State government reserves have hit a record $2.4 billion, another sign that Gov. Nathan Deal and lawmakers have been successful in rebuilding Georgia’s savings account after the Great Recession.
Deal had made replenishing the reserve — about as unsexy an exercise as politicians can engage in — a priority after he took office in 2011 with little in the state's till.
The Great Recession showed exactly how important reserves are. Even with a fairly strong reserve, lawmakers had to dramatically cut state spending, which led to layoffs and furloughs for state employees and teachers, shorter school years, higher college tuition, and cutbacks in most state services.
The Revenue Shortfall Reserve was close to empty when Deal took office, but he promised that when he ended his second term in January 2019, his successor would have at least $2 billion in the state savings account. With a consistently strong economy bringing in tax revenue, Deal met that pledge in 2016, and he has reset the goal to $2.5 billion.
That’s enough to run state government — from schools to prisons, parks to public health care — for more than a month.
Besides making sure the state has enough money to pay its bills, the reserves are important because officials say they help the state keep its AAA bond rating, which allows the government to borrow money at lower interest rates. That can save the state millions of dollars a year in interest payments.
The Pew Charitable Trusts recently released a report saying that last year, Georgia had the 11th-largest revenue shortfall reserve — based on how many days of government it could fund — in the country and tops in the Southeast.
State Senate Appropriations Chairman Jack Hill, R-Reidsville, a champion of both the reserves and the state's top bond rating, wonders whether Georgia, on the heels of Tropical Storm Irma, should create a separate savings account to pay for natural disaster recovery.
“I see the RSR as a reserve to continue state operations in the short term, when revenues are interrupted and drop suddenly as in the last recession,” Hill said in his weekly newsletter. “The RSR should tide the state over until appropriations decisions can be made in the amended or general budget to line up with the revenue estimate.”
Storms such as Irma, or Hurricane Harvey, which devastated Texas, are something different. While lawmakers appropriate money for the governor's emergency fund, it doesn't have nearly enough to provide a state a 25 percent match of Federal Emergency Management Agency funding in the event of a storm causing catastrophic damage.
Lawmakers appropriated $11 million for the governor’s emergency fund this year. If Georgia suffered $1 billion in losses from a storm, the state match would be $250 million, Hill said. That would blow a big hole in the state’s budget.
The appropriations chairman said FEMA is considering a proposal that would force states to have deductible matches in hand when applying for disaster assistance.
“Maybe this (upcoming) session we should look at legislation creating a separate FEMA match reserve,” he said.
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