STATE BUDGET CRISIS: Spending cuts must be strategic and selective

Like many in private enterprise these days, state officials are confronted by falling revenues, with a projected gap of $1.6 billion in the current year’s budget. The spending cuts needed to close that gap will be painful, but as they make them, officials should honor government’s responsibility to maintain essential services for the state’s neediest and most vulnerable residents.

That means the state cannot, for instance, shirk its responsibility to provide adequate funding for mental health services for those Georgians who do not have private health insurance, a growing population that has been neglected in recent budget cycles even when revenue flowed freely.

However, it also means that Georgians may have to accept cutbacks in nonessential services. Some state parks and historic sites may have to close or curtail hours. Lines at licensing offices might also return if the Department of Driver Services has to take a big cut. And class sizes in local school districts —- as well as in lecture halls at state universities —- may get bigger.

Such trade-offs are at the heart of responsible budget making. They will not come easy, nor will they be politically popular. But leadership in a time of fiscal uncertainty demands that Gov. Sonny Perdue and the General Assembly strategically target spending cuts while maintaining essential services.

Moreover, the state budget shortfall should refocus attention on the dozens of unwise sales and income tax breaks approved on behalf of special interests in recent years.

Perdue has asked agency heads to consider reductions of 6, 8 and 10 percent in their fiscal 2009 budgets as well as in their recommendations for the next budget cycle. Such an exercise is not necessarily a bad thing —- all administrators should have contingency plans for lean years.

However, across-the-board budget cuts are often the least effective way to deal with a fiscal crisis. In some areas of public spending, the state simply cannot afford to regress, and budget reductions in other areas must be carried out strategically. They include:

Mental health

Georgia already ranks 42nd in per capita spending on community mental health programs and 35th in state psychiatric hospital spending. Just to reach the national average on per capita mental health spending, Georgia would have to appropriate about five times as much as it now spends. A 10 percent reduction in mental health spending would instead mean budget cuts of $77.5 million, all but begging for federal intervention.

The U.S. Justice Department is investigating whether state mental hospitals are already so overcrowded and understaffed that they systematically violate the civil rights of their patients, including the fundamental right to be safe.

The jury is still out on whether for-profit providers can effectively serve state mental patients, an idea the state says it wants to pursue. But for now, the state needs to maintain its current level of spending for this essential service. There can be no cuts here.

Medicaid and PeachCare

For too long, even in flush times, the General Assembly has balanced at least part of its annual budget by shortchanging hospitals, physicians and nursing homes who take care of Medicaid patients. This health program for the poor —- where federal taxes pay about two-thirds of the cost —- hasn’t seen a significant increase in state reimbursement rates in six years. As a result, most hospitals had been getting 80 to 85 cents from Medicaid for every $1 it cost to provide care to Medicaid patients.

This year, the state moved a little closer to covering the actual cost of hospital care for Medicaid patients, in particular those treated for traumatic injuries. Even small increases in Medicaid reimbursement have a huge impact on the bottom lines of public facilities, including Atlanta’s Grady Memorial Hospital..

With the unemployment rate in Georgia reaching 6.2 last month, the highest in 15 years, more families will rely on the state PeachCare program to insure their children. Reductions in state spending would undoubtedly lead to delays in qualifying families for the program just when they need it the most. If the Department of Community Health is to take any cuts, it must not be in these two vital health programs.

Aid to public schools

The state has imposed annual “austerity” cuts in grants to local school districts for a number of years, even while the state budget was building more than $1 billion in reserves. As a result, local districts have been forced to either cut services or raise local property taxes to make up the difference. The state should stop playing this game with local districts, most of which have already set their budgets for the coming year. The budget for schools, as passed by the 2008 Legislature, should stand.

Indigent defense

In 2003, the state took responsibility for funding and coordinating what had been a badly fragmented indigent defense system. Yet providing lawyers for indigent defendants has never been a popular cause with state budget makers. In 2007, for instance, they raided funds set aside from court fees to pay for the system and used them on other state priorities. Because of that, the indigent defense budget has been severely strained over the last two years. It cannot be reduced further.

Prisons and public safety

Overcrowded prisons breed safety and health problems that invariably put the state in federal court defending itself. Any reductions must be strategically carried out. Similarly, the Georgia Bureau of Investigation provides essential services to local police investigations and forensic science services to prosecutors around the state. These services should not be considered for major cuts.

—- Mike King, for the editorial board (mking@ajc.com)

A RESPONSIBLE APPROACH TO GEORGIA’S BUDGET

Rather than an across-the-board reduction in all state agencies, Georgia should consider targeting deep cuts in some departments and staying with what the 2008 General Assembly budgeted for others. The goal should be to preserve essential services.

Protect these agencies from the budget ax

Given their mission and the impact of austerity cuts forced on them in the past, the following agencies should retain the full amounts appropriated by the General Assembly for fiscal year 2009.

State Board of Education: $8.2 billion

Medicaid: $2.2 billion

PeachCare: $99 million

Public Defenders Standard Council: $40.4 million

The largest cuts should come here first

No doubt, some services provided by these state agencies will be severely affected by budget reductions of at least 10 percent. But not all departments are created equal, and some should take deeper cuts than others.

Here’s what a 10 percent cut would save:

Legislature: $7.7 million

Accounting: $546,000

Administrative: $1.4 million

Agriculture: $4.7 million

Banking and Finance: $1.3 million

Community Affairs: $5.3 million

Economic Development: $4 million

Forestry: $3.9 million

Governor’s Office: $4.8 million

Labor: $5.6 million

Law: $2 million

Public Service Commission: $3.2 million

Next: Selectively cut the biggest spenders

The DNR, for instance, should not reduce spending for environmental protection. In the state university system, cuts should not be so deep as to force increases in tuition.

Here’s what an 8 percent cut would save:

Natural Resources: $10.5 million

Pardons and Paroles: $4.7 million

Board of Regents: $182.3 million

Revenue: $10.3 million

Secretary of State: $3.2 million

Soil and Water: $286,000

Technical College System: $30 million

Transportation: $2.4 million

Veterans Service: $2.1 million

Workers Compensation: $1.4 million

Finally, consider smaller cuts to these agencies

Most of the following agencies provide essential services. Cuts in DHR, for instance, should not include reductions to the planned spending for mental health services or for child protection.

Here’s what a 6 percent cut would save:

Judicial: $10.2 million

Community Health: $10.7 million

Corrections: $69.4 million

Defense: $703,000

Driver Services: $3.8 million

Early Care and Learning: $274,000

Employees Retirement System: $429,000

Human Resources: $98.3 million

GBI: $4.6 million

Juvenile Justice: $20.7 million

Public Safety: $8.1 million

Teacher Retirement System: $91,000

COMING TOMORROW

>How to pay for essential services in a time of fiscal uncertainty