In Georgia budget crisis, tax breaks, ‘pork’ are safe

State agencies are preparing to furlough employees and slash spending because of the budget crisis, but insurance companies, pig farmers and donors to private-school scholarship groups are keeping their tax breaks.

The state also plans to borrow about $1 billion for construction projects. And some lawmakers will continue to hand out millions of dollars in local grants, which are commonly referred to as “pork” at the Capitol.

State budget writing, in good times and bad, is about priorities and timing. In trying to come up with a plan to slash up to $1.6 billion to fill unanticipated holes in the budget, Gov. Sonny Perdue and lawmakers have so far chosen to avoid eliminating special-interest tax breaks and cutting local construction projects. And at least one chamber has steered clear of reducing the local grants.

The tax breaks alone could cost state government, and save those who will benefit, about $150 million a year, according to the Atlanta-based fiscal policy group, the Georgia Budget and Policy Institute.

“The action and inaction on this issue tells you what the priorities are,” said Alan Essig, whose group has criticized the tax breaks that lawmakers approve each year.

“Right now the priorities are spending cuts,” he said. “We need to prioritize the tax breaks against what spending we’re looking to cut.”

The slow economy has caused state tax collections - particularly sales and income tax collections - to drop. That, in turn, has Perdue and lawmakers scrambling to balance the state’s budget with less money.

Perdue has frozen a $428 million grant program that is supposed to help hold down property taxes. However lawmakers, who face re-election this fall, have objected to that idea, fearing it could bring higher property taxes.

So far, the cuts appear to be hitting state agencies and the 110,000 workers who do everything from regulate car insurance and renew drivers’ licenses to those who clean the floors at the University of Georgia.

Their pay raises have been axed. Some will lose a day’s pay each month. Others may eventually be laid off.

When the size of the budget crisis became clearer last month, legislators initially talked of delaying the special-interest tax breaks they approved during the 2008 legislative session.

However, House Appropriations Chairman Ben Harbin (R-Evans), now says, “It’s not money we’re looking at right now.”

House Speaker Pro-Tem Mark Burkhalter (R-Johns Creek), said, “We don’t want to take away any tax cuts if we can avoid it, particularly when you are trying to incentivize businesses and create jobs.”

Harbin said lawmakers can’t delay implementation of the tax bills this fall unless Perdue calls them into a special session. They could act during the 2009 regular session, which begins in January, but tax breaks will already have taken effect.

Such tax breaks are as old as Georgia’s tax code. Georgia State University estimated there are about $10 billion a year worth of sales-tax exemptions on the books. Industries and companies hire lobbyists each session just to push for tax breaks.

This year, lawmakers passed two premium tax breaks for insurance companies, a $10 million tax cut for filmmakers and a tax cut of more than $20 million on manufacturers’ equipment and energy use.

In addition, they passed up to $50 million in tax credits for people or corporations that donate to private school scholarship funds and a tax cut of about $34 million for forest-land owners, according to a Budget and Policy Institute review.

Legislators also extended a few existing sales-tax exemptions. For example, swine-raising facilities will continue to pay no state sales tax on fuel they use, saving them about $300,000, the institute said.

Said Sen. Kasim Reed (D-Atlanta), “The $50 million tax break for vouchers needs to be on the table [to cut]. The insurance tax breaks need to be on the table.”

Many lawmakers see tax cuts as a way to spur job development. They view the $1 billion in construction projects approved in the 2008 session the same way.

“In times like this, you really want to invest,” said Senate Appropriations Chairman Jack Hill (R-Reidsville). “There aren’t many ways we can stimulate the economy, but that’s probably the best weapon we have.”

During the 2008 session, lawmakers also approved 470 local grants, worth about $6 million. They include money for local communities to promote tourism, improve parks, restore old buildings and buy football uniforms.

Staffers at the Department of Community Affairs, which handles the grants, said Senate officials told them to proceed with giving out grants proposed by senators, about $3.25 million worth.

Harbin, on the other hand, has sent House members a memo asking them to review the grants in their districts and consider cutting at least some of them.

“I’m personally going to be reducing some grants and doing away with some,” Harbin said. “We’re asking all the House members to do the same.

“It’s not a lot of money, but the main thing we’re trying to do is let everyone know how important this is. It’s the right message to send.”