Georgia’s fiscal shortfalls: An ax isn’t the only tool the state needs

“Barring an exceptionally fast economic recovery, Georgia is facing a long-term structural budget deficit, and in the absence of increased federal funds, will have to substantially alter its expenditure and/or revenue structure to bring the budget into balance.”

— Fiscal Research Center, Georgia State University

Hope for the best and plan for the worst. That about sums up the fiscal situation facing our next governor.

The projections are that we’re in for at least a couple more threadbare years ahead. That means strategic, forward-facing thinking must prevail if Georgia is to remain a player in national and global economic arenas.

Although we’re in an election season, when blame-it-all-on-Washington-or-someone-else attacks are in full force, Georgia’s next governor and legislative leaders will have sobering spreadsheets to review once the last campaign ad has run and voters have made their choices.

Georgia State University professors Carolyn Bourdeaux and David L. Sjoquist wrote in a July report that, “In the next couple of years, state governments are going to have to make choices that will affect the structure of government services for decades to come.” Put simply, a structural deficit occurs when tax and fee revenues are insufficient to pay for existing services and programs.

Finding money to fund even a minimal level of state services in the short-term will be tough, even as the economy begins to recover.

The study notes that in fiscal year 2010, which ended in June, the state “faced a $4.2 billion structural deficit.” Spending cuts shrank the gap to $2.8 billion, which was closed using one-time funds, reserves and about $1.7 billion of that controversial federal stimulus money. Estimates for fiscal 2011, which began July 1, show a similar scenario.

In fiscal 2012, the GSU work predicts a $1.8 billion hole when stimulus dollars disappear altogether from Georgia’s budget.

Fiscal conservative politicians say state government should further tighten purse strings, much as Georgia’s families and businesses have done. Thrift is indeed needed in a time when state general fund revenue fell to $16.12 billion in fiscal 2010, from $17.83 billion just a year earlier — a 10 percent drop.

It’s true that jettisoning waste and inefficiencies is good for corporate and government budgets alike. We must do more than cut, though.

State officials should study another strategy of the private sector that they’ve charged with creating jobs in Georgia. Businesspeople know well that cost-cutting should be paired with prudent investments to maximize chances for success.

Companies and governments sometimes have to shrink their way to stability. We’d suggest, though, that they can’t just shrink their way to greater prosperity.

It acts against economic interest, for example, if prudence comes at the price of an undersized, underinvested transportation network that strangles profits and efficiency alike. A jaunt around I-285 at rush hour will prove that point in short order and slow speeds.

Ditto for slashed education spending that could put our children at a competitive disadvantage and cause companies to look past pluses like Hartsfield-Jackson International Airport in favor of states with a better education report card.

That’s the challenge facing Georgia in coming years. The state Legislature did make a significant move toward addressing long-term revenue issues by creating the Special Council on Tax Reform and Fairness for Georgians. It’s charged with bringing forth draft tax-reform legislation by the time the General Assembly convenes next January.

Lt. Gov. Casey Cagle told the council last month that the tax code is “outdated” and “in need of being better streamlined and more fair for our state’s citizens.”