipated pension gains to fund current operating expenses — a practice that has produced a credit rating one notch above junk.
The common thread: every time a government tries to solve a recurring-spending problem with a non-recurring revenue source, the same kind of cliff appears a decade later. Sometimes the political system absorbs it quietly. Sometimes it produces a crisis that consumes years of governing attention. In no case that this research identified has the long-run outcome been better than the alternative of funding the commitment honestly at the front end.
Amendment 3 builds a fiscal cliff into the Louisiana Constitution. The cliff is delayed — the early years look comfortable — but it is not avoided. Somewhere between 2036 and 2041, a future Louisiana Legislature will inherit a permanent teacher-pay obligation with no recurring funding source, and will face the same Options A through D that every cliff has produced. Louisiana has been here before. It has not ended well. Vote NO on Amendment 3, and demand a real teacher pay raise on a real funding source in the next session.