State deficit challenges candidates' schools plans

Gubernatorial candidates vowing to plow big bucks into schools and slash taxes face a sobering reality if they win election: It may be at least four years before the state can afford to do what they promise.

If then.

A new Georgia State University study obtained by The Atlanta Journal-Constitution suggests that without major, permanent spending cuts or revenue increases, the state faces massive budget shortfalls through at least the four-year term of the next governor. Budget shortfalls may be the new normal for state government.

“The gap is not going to close itself,” said Carolyn Bourdeaux, one of the authors of the study and, until recently, the state Senate’s budget director. “The state is going to have to change the structure of its expenditures, how it does business, which means getting rid of programs and getting rid of big programs if they want to do this through expenditure cuts.”

The prospect of long-term deficits could force dramatic changes in state education programs and other services. That’s something a few legislative leaders have warned of in recent years as federal stimulus money helped them avoid “draconian” spending cuts.

So instead of putting billions more into schools, as some candidates promise, state leaders could reduce spending so much that systems will be forced to eliminate school days for good. Or lay off more teachers, with no hope of bringing them back. Or end any program that isn’t basic, k-12 curriculum.

State parks could close because the Department of Natural Resources might not have the money to staff them. Driver’s license lines could go back to the way they were in the 1990s. Prisons could be forced to parole more felons. Tuition for colleges could skyrocket, classes could be cut and campuses merged or closed to save money.

The Georgia Constitution mandates a balanced budget.

At least part of the gap could be made up with higher taxes or by eliminating some tax loopholes lawmakers have approved over the years. A new state council began work reviewing the tax code just last week.

That panel will spend the next five months considering a host of issues, including whether the state should charge sales taxes on more goods and services and raise less from income taxes, and which tax breaks create jobs and which don’t.

But whatever the panel recommends, the Republican leaders who head the state say they want any tax changes to be “revenue neutral,” meaning they won’t raise additional money.

“We are certainly not anticipating any tax increases,” said Rep. Don Parsons, R-Marietta, a longtime member of the House Appropriations Committee.

According to the Georgia State study, state tax collections, which have plummeted during the recession, may not surpass what was raised in fiscal 2007 until 2015. Without changes in taxes or spending policies, annual deficits of $1.5 billion to $2.1 billion are “likely to persist well past FY [fiscal year] 2015,” Bourdeaux and GSU economist David Sjoquist said in the study.

The GSU study isn’t the first to predict bad times ahead for the state’s budget. Economists and budget writers have said the coming year will be tough in part because the federal stimulus money that has propped up state finances disappears.

But the GSU study takes the analysis a step further, looking ahead several years to see the potential for an annual crisis without significant changes.

Parsons is skeptical of the long-range forecasts. He’s been hearing them for years while on the Appropriations Committee.

“They’ll say, based on historical data, this should have happened, but because of something external that occurred, it didn’t go the way they thought it would go,” Parsons said. “They [GSU researchers] may be wrong.”

Lt. Gov. Casey Cagle, on the other hand, has long warned that there would be a day of fiscal reckoning for state government.

“Georgia has no choice but to prioritize just like business,” he said. “You have to determine what the essential services of government are, and non-essential services have to go by the wayside.” Cagle listed schools, prisons and taking care of the needy as essential.

Education, prisons and health care for the poor make up more than three-fourths of the state’s budget. The biggest cost is education.

The state Constitution provides that “an adequate public education for the citizens shall be a primary obligation of the State of Georgia.” So dramatic changes may bring legal challenges.

Cagle and others have raised the possibility of saving money by eliminating the jobs of some of the state’s 90,000 employees.

One gubernatorial candidate, former Secretary of State Karen Handel, has already called on the state to lay off 7,800 workers. That would save about $400 million.

But Handel has also called for phasing out the state’s income tax, which could make the hole much deeper. The income tax provides more than half of all state revenue. She suggested at least some of the lost revenue could be made up by raising the state sales tax.

Her Republican runoff opponent, former U.S. Rep. Nathan Deal, is calling for tax cuts. He wants to cut corporate income taxes by one-third, eliminate the corporate net worth tax on businesses and exempt Georgians from paying taxes on the first $7,000 worth of income they earn.

Combined, Deal’s package could cost state coffers — and save individuals and businesses — about $2 billion a year.

The Democratic nominee, 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.

His opponents estimate the price tag of his proposals at more than $2 billion. Barnes said at least some of the money could be raised by eliminating special-interest sales and income tax breaks, but he provides few specifics.

Kelly McCutchen, president of the Georgia Public Policy Foundation, a conservative Atlanta think tank, says campaign promises should be taken with a grain of salt considering the state’s financial condition.

But he said there are things the state can do.

A task force Cagle appointed and McCutchen served on this year recommended several steps that could potentially save $3 billion. Some would be politically difficult, but McCutchen said they are worth discussing. They include freezing longevity raises for the state’s 125,000 teachers and making them pay more into their pension system. Teachers would get raises based on “merit,” not on how many years they worked.

The task force called for a review of college tuition that would probably mean sizable increases for students attending schools such as the University of Georgia.

It recommended changes in health-care programs for state employees and the poor that it says would save $1.9 billion in five years. It called for reducing the state’s vast real estate holdings.

And it calls for eliminating state jobs.

While lawmakers have, so far, tried to cut k-12 education less than other services, McCutchen said the state can’t solve its problems without making changes there too. He supports a major expansion of online education and said some school districts should consolidate or at least share services such as payroll, food service and transportation management.

Fixing the state’s financial problems, he said, “is going to require some really innovative leadership in the governor and General Assembly to look at new ways of doing things. And it’s got to come in major spending areas of health care, education and corrections.

“None of those things can be done overnight. But we have to start now” he said. “That’s what we need to hear the candidates talking about.”

Bourdeaux said, “The next governor is going to face some very, very tough choices. I don’t think anybody envies what they are facing.”

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Check our sources

The Georgia State study’s authors:

Carolyn Bourdeaux is an associate professor of public administration at Georgia State University. She recently returned to the school after a leave of absence working as director of the Georgia Senate budget office. Her recent research focuses on state budget decision-making and program and performance-based budgeting.