Perdue: Colleges to see smaller cuts, hospitals deeper ones

Cuts to higher education would not be as severe as feared, but hospitals would face hundreds of millions in new fees and taxes under Gov. Sonny Perdue's revised budget plan released Thursday.

With Monday's release of February state revenue numbers showing a 15th consecutive month of declining tax collections, Perdue's actions Thursday were all but unavoidable.

The governor announced that the state budget is under water for the current fiscal year by $342 million. He also said that his original $18.2 billion budget for the fiscal year that begins July 1 must be cut by $443 million -- much less than the rumors of a needed $1 billion in additional cuts -- for a 2011 budget that would spend $17.7 billion. The hole in the current 2010 budget will be filled with federal stimulus funds that the governor had planned to spend in 2011.

Perdue finds $244 million in new revenue through fee increases and by taking away the sales tax exemption that nonprofit hospitals enjoy for purchases. The governor, signaling his ire at Georgia's hospitals, also said he would reduce the rate by which hospitals and doctors are reimbursed for treating Medicaid patients by 10.25 percent.

When the governor released his original 2011 budget proposal in January, he included more than $344 million in revenue from a proposed 1.6 percent fee against many hospitals. The hospital industry attacked that plan, and Republican lawmakers lambasted it as a hospital "bed tax." Perdue said Thursday that the hospital industry has forced him to take more drastic measures.

"I don't think the hospital community has been fair with the citizens of Georgia," Perdue told reporters. "They've offered no ideas other than to cut ‘them' or raise money elsewhere."

Hospital industry leaders disagreed. Earl Rogers, senior vice president of the Georgia Hospital Association, said the governor's plans would harm patient care and that a 10 percent reduction in provider reimbursements would have drastic consequences, including the closure of Grady Memorial Hospital.

But Bert Brantley, Perdue's spokesman, said the hospitals can't have it both ways.

"This was the worst option, and the governor has said that repeatedly. And they [the hospitals] fought the provider fee," Brantley said. "They cannot point to Grady arguing against a provider cut when they wouldn't point to Grady arguing for the provider fee."

The governor has said that hospitals such as Grady would have made money off his provider fee plan, which included a Medicaid reimbursement increase of 14.5 percent. Instead, hospitals now face a 10.25 percent drop in reimbursements.

Perdue also signaled a willingness to continue to negotiate with the hospitals on a solution.

Still, while hospitals are the clear loser in Perdue's plan, higher education and k-12 emerged in better shape than feared. The 2011 budget still includes the $265 million reduction to higher education Perdue announced in January, but over the past three weeks, the University System of Georgia has reeled from calls from lawmakers for an additional $300 million. The governor's plan released Thursday instead has $113 million in new cuts.

K-12 will see a cut of $101 million in 2011 beyond what Perdue had originally proposed.

Democrats on Thursday called for a "firewall" around education.

"We must protect the HOPE scholarship and public schools," Senate Minority Leader Robert Brown (D-Macon) said.

The idea of a tobacco tax increase seems to be losing steam by the day. However, House leaders in the next few days are expected to file legislation hiking a host of user fees in hopes of raising about $100 million more next year.

House Appropriations Chairman Ben Harbin (R-Evans) said the bill to let agencies set fees would take some of the politics out of the process. Lawmakers fear a political backlash any time they raise fees.