Perdue: State can’t afford property tax relief

Gov. Sonny Perdue on Wednesday defended his decision to recommend the death of the property tax relief grant program that saves many homeowners $200 to $300 a year.

Perdue recommended the end of the program, which costs the state $428 million a year, because the downturn in the economy has soured state finances.

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“I could not find it [in the budget],” Perdue told lawmakers as they opened hearings on state budgets that will require at least $2 billion in spending cuts. “It became fiscally impossible to fund $428 million in the homeowners relief grant. We wanted to fund it, but there is not the money to fund it.”

Perdue raised the issue during the first day of hearings because legislative leaders have already come out against his plan to eliminate the tax relief. If legislators fight the change, they will have to come up with an extra $428 million on top of the $2 billion in spending cuts Perdue has proposed.

The $2 billion shortfall is the largest the state has ever faced. By contrast, when Perdue took office in 2003 facing a fiscal crisis, the shortfall was about $620 million.

Still, Perdue told lawmakers, “Things will get better. We don’t know when. That’s the challenge.”

The state’s fiscal economist, Kenneth Heaghney, was less optimistic when he spoke to legislators. “We believe the economic situation is deteriorating.”

Heaghney was in line for some tough questioning because lawmakers thought state economists didn’t adequately warn them during the 2008 session about the recession.

When he introduced Heaghney to legislative budget writers Wednesday, Senate Appropriations Chairman Jack Hill (R-Reidsville), said, “The state economist is going to tell us what he forgot to tell us last year.”

Heaghney told lawmakers he expects the recession to continue through the first half of 2009 and that a weak recovery will begin in the second half of the year. However, he warned, a spike in oil prices or some other financial shock could delay a recovery.

The state is projecting a 4.4 percent decline in tax collections for fiscal 2009, which ends June 30. In fiscal 2010, the state is expecting about a 2.2 percent increase in tax revenue.

A proposed federal stimulus package could dramatically alter lawmakers’ budgeting plans.

Heaghney told lawmakers that if the federal stimulus plan is allocated per capita, Georgia would receive more than $11 billion over the next two years for infrastructure improvements, Medicaid expenses and other spending.