Georgia revisits lessons of Great Recession with new economic downturn

Brenda Simmons had been working for the state agency that investigates child abuse cases and helps the poor sign up for food stamps for more than 20 year when the Great Recession hit Georgia’s economy like a sledgehammer in 2008.

Georgians lost their jobs, homes and businesses. State government, which provided salaries to about 300,000 teachers, university staffers, state patrol officers, prison guards, park rangers and meat inspectors, saw tax collections plummet. That brought layoffs, pay cuts, furloughs, the elimination of programs and closing of facilities.

For Simmons and her colleagues in the Savannah office, many of whom earned $25,000, $30,000, maybe $40,000 a year, it meant taking a day off without pay each month — more than two weeks without income over the course of the year. Managers let them know they could apply for food stamps if the pay cut made them eligible.

“More people needed assistance. The caseloads increased, but because of the budget cuts and furloughs, we had large turnover. … The workload increased for those that remained,” said Simmons, now retired. “It was a struggle, but thank God we made it.”

That feeling was prevalent from 2008 through about 2012 for those who kept teaching, kept patrolling highways, kept investigating complaints and kept parks open: The aim was to survive the downturn, hoping for things to get better eventually.

Many of the people who run state government are experiencing a similar mix of dread and determination now as they prepare for the Coronovirus Recession.

The question is: Did state officials and budget writers learn from what they went through a decade ago? Will it be any different this time around? And will there be a new normal in state government, just like there may be ahead for society at large?

The Great Recession was a shock to the state's financial system that lasted for years. The coronovirus pandemic hit even quicker, and the pain — at least over the next 15 months — may go deeper.

"While the Great Recession of 2008 was considered to be a 'once in a lifetime' event, our current situation will certainly overshadow it," state budget writers wrote recently in directing state agencies to cut more than $3.5 billion — 14% — from the upcoming year's budget.

National experts warn that layoffs and furloughs in state and local governments could prolong the recession, adding to unemployment rolls and stunting consumer spending.

Still, the billions in income, sales and fuel taxes the state won’t collect, and the likelihood of government job cuts, are far down on most Georgians’ lists of things to worry about.

"I'm not sure people could say, 'because of budget cuts, the street has a hole in,' " said state Rep. Dar' Shun Kendrick, D-Lithonia. "They probably won't notice until they have an issue. So many people are detached from state government."

But to many of the hundreds of thousands of Georgians who make a living either working for the state, public universities or local school districts, or supplying products or services to state programs, the impending spending cuts are something they have been thinking about since the pandemic shut down Georgia in March.

Especially those who were there during the Great Recession.

"At the end of every dollar was a person," said House Appropriations Chairman Terry England, R-Auburn, who took over the budget committee three years into the Great Recession. "Whether it's a service to an individual, a frontline person like a teacher, state patrol, corrections officer or food inspector.

“I spent a lot of nights thinking about it, knowing the only option school systems were going to have was to lay off or furlough people,” he added. “You spent a lot of sleepless nights thinking about the impact of the decisions you were going to have to make.”

‘Once in a lifetime’ recession

The global financial and real estate crisis known as the Great Recession began at the end of 2007, but Georgia really started feeling it hard in 2008. Then-Gov. Sonny Perdue acted quickly — a month into the new fiscal year that began that July — stalling raises that lawmakers had approved and announcing cutbacks.

The $1.5 billion the state had accumulated in reserve was gone quickly to fill budget holes, and revenue collections dropped sharply.

The state gets most of its money from income and sales taxes. With unemployment high and people losing their homes, many Georgians were earning less, as were businesses. They had less money to spend on cars or clothes or going to eat. And less to pay in taxes.

Sarah Beth Gehl, then the deputy director of the left-leaning Georgia Budget and Policy Institute, said it seemed to drag on forever.

“Year after year of revenue declining … it wasn’t just this swift bottoming out,” Gehl said. “It really seemed like budget after budget of really draconian cuts to education and health care.”

Perdue, a Republican, and the GOP-dominant General Assembly had been known for cutting taxes, not raising them, so few schemes to raise more money went anywhere. The state would do with what it had coming in, along with some help from the federal government.

State staffers were quickly given days off without pay. Thousands of vacant positions were swept from the books. It remains unclear today how many state employees lost their jobs.

“It was doom and gloom at every turn,” said Ben Harbin, who was the Georgia House budget chief during the first few years of the recession. Harbin said his committee called in agencies and told them to develop plans to cut, deep.

“We told them, help us cut what we don’t have to have right now and let’s keep what we have to have,” he said. “If you do that, you end up surviving.”

The Department of Natural Resources, which saw its budget cut about 40% during that period, reduced park hours and closed some facilities. The Georgia Bureau of Investigation curtailed agents’ involvement in some cases. The Georgia State Patrol cut radio dispatch jobs and moved some troopers off their regular duties to fill holes.

Steve Herndon was a deputy commissioner in the Department of Juvenile Justice, which had to, among other things, close one of its facilities in Milledgeville. Hundreds lost jobs in the department’s closings and downsizing, and kids were either moved to other facilities or released.

A decade later, he doesn’t like thinking about it.

“We had people who had only been employed with us a few months. We had people who were within a few months of retirement,” Herndon said. “We had a lot of good people, and you don’t like to see career employees let go.”

He noted that staffers in many of those jobs were among the lowest-paid in state government.

“I think about the prison guards, the juvenile corrections officers, the DFCS workers, who have really, really tough jobs,” he said. “And then to lay all of this stress on them, having to think, ‘Am I going to have a job?’ “

The recession forced lawmakers to do away with some of their most prized appropriations each year — the so-called projects of regional concern (PORC) — local funding for football or band uniforms, ballfield lights, local tourism or downtown beautification projects. Money for tourist attractions such as halls of fame — which were also popular with lawmakers from those regions — was also nixed.

The state raided surpluses in the State Health Benefit Plan, which provided health insurance to more than 600,000 teachers, state employees, retirees and their dependents. That ensured higher health insurance premiums for those covered by the plan.

Schools hit hard

Nothing caused as much consternation as the cuts to k-12 education. The state spends $10 billion a year on public k-12 schools, and the billions it cut during that period caused districts to raise property taxes, furlough and lay off teachers and staff, eliminate programs such as band and art, reduce the school year by 5 to 20 days in some areas and increase the number of children in each class.

“I watched class sizes grow in my children’s elementary school, and watched entire programs disappear in middle and high schools,” said John Palmer, a Cobb County band director. “I watched good teachers lose their jobs simply because they were the last to be hired.”

The spending reductions cut especially deep in rural Georgia, where small-town school boards couldn't raise enough money by increasing property taxes to put a dent in the shortfall. In many of those districts, there were no options but to lay off teachers and staff, eliminate ROTC programs and get rid of academic coaches for struggling students. The impact lasted for years, with some districts still using pay raise money to plug budget holes and still furloughing staffers into 2017.

The one area of state government that had the ability to grow was the University System of Georgia, where the Board of Regents could hike tuition to raise more money. The regents did just that. Tuition at the University of Georgia increased 50% between 2008 and 2011, and student fees rose 87%.

Kendrick was getting her master’s in business administration at Kennesaw State at the time. She said many students resigned themselves to higher costs each year.

“They raised tuition every year anyway,” she said. “At some point, you look at how much it is raised, rather than if it’s going to be raised.”

Current University System Chancellor Steve Wrigley was an administrator at UGA at the time, and he said the jump in college costs for students bothered him.

“The financial consequences to students and families were dramatic and altered the course of many lives,” said Wrigley, who worked his way through Georgia State University. “I was struck at the time, and it stays with me today, that higher education nationally and in Georgia was not as sensitive to the financial suffering of families and its impact on the ability to afford college.

“Colleges and universities raised prices and did not pay enough attention to reducing costs and understanding the financial plight of students.”

The Board of Regents last month decided not to raise tuition this fall. And Wrigley recently sent out a letter letting college faculty and staff know he expected cutbacks, including possibly furloughs and layoffs.

What will be different this time?

The effects of the recession were still lingering when Nathan Deal became governor in 2011, but he quickly showed a few lessons had been learned.

Deal made it a policy that most state agencies wouldn't be able to ask for more funding each year, allowing him to save money and build up a record $2.5 billion reserve by the time he left office in 2019.

He also knew the state couldn't afford to keep building prisons to warehouse inmates. One of the ways he was able to sell his criminal justice overhaul to lower the prison population was to show the substantial savings it would bring at a time when the state didn't have extra money to spend.

Gehl, who now works for the the Southern Economic Advancement Project, a policy program that aims to broaden economic power in the South, said the lesson many lawmakers took from the Great Recession was that they could get through downturns solely by cutting spending. It’s the wrong lesson to take, she said.

“When you cut and cut basic services like education and health care, the inequities (in society) will deepen,” she said. “Some communities can make up the difference from cuts, some can’t. Technology gaps increase, health infrastructure disappears. You are just dooming some communities.”

For instance, lawmakers have spent much of the past few years trying to bring broadband to rural Georgia and to prop up small-town hospitals, several of which have closed. The broadband problem is especially acute now that students are being taught online because schools have closed.

While similar issues existed before the Great Recession, they were not helped by a political culture that relied on cutting back to get through the downturn, she said.

Kendrick said the state knew about inequities in areas such as education but didn’t react as the Great Recession faded.

“I think state government is always 10 years behind the curve,” she said. “We learned lessons, but unfortunately we didn’t move fast enough.”

Kyle Wingfield, the president of the conservative Georgia Public Policy Foundation, said that for the most part, the state didn’t rethink what it was doing, like how Georgia provided education to k-12 students.

“They just patched things together and continued doing things the way they always did them,” Wingfield said. “I think that the theme is not lessons learned. It’s lessons that went unheeded last time that can’t be ignored this time.”

Among those may be more online learning, Wingfield said. Instead of continually building schools, as Georgia has done year after year, he said the current experiment in teaching classes online may be expanded so that children, for instance, wouldn’t go into a classroom every day but maybe a few days a week on a staggered basis, freeing up space.

“Parents are considering other ways of schooling their kids like never before,” he said. “There is an understanding that (schools) are not going to put 24 kids together in a classroom if they open their doors.”

The same could be true for colleges, which currently aren’t sure how many students will want to return in the fall. Colleges have been on a building spree for a couple of decades, and that could slow.

England noted that the pandemic forced tens of thousands of government staffers to work from home, and he said there may be a similar impact. State agencies have found out what works and what doesn’t, and they may keep some workers at home, reducing the need for state office space.

As in the last recession, furloughs and staff layoffs are expected. But Wingfield said he wouldn’t be surprised to see some stronger consideration given to measures to increase revenue, such as legislation filed annually to bring cigarette taxes up to the national average or a resolution proposing a constitutional amendment to allow casinos in the state.

But other Republican lawmakers will, as they did during the Great Recession, want to make state government smaller and avoid having spending go back to the levels it was before the pandemic shutdown.

As Gov. Brian Kemp said, “It’s a great opportunity for us to revive conversations about doing more with less.”

Wingfield said: “There are going to be very difficult discussions. We just tried to paper over it last time and apply some duct tape to the thing. This time you’re going to really have to rethink how you do things.”

Impact of Great Recession on Georgia

State income and sales tax collections tanked once the Great Recession kicked in, and they stayed low for years afterward. Below are the collections before the recession hit the state in 2008, and after, and state spending those years:

Individual income taxes

Fiscal 2007 — $8.82 billion

Fiscal 2008 — $8.83 billion

Fiscal 2009 — $7.8 billion

Fiscal 2010 — $7 billion

Fiscal 2011 — $7.6 billion

Corporate income tax collections

Fiscal 2007 — $1 billion

Fiscal 2008 — $942 million

Fiscal 2009 — $695 million

Fiscal 2010 — $685 million

Fiscal 2011 — $670 million

Sales tax collections

Fiscal 2007 — $5.9 billion

Fiscal 2008 — $5.8 billion

Fiscal 2009 — $5.3 billion

Fiscal 2010 — $4.8 billion

Fiscal 2011 — $5 billion

State spending

2007 — $18.6 billion

2008 — $17.9 billion

2009 — $16.7 billion

2010 — $16.6 billion

2011 — $17.7 billion

Source: Governor’s Office of Planning and Budget