Georgia’s record budget still lags population growth, inflation

A record state budget of $23.7 billion goes into effect Friday, bringing pay raises for thousands of teachers and an expansive road and bridge construction program.

On the surface, it is seen as yet another sign that a state that once struggled to keep schools open 180 days a year has left the Great Recession in its rear-view mirror.

But an Atlanta Journal-Constitution analysis of state budgets shows, when inflation and population growth are considered, many areas of government spending remain below where they where in 2008 when the recession hit.

On a per-capita, inflation-adjusted basis, state spending on universities and technical colleges is down more than 20 percent, on criminal justice and public safety more than 10 percent, and on natural resources by more than one-third. Even spending on k-12 schools — the target of much of the state’s increased revenue in recent years — is below where it was in 2008 when population growth and inflation are taken into account.

Meanwhile, spending on public health programs such as Medicaid, student scholarships such as HOPE and, thanks to new taxes, transportation has ballooned.

None of that surprises Alan Essig, a one-time state budget analyst and former director of the left-leaning Georgia Budget and Policy Institute. Essig, who is now a consultant, has studied Georgia spending trends for years, and he said tax collections, while up, have not kept pace with population growth and inflation.

That’s important because state government, unlike the federal government, can’t spend more than it takes in.

“It’s kind of what I expected,” Essig said after reviewing the AJC’s analysis. “Clearly, we’re not back to where we were pre-recession in terms of revenue.”

‘Record budget … record population’

State House Appropriations Chairman Terry England, R-Auburn, said the slow growth goes back even further.

“If you look at per-capita spending, we are somewhere around where we were in 1998,” England said.

You wouldn’t necessarily know that looking at the raw numbers. Overall state spending in the upcoming fiscal year will be far above what it was before the recession.

But as England said, “We have a record budget, but we also have a record population.”

During the upcoming fiscal year, the state is budgeted to spend roughly $1.1 billion more on k-12 schools than it did in fiscal 2008. Per-pupil spending will be higher, but inflation rose faster than enrollment.

Public safety/law enforcement spending is up 14.7 percent. Spending on public health care has jumped about $1.4 billion.

Direct state funding to the University System of Georgia and technical colleges has dipped.

But the agency that gives out scholarships to students attending those schools — such as the HOPE scholarship — has seen its budget increase more than 50 percent. And unlike most other agencies, the University System has been able to make up for cuts in per-pupil spending from the state by raising tuition. So while the state has chipped in less for years, students and scholarship programs paid more.

One of the biggest areas of growth is transportation spending, which is skyrocketing because of new gas and hotel taxes that lawmakers approved during the 2015 session that promised $900 million or more in new revenue.

Same tax policy, different economy

Despite the big numbers in this year’s budget, England said the state would have much more to spend if tax collections continued to climb at the rate they were growing leading up to the Great Recession.

But Kelly McCutchen, the president of the conservative Georgia Public Policy Foundation, said the state has struggled to recover from recent recessions.

“We have lost a lot of manufacturing jobs, management jobs, IT jobs that we haven’t recovered,” he said.

McCutchen said growth in the sales tax base — a vital component of state and local budgets — has been slow in part because the state taxes the economy of 20, 30 years ago, when goods, and not services, were king. Also, lawmakers annually approve special-interest tax breaks that cut into the state’s tax take.

Meanwhile, he said, the state hasn’t done enough to rein in the cost of public health care programs. The cost of health care is growing at a faster rate than basic inflation, and the number of poor Georgians signing up for Medicaid has grown tremendously.

Because some doctors say they can’t afford to accept the low rates paid by Medicaid, McCutchen said, they are leaving the program. So Medicaid recipients have fewer choices of doctors and more of them wind up in costly hospital emergency rooms for services or treatment that could be handled much more cheaply in doctors’ offices.

“Driving more people to the ER, adding 500,000 more people (to Medicaid rolls) and not adding any doctors … isn’t going to make it cost less,” he said. “It’s incredibly inefficient.”

‘More effective and efficient’

Overall, Essig said, Georgia continues to be one of the lowest-spending state governments, per capita, in the country.

Most state leaders don’t see that as a bad thing.

The state maintains a AAA bond rating — meaning it gets low interest rates when it borrows money for construction — in part because it has traditionally been a fiscally conservative state.

“We are trying to manage the best we can and make sure we are spending taxpayer dollars most efficiently,” England said.

In some areas, the relative decline in spending may have been a positive thing, McCutchen added.

“We have managed the budget by becoming more effective and efficient in many areas,” he said. “For example, consolidation of technical colleges and universities has reduced administrative costs, and criminal justice reforms have saved millions of dollars.”

“Being forced to reduce spending is not a problem if it forces tough decisions that enhance efficiency and effectiveness,” McCutchen said. “Even the private sector often allows wasteful spending to grow during good economic times but then uses the excuse of a recession to scale back.”