Georgia lawmakers head into the 2013 session next week facing the same problem they had in 2012. And 2011, 2010 and 2009: more people using state services, not enough money to pay for them.
So the Legislature will get a plan from Gov. Nathan Deal that funds the basics, includes another round of spending cuts and probably not a lot else. There will be few if any new major initiatives and likely no cost-of-living raises for 200,000 teachers and state employees. Deal will release his plan Jan. 17.
Lawmakers who used to look forward to carving the budget pie — and saving a few slices for their districts — will feel good to get out of the session this spring with a bare-bones budget that allows the state to continue paying for its health care, education and prison programs. Just as in the past few years.
“It’s more of the same,” said longtime Senate Appropriations Chairman Jack Hill, R-Reidsville. “If anything, the (revenue) growth outlook is more unstable than it was a year ago. The real crux of the problem is our revenue is not growing as fast as the obligations we have to meet, the must-do things we have to do in government.”
Lawmakers have been cutting spending since shortly after the Great Recession started affecting state tax coffers in late 2008. The state budget for fiscal 2013, which ends June 30, is $19.3 billion ($39 billion, if you include federal funds). Even though the economy and tax collections have been improving, the budget is still about $2 billion below the spending plan lawmakers passed in 2008.
Meanwhile, rolls for Medicaid, K-12 schools and colleges have grown since the beginning of the recession. Fewer people with jobs means more people on government health care and more adults going back to or staying in college. A growing population means more kids in schools.
The Nelson A. Rockefeller Institute of Government in Albany, N.Y., reported last year that state tax collections across the country had finally rebounded and were now exceeding pre-recession levels. But Georgia’s rebound is incomplete.
“We’re still in the recovery phase,” said Ken Heaghney, the state’s fiscal economist.
Tax collections through the first five months of fiscal 2013 are below the 5 percent growth rate needed to fund the budget.
With the potential for slow growth in mind, Deal ordered state agencies to come up with $553 million in budget cuts for this year and next, much of it from public health care and the university system. Both of those areas have taken cuts for several years. Medicaid, in particular, has long been problematic, with rapidly rising costs and lawmakers frequently trying anything to fill funding holes.
“We have been playing games and underfunding it for years,” said Alan Essig, executive director of the Georgia Budget and Policy Institute, which has advocated for increased social service spending.
The health care program will again be in the spotlight, with lawmakers debating whether to renew a hospital “bed tax” designed to help prop up Medicaid.
Hospitals pay the bed tax to the state, and the state sends the money back to them according to the level of Medicaid care they provide.
The state’s budget for Medicaid and PeachCare for Kids is already short by $374 million for the current fiscal year and faces an expected shortfall of nearly $400 million for the 2014 fiscal year. Failing to renew the bed tax would create an even bigger deficit.
The state will collect more than $230 million from the fee this year, bringing in over $400 million more in matching federal money for the program.
Renewing the tax will be a political battle for state leaders, who say it’s a necessity to balance the state budget.
Anti-tax activist Grover Norquist, president of the Washington-based Americans for Tax Reform, sent a letter to Republican state lawmakers last year saying renewing the hospital fee would kill jobs and raise health costs. He argued that supporting the renewal would violate the anti-tax pledge that many of the state lawmakers signed. Some lawmakers have already come out against it.
Other areas of the budget debate may not be so contentious.
Most of the K-12 education budget — the biggest state expense — was spared by Deal’s demand for budget cuts. The governor has also committed to put extra money into the state’s pre-kindergarten program to fully restore the program back to 180 days per year.
The university system will take another year of funding hits, meaning students will likely be paying higher tuition and/or fees next year to make up the difference.
The governor has provided few budget details so far. But he has promised another $50 million to expand the Port of Savannah, bringing the state’s total contribution to the massive project to slightly more than $231 million. The university system will again likely get big construction money. The system requested about $260 million, including nearly $60 million for a new law school/humanities building at Georgia State University.
By law, legislators have to pass a balanced budget before ending the session. Thanks to Congress’ decision to put off potential spending cuts for a few months, that may not happen until April.
A good chunk of the state budget comes from the federal government. Most of it shouldn’t be affected by congressional cuts. But about $100 million is potentially at stake, and lawmakers may have to take a break at some point during the 2013 session to wait and see what Congress does. Some lawmakers have already raised that possibility.
But waiting won’t change the fact that the state is still having a hard time balancing the books. Legislators annually consider and often pass bills to cut state taxes, but that makes it harder to balance the budget in years when costs grow and the economy isn’t humming enough to bring in a lot of extra revenue, officials said.
“We have a combination of restricting revenue and increasing costs, and we haven’t balanced that out,” said Hill, the Senate budget chief.
Essig said, “It’s the same story. The problem is, unless the economy really picks up, we will be looking at the same thing again next year.”
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