Georgia relying more on feds to pay state bills

By James Salzer

The Atlanta Journal-Constitution

Legislative leaders in Georgia love to gripe about the spend-o-holics in Washington, but they have increasingly relied on the federal government to pay their bills.

The portion of state budget coming from federal taxpayers has increased from about $7 billion in fiscal 2003, during the last recession, to nearly $13 billion in the fiscal year than begins July 1, according to state records. Gov. Sonny Perdue signed the upcoming year’s budget last week.

Some of that increase in federal tax money — $1.9 billion during the upcoming fiscal year — will help pay for state health care and education programs as part of the federal stimulus package. That has proved to be a lifesaver as the number of Georgians on Medicaid has risen during the recession.

But that’s not the whole 
story. At a time when state tax collections have slowed, lawmakers have consistently looked to the federal government to fill in budget gaps, despite their public misgivings. Next year’s budget is loaded with examples of state agencies shifting the cost of programs and employees from state taxpayers to the federal government.

In doing so, agencies manage to do what lawmakers demand — cut state spending — while continuing to provide services.

During the legislative session, key lawmakers and state departments look for ways to “maximize” — or qualify for — more federal money to pay for what the state needs. It becomes “matching money” or a “federal grant” that helps the state balance its budget. Few publicly talk about it as taxpayer money.

Kelly McCutchen, president of the Georgia Public Policy Foundation conservative think tank, noted that lawmakers are approving such spending at a time when the federal government is running huge deficits. The accumulation of those deficits — the federal debt — will eventually have to be paid off.

“It’s a huge problem,” McCutchen said. “The idea is that this is free money. But it’s not free at all. We are all federal taxpayers.”

Senate Appropriations Chairman Jack Hill (R-Reidsville) said he worries about Georgia officials relying too heavily on a financially shaky federal government to pay local bills.

“It scares me because at some point, the federal government will have to face its own budget issues,” Hill said. “It seems to me we have become too dependent on them.”

Under Georgia’s constitution, lawmakers must pass and the governor must sign a balanced budget. The federal government, on the other hand, can and does run deficits. Since 2003, the national debt — the amount of money owed to lenders — has approximately doubled.

Part of the increase in federal spending in Georgia comes from a program designed to help get states through the recession. But even before the economic downturn, the proportion of the state budget coming from the federal government was on the rise.

In 2002, the last year Democrats held all the power at the state Capitol, the Legislature passed a fiscal 2003 state budget of about $28.1 billion, according to the Office of Planning and Budget. Of that, $16.1 billion came from state taxes, the federal government sent $6.5 billion and $5.5 billion was raised from other sources, such as park fees, fines and grants. Hill argues that the state did a poor job of tracking federal spending at the time, so the federal number was higher.

In the upcoming fiscal year, the state will spend $38.5 billion, of which $12.88 billion will come from the federal government. The portion of the budget paid out of state taxes will be $17.9 billion.

The percentage of the budget coming from federal taxpayers has gone from 23 percent at the beginning of fiscal 2003 to 33 percent today.

That isn’t particularly unusual. Sujit M. CanagaRetna, senior fiscal analyst for the Atlanta-based Southern Legislative Conference, said states across the country have been relying more heavily on the debt-ridden federal government to pay bills over the past decade.

Politics plays a role in many states. It’s easier for lawmakers to take money from the federal government than raise state income or sales taxes to balance the budget.

“Raising [state] taxes is such a politically toxic move that legislators look for every other possible source of revenue just to avoid having to raise taxes,” he said.

At the same time, lawmakers regularly gripe about federal spending.

In the midst of the recession, many Georgia Republicans criticized the stimulus package Congress passed to help bail out state budgets. Republicans in the U.S. House voted against it and some state Republicans talked of not accepting all the money.

Georgia Senate Majority Leader Chip Rogers (R-Woodstock) called the stimulus package a “bogus loan program.” When the Senate passed the fiscal 2010 budget, Rogers said, “While Washington, D.C., saddles us with over $1 trillion in debt, the assembly worked together and passed this budget without a single ‘pork barrel’ project.”

The budget he referred to contained $13 billion in federal funding.

Republicans continue to slam federal spending habits in campaigns.

“We all know the politicians in Washington and career bureaucrats are the problem,” Gwinnett County Republican state Rep. Clay Cox, who is running for Congress, said in a recent TV ad. “They spend money we don’t have, mortgaging our families’ futures.” He vowed to “stop out-of-control spending and debt.”

Cox voted for the fiscal 2011 state budget with almost $13 billion in federal funding.

Rogers and others attribute the rising percentage of federal dollars in the state budget to an increase in federal mandates, but CanagaRetna said there are fewer new federal mandates forcing states to spend money than there were 15 or 20 years ago.

Sen. Nan Orrock (D-Atlanta) said Republicans who oppose federal funding, but seek it to balance the budget, are being hypocritical.

“The same people who criticize Obama, who criticize federal spending are using it to fill our budget holes,” she said.

Lawmakers and state agencies have found creative ways to increase their federal take.

Twice in the past eight years, state lawmakers have approved plans to tax health care providers — nursing homes and hospitals. That revenue has been used to make the state eligible for more federal money.

Next year’s budget contains several examples of state agencies using federal grants to pay for workers on the state payroll.

One of the most obvious is in the Georgia Forestry Commission, where more than $1 million in state funds were replaced with federal funds and other sources to pay for staffers in agency administration, forest management and forest protection.

Dan Gary, director of administration for the commission, said federal grants pay to run fire prevention efforts or help buy equipment for local fire departments. Some of that money will pay salaries for staffers — including some firefighters — this year. “If it wasn’t for the federal funds, 37 people would be out looking for jobs right now,” Gary said.

House Appropriations Chairman Ben Harbin (R-Evans) said federal money has helped the state avoid massive layoffs. Even with the stimulus money, the state had cut overall spending by more than $2 billion the past two years.

“The federal money has helped soften the blow,” Harbin said. “We didn’t have to have as many teachers laid off, we didn’t have to lay off as many employees.”

But McCutchen of the Public Policy Foundation said too often, federal funding has allowed the state to put off tough decisions to reduce spending long term.

“Using stimulus money for one-time programs — building bridges and roads — is one thing. To use it to fund salaries and programs that are ongoing is irresponsible.”

Many lawmakers don’t see anything wrong with finding creative ways to get more federal funding.

Former longtime Senate Appropriations Chairman George Hooks (D-Americus) said it’s one way for Georgia to get back some of the federal tax money its citizens pay.

“It’s Georgia taxpayers’ money we’re sending to Washington,” Hooks said.

“You can sit around being philosophical on the radio all you want to, but you’ve got to educate your children, pave your roads and pay the nursing homes and doctors,” he said. “It’s easy to be philosophical when you’re rich, but we’ve got needs.”

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How we got the story

A reporter who has covered the state budget for two decades noticed that throughout the fiscal 2011 spending plan, agencies said that they planned to use federal funds to pay for things previously funded by the state. The reporter added up the federal spending in the fiscal 2011 budget and received an accounting from the Office of Planning and Budget of federal spending in 2003 for a comparison. The reporter also reviewed where the federal money has gone, and interviewed current and past legislative leaders and officials who keep track of state spending.