Georgia’s budget shortfall could top $2 billion

The state’s fiscal crisis appears to be growing, and the shortfall may top $2 billion this year, making deeper spending cuts likely, legislators and budget analysts say.

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After Department of Revenue reports showed tax collections down 7 percent in August, House and Senate leaders began to believe that the shortfall will exceed the $1.6 billion that Gov. Sonny Perdue projected in early August.

Perdue ordered state agencies to cut spending 6 percent. That may not be enough.

“The [national] financial crisis is having an effect on what’s going on here,” said House Appropriations Chairman Ben Harbin (R-Evans). “Nobody is borrowing money, so no investments are being made and no jobs are being created.”

Bigger budget cuts could mean a host of things, from less money for local high schools and health care programs to shorter hours at state parks and fewer degree and certificate programs at technical colleges. If school funding is cut significantly, it also might mean higher property taxes next year to make up the difference.

The same problems are affecting state budgets across the country. California officials fear their newly approved plan to balance the books is already $1 billion in the red, according to Stateline.org, which covers state government news nationally. Florida lawmakers last month moved $672 million from reserves to help cut into a $1.5 billion deficit. Virginia is facing an estimated $3 billion deficit over two years.

How serious are Georgia lawmakers taking the situation?

House Speaker Glenn Richardson (R-Hiram) and Lt. Gov. Casey Cagle, the Senate’s president, said Wednesday that both chambers are putting a hold on politically popular special project grants to communities and organizations, which are commonly called “pork” at the Capitol.

“As we face a significant budget shortfall in our state, the Senate is working to identify essential government spending, prioritize that spending and find further efficiencies,” Cagle said. “Local assistance grants should not be exempt from consideration.”

State agencies have already turned in budget plans that could bring hundreds of layoffs over the next 1 1/2 years. And hundreds of positions the agencies want to fill will be eliminated as well.

Alan Essig, a former state budget analyst who runs the Georgia Budget and Policy Institute think tank in Atlanta, said Perdue’s original projection for a $1.6 billion shortfall this year is “not realistic” unless the economy starts turning around within a few months. House leaders said they are currently working on the budget based on an estimated shortfall of $1.8 billion, although some lawmakers think that figure is still too low.

Essig said, “I think a $2 billion (shortfall) could be conservative. The only question is whether it’s $2 billion, whether it’s $2.5 billion or whether it’s $3 billion.”

At $2.5 billion, state officials would probably have to cut about 10 percent from the budgets for many schools, public health programs, prisons and other agencies.

Still in question is whether lawmakers will go along with Perdue’s decision to save money by withholding $428 million in grants to counties designed to hold down property taxes. Cagle and lawmakers have insisted they will fund the grants when they come back into session in January. If they don’t, county officials will likely be mailing out supplemental tax bills by spring.

The grants - which are worth $150 to $300 to most homeowners - may not be back after this year. Perdue has argued the grants, which were started by his predecessor Roy Barnes, haven’t helped hold property taxes down. And some lawmakers agree.

“The future of the grants is very questionable,” Harbin said. “We’re going to fund them this year. But this is something we are going to look at seriously for future years because we’re not sure it’s doing what it was supposed to do, and that’s reducing property taxes.”