Lawmakers face painful spending decisions

Lawmakers return to the statehouse Monday for a legislative session that promises to be governed by a simple theme.

Borrowing a line from Bill Clinton’s 1992 presidential campaign, “It’s the economy, stupid.” Or more precisely, it’s the economy and the record-setting hole it has created in the state budget.

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Kimberly Smith/ksmith@ajc.com

Clerk of the House Robbie Rivers puts things in order Friday at the state Capitol. Legislators return Monday.

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From the ceremonial opening gavel in the House and Senate through the hectic 40th and final day, the economic meltdown and its impact on the state budget will cast a shadow over most everything lawmakers try to do.

With a shortfall of about $2 billion this year and possibly worse news facing them in fiscal 2010, legislators are under unprecedented pressure to approve skimpy budgets that maintain needed services and help the economy rebound.

What they do will affect millions of Georgians. The state helps pay to educate nearly

2 million students and provides health care to 1.5 million Georgians. More than 200,000 Georgians get all or part of their paychecks from the state.

Decisions that lawmakers make will also affect what homeowners and business owners pay in property taxes. If they cut back on money sent to schools, for instance, local boards may raise property taxes to make up the difference.

“This is the one thing we have to do, and we have to do it right,” House Appropriations Chairman Ben Harbin (R-Evans) said.

Some legislative leaders say they’d like lawmakers to come to Atlanta, pass midyear and fiscal 2010 budgets and quickly leave town. They point out that many of the 236 legislators have their own shaky businesses to run back home.

But if history is a guide, such talk is optimistic. Addressing the shortfall will take time. And legislators probably will try to come up with bills to help struggling industries, such as home building.

Finally, lawmakers want to see what kind of stimulus package President-elect Barack Obama and Congress approve. That could have a major impact in how deep state officials have to cut into their budget.

Gov. Sonny Perdue will recommend a budget to legislators on Wednesday. His staffers said the governor won’t talk about his budget-cutting proposal until then.

Sen. Jack Hill (R-Reidsville), who chairs the budget committee, joked last week that he “prepared for the session by having a colonoscopy.”

Alan Essig, executive director of the Georgia Budget and Policy Institute, an Atlanta-based research group, said it will be hard for lawmakers to concentrate on anything besides the $2 billion in spending cuts they’ll have to make.

“It’s going to suck the air out of just about anything else they are doing.”

Most states are in the same situation as Georgia. In December states reported a collective shortfall of about $70 billion this fiscal year. Some states may use loans to pay bills. They are laying off employees, talking about cutting the number of school days and proposing tax increases to make ends meet.

None of this is entirely new for Perdue and veteran lawmakers. Perdue took office in 2003 after a recession wrecked state finances. He persuaded lawmakers to raise cigarette taxes, but for the most part, the state survived using financial reserves and making steep budget cuts.

This time, the reserves are a bit fatter, but the shortfall is much bigger. And the fiscal crisis may just be beginning.

Typically, gains in state revenue collections lag behind economic activity. So even if the economy picks up in the second half of 2009 or early 2010, state finances could be troubled into fiscal 2011.

“It’s going to be a tough couple of years to get through here because revenues are going to be lousy and demands on spending are going to be going up,” David Wyss, chief economist at Standard & Poor’s, told lawmakers at a conference in Atlanta last month.

In Georgia, Hill said, while tax collections are down — off 2.7 percent through December — they haven’t been all that bad compared to other economic indicators.

But Hill, who runs a grocery in South Georgia, added, “You just look around you, and you know the worst is yet to come.”

During last year’s session, a $21 billion budget was approved for fiscal 2009, which runs through June 30. After the fiscal year began, Perdue ordered spending cuts, killed pay raises for state employees and asked agencies to slash spending 6 percent, which has since been raised to 8 percent.

Perdue and lawmakers hope to avoid major cuts in public schools or health care programs for the poor and disabled. The problem is that kindergarten through 12th-grade education and public health care are the most expensive things in the budget.

So other areas, such as public colleges, may be cut 10 percent to 15 percent to make up the difference. Hundreds, if not thousands, of jobs could be lost in the process.

Tom Lewis, a longtime Capitol lobbyist who now serves as special assistant for government relations at Georgia State University, said cutbacks of up to 15 percent would be “devastating” for the downtown Atlanta campus.

“If you get into cuts over

10 percent, you’ve going to have to get into furloughs, layoffs, cutting down on the hours at libraries and labs and cutting the number of class sections,” said Lewis, whose school has 27,000 students and employs 3,000 people.

Michael Light, spokesman for the state’s technical college system, said officials have already laid off about 80 people and merged schools to save money. If more cutbacks are required, layoffs in administrative staff would be likely.

“The one thing we’re not going to do is affect the students,” he said, although he added that tuition increases may be discussed if much bigger cuts are mandated for fiscal 2010. Light said system officials have talked about the possibility of more dramatic cutbacks than the 8 percent mandated by Perdue. “We have to be prepared for worse.”

Chris Clark, who will be taking over as Department of Natural Resources commissioner this year, said his agency has gotten by in part by not filling vacant positions. State parks have remained open.

Clark said he couldn’t say much until Perdue releases his budget proposal. But if deeper cuts are required, he said, “We are looking at all our options out there.”

One of the most politically tricky decisions legislators will have to make is on the state’s property tax relief grants, which save average homeowners $200 to $300 a year and cost the state about $428 million.

Perdue and House Speaker Glenn Richardson (R-Hiram) both said the grants have not helped hold down property taxes, as intended. Richardson and Lt. Gov. Casey Cagle, the Senate’s president, have committed to funding the grants this fiscal year. After that, the fate of the grants is unclear.

If the grants aren’t approved for fiscal 2010, county officials have said homeowners will get a $200 to $300 property tax increase because they will lose money that funds the program.

Lawmakers could choose to make up at least some of the shortfall with tax or fee increases. However, the leaders of both chambers have said they oppose any tax increases. Cagle, who is expected to run for governor in 2010, has been particularly vocal on the issue.

Even without new taxes, Perdue and lawmakers hope to stimulate one part of the economy: construction.

Perdue said last month he will recommend an “economic stimulus package” that will include borrowed money for schools, roads and other construction projects. Perdue said borrowing money for construction projects will create jobs and provide communities with needed infrastructure.

Lawmakers said Perdue has said the package will be in the range of $1.2 billion. They will be considering it while Congress is debating a larger but similar national construction package from the Obama administration.

Other than the stimulus borrowing, legislative leaders say the state spending plans for the next two years will be lean.

Like a lot of Republicans, Cagle sees the recession as a chance to pare the budget down to the “core functions” of government.

“It’s going to be a painful session,” he said. “Every line item in that budget has a constituency group and all of them view their program as a higher priority than the other programs. But government should not be all things for all people. Government should only do what the citizenry cannot do for itself.”