The state budget crisis isn’t keeping candidates for governor from making big promises.
Top Democrats are pledging to invest more in schools, build commuter rail lines, create incentives to attract businesses and retrofit state buildings to make them more energy efficient. Two Republicans want to eliminate the state income tax — an $8 billion to $9 billion proposition — while others want other huge tax cuts.
Few have specific, guaranteed ways to pay for what they want despite the fact that the next governor will take office facing a massive budget shortfall.
In fact, outgoing Gov. Sonny Perdue may have to announce more spending cuts shortly after the July 20 primaries because of stagnant revenue collections. That will be on top of $3 billion in state reductions during the past two years.
Kelly McCutchen, president of the Georgia Public Policy Foundation, an Atlanta think tank, said it’s important for Georgians to ask candidates where the money will come from to pay for their big ideas.
“For at least the next two or three years, we are going to be in a holding pattern, struggling to keep the status quo in spending and taxes,” he said.
University of Georgia political scientist Charles Bullock said making big promises, even in the middle of a fiscal crisis, is standard stuff for gubernatorial campaigns.
“They are telling people what they want to hear,” Bullock said. “ ‘We can give you more of what you want and you can pay less.’ Well, that sounds great, I’m all for that.”
In general, the leading Democratic candidates for governor are proposing more spending, the Republicans, more tax breaks.
The front-running Democrat, former Gov. Roy Barnes, wants to reduce school class sizes, end teacher furloughs, increase teacher pay, build commuter rail, retrofit state and local buildings for clean, efficient energy consumption and restore a state property tax relief program cut from the state budget last year.
Opponents say all of that would cost well over $2 billion a year. Barnes’ campaign questions that figure, but hasn’t compiled a total for how much his promises would cost.
Chris Carpenter, campaign manager for Barnes, said the candidate would pay for it all by eliminating some of the sales and income tax exemptions lawmakers have approved over the years, and by doing a better job of collecting sales taxes from businesses that aren’t paying them. He hasn’t specified which exemptions he’d eliminate.
One of Barnes’ Democratic competitors in this year’s race, Attorney General Thurbert Baker, wants $2 billion more invested in schools alone. Baker says he will pay for it by creating a Georgia Lottery-run bingo game.
Baker also promises a venture capital fund to help jump-start businesses, a $50 million fund to help attract businesses to the state and a $25 million fund to give biotech companies the specialized space they need. Baker wants the state to invest in reservoirs, which means the state would likely have to borrow money to pay for them.
Democratic hopeful DuBose Porter, the state House’s minority leader, has pledged to fully fund Georgia’s education system and stop teacher furloughs. Doing so would cost $1 billion or more. Porter’s top proposal to pay for it is to go after businesses that haven’t paid taxes or aren’t paying what they owe.
A fourth Democratic candidate, former Adjutant General David Poythress, wants to reduce class sizes in schools, restore recent spending cuts to education and provide tax breaks for businesses. He said he would pay for it by cutting “wasteful spending,” eliminating some tax breaks and being more aggressive in going after tax cheats.
Estimates of the amount that could be raised by going after businesses that aren’t paying enough in sales taxes range from less $100 million to $500 million a year. Even some campaigns that support the idea acknowledge that they don’t know how much the effort would bring in. Neither does State Revenue Commissioner Bart Graham, the guy who collects taxes.
On the Republican side, two candidates — Insurance Commissioner John Oxendine and former Secretary of State Karen Handel — want to phase out the state income tax.
The income tax raises about $8 billion to $9 billion and accounts for about half of the state’s tax revenue. The corporate income tax, which Oxendine also wants to eliminate, has raised another $600 million to $1 billion in recent years.
Oxendine has been championing the tax cuts for more than a year, saying it will attract businesses and jobs to the state. His campaign says the lost income tax will be replaced when the people in those new jobs spend money and pay other taxes, such as the sales tax.
That is the general economic theory behind most of the tax cuts Republicans and Democrats are proposing. Lower taxes equal more business and jobs, and more income for individuals and businesses. They in turn buy or invest more and pay taxes on what they consume.
However, none of the candidates spell out how much new revenue would be created to balance the budget.
Stephen Puetz, Oxendine’s campaign manager, said his candidate is also willing to look at eliminating some sales tax exemptions, a move that could raise money. And the sales tax rate could be raised to bring in money.
Handel’s campaign echoes Oxendine on that issue.
Puetz said Oxendine also wants a “top-to-bottom” review of state government to look for places to reduce spending. All of the major Republican candidates essentially say the same thing, but few provide examples of what could be cut.
Handel has offered one specific cut in spending: she’s proposed laying off 7,800 state employees to save about $400 million. While it’s a start, it would only provide a fraction of the $8 billion to $9 billion lost by eliminating the state income tax.
Of the $17.89 billion state-funded budget this year, more than 85 percent goes to pay for education, health care programs, prisons and roads. None of the candidates have advocated cutting specifically from those areas.
Republican hopeful Eric Johnson, a former state Senate leader, wants to eliminate the sales tax on energy used in manufacturing, a major expenses for businesses like carpet mills. Doing so would cost the state — and save the businesses — about $141 million per year. He also wants to lower income taxes, replacing the lost revenue by broadening the sales tax to cover more goods and services.
He has proposed pouring $500 million or so annually into transportation projects for a few years, including constructing a western bypass for truck traffic to get around Atlanta. However, he said he would pay for it by simply spending less on other projects, such as college campus construction.
A fourth Republican hopeful, Nathan Deal, is calling for several tax cuts. He wants to cut corporate income taxes by one-third, to eliminate the corporate net worth tax on businesses and he wants to exempt Georgians from paying taxes on the first $7,000 worth of income they earn.
Combined, Deal’s package of tax cuts could cost state coffers—and save individuals and businesses — about $2 billion a year.
Brian Robinson, spokesman for Deal, said the tax cuts may produce a budget shortfall initially. But, like other Republican candidates, Deal thinks tax revenue would increase as the tax cuts attracted more business and jobs to the state.
Like the other candidates, Robinson said Deal would cut spending by more closely looking at each state agency’s budget. But he didn’t provide any specifics.
“We are going to do some significant cuts in state government,” he said. “It’s coming no matter what the [tax] policies are in place.”
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Credit: Jason Getz / Jason.Getz@ajc.com