More Budget cuts in store for Georgia?

Before Gov. Sonny Perdue announced plans last week to cut $900 million from the budget and furlough teachers and state employees, he broke the news to local school superintendents.

But after that conference call, some of them were left with the impression that the new hits won’t be enough to solve the deep fiscal problems the state faces.

“It sounds to me like this isn’t over,” said Cherokee County Superintendent Frank Petruzielo. “I am telling my [school] board ... to probably get ready for phase two by January.”

Petruzielo might be right.

With fiscal 2010 less than a month old, Perdue and lawmakers don’t know what’s ahead for the state’s economy. But they do know that historically, governments don’t see an uptick in tax collections until well after an economic recovery begins.

“This train is not going to go downhill forever,” Perdue said when he announced the cuts. “Predicting when this will get to the bottom of the hill is very inexact science.”

Some legislative leaders who have been working with Perdue on the budget crisis say the state might have to cut as much as $600 million more to balance the budget. And with as little as $35 million left uncommitted in state reserves, there is little margin for error.

That $35 million, said House Appropriations Chairman Ben Harbin (R-Evans), would be enough to “run state government for about half an hour.”

Harbin doesn’t rule out the need for a special legislative session to cut more if the state’s fiscal situation doesn’t improve.

“We’re going to get a couple of months into this fiscal year and if we’re still not hitting the bottom, then it’s probably time for us to call a special session and have all of us come in and work on this together,” Harbin said.

Georgia’s fiscal problems aren’t new or particularly unusual. Legislators from across the country have closed at least $268.6 billion in gaps between projected spending and revenues since the recession started in December 2007, according to the National Conference of State Legislatures. The drop in state tax collections during the first three months of 2009 was the sharpest on record, a survey by the Nelson A. Rockefeller Institute of Government found.

In Georgia, tax collections fell about 18.5 percent during the first half of 2009.

State tax money in Georgia helps pay to educate about 2 million Georgians and provides health care to about 1.5 million people. The state pays a large portion of the salaries of about 125,000 public school teachers and employs another 100,000 Georgians. It regulates insurance and food safety, patrols highways, oversees elections and provides parks throughout the state.

The reductions Perdue announced last week will bring Georgia to a budget level nearly equal to that of 2005.

But, as Perdue pointed out, the state’s population has grown by 1 million since that time.

School superintendents and state officials are scrambling to figure out how to deal with the latest cutbacks. Some state agencies have been furloughing employees since last fall. School officials are trying to schedule the days off without affecting student instruction.

House leaders wanted a special session to address the problem. They wanted to consider eliminating entire programs and state services.

Instead, Perdue and lawmakers will monitor the revenue situation in hopes that the $900 million cut Perdue ordered last week will do the trick. They will also review plans agencies develop to make the cutbacks.

“I think this should be enough,” said Kenneth Heaghney, the governor’s chief economic adviser and a Georgia State University economist. “But I’ve been wrong before.”

He said the projection is based on the state’s economy being “near a bottom,” with growth beginning by the end of the year. “Obviously that’s not assured,” he added.

Senate Appropriations Chairman Jack Hill (R-Reidsville) is less optimistic. He wrote recently that the state could “easily face a $1.5 billion shortfall” this year,” if tax collections continue to show double-digit declines.

“There really aren’t any guides we can look at that say we have reached the bottom,” Hill said.

The Georgia Budget and Policy Institute, an Atlanta budget think tank, has recommended the General Assembly consider raising cigarette taxes, hire more auditors, temporarily impose a 1 tax percent surcharge on family income of more than $400,000 and/or reinstate an estate tax. The last two recommendations, institute officials say, would affect less than 1 percent of Georgians.

But 2010 is an election year and no incumbent wants to run for office after voting for a tax hike. The General Assembly has consistently voted to cut, not raise taxes.

“There is one thing everyone is united on,” said House Majority Leader Jerry Keen (R-St. Simons Island). “We don’t raise taxes on citizens and businesses during a recession. Nothing would hinder a recovery more than raising taxes.”

Kelly McCutchen of the Atlanta-based Georgia Public Policy Foundation, agrees raising taxes right now is a bad idea.

“Barring another dip in the economy, we believe the 2010 budget can be balanced with cost cutting,” McCutchen said. “However, if state revenues do not start to normalize by next year, the 2011 budget will force some very difficult choices. Raising taxes would certainly be the last option you would want to pursue in a recession.”