Typically, administrations receive spending requests for the current and upcoming year in the fall, meet with agency directors and then put together spending plans that the governor submits to lawmakers during the first week of the General Assembly session in January.
But state lawmakers were surprised last month by Kemp's announcement that — due to the potential for an iffy economy next year and the need to save money for his priorities — agencies would have to cut back.
After all, only a few months earlier, they’d passed a $27.5 billion spending plan for fiscal 2020, which began July 1. And at the time, there was no talk of needing to reduce spending by several hundred million dollars in agencies that do everything from patrolling highways and guarding felons to investigating environmental problems and administering health care programs for one-quarter of Georgians.
Kemp said the state would begin withholding money from agencies starting Oct 1.
Some massive enrollment-driven programs — such as k-12 schools, universities and Medicaid, the health care program for the poor and disabled — are exempt from the cuts.
In all, only about 23% of the state-funded portion of the budget was not exempted, but that still leaves several agencies on the hook for cuts, including the departments of Agriculture, Corrections, Driver Services, Public Health, public defenders, the Georgia State Patrol, the GBI, most of the Department of Natural Resources, and the administration of k-12 schools and colleges.
The board of the Department of Community Health, which administers health care plans that cover more than 2.5 million Georgians, voted last month to submit a proposal for $10 million in cuts to the agency's administration. Job reductions have not been ruled out.
Many of the agencies on the chopping block are labor-intensive — they provide services that require staffers — so there are fears that they will have to eliminate positions.
But Kemp won office in 2018 promising a leaner state government, and he wants to have enough money to fund his priorities, such as another big pay raise for teachers.
Once Kemp announced plans to reduce spending, House Speaker David Ralston, R-Blue Ridge, called on his Appropriations Committee this fall to hold rare hearings on the budget before the session. Last week, the House and Senate announced joint hearings later this month.
“We will work to take the governor’s concerns about a slowing economy into account as we begin this important work, and we look forward to working with Governor Kemp’s staff, state agency heads and economists to determine the prudent way forward,” England said last week.
But the Kemp administration plans to make clear it won’t participate, and neither will the people it has appointed to run state agencies.
While the administration isn’t seeing flashing red warning signs on the economy, the governor and his staff have been cautious about how they deal with state finances.
The Kemp administration's budget directive came only a few months after it cut spending by suspending for a month contributions into the State Health Benefit Plan, which provides health coverage for more than 660,000 teachers, state employees, retirees and their dependents. The one-month "holiday" saved state agencies and school districts about $235 million.
The move was made because administration officials wanted to make sure the state was able to make its budget for fiscal 2019, which ended June 30.
They face the loss of an additional $550 million in revenue next year if the General Assembly in January approves a reduction in the top state income tax rate from 5.75% to 5.5%. The vote will be the second part of a plan approved in 2018 to reduce income tax rates. A recent report by the left-leaning Georgia Budget and Policy Institute said most of the savings will go to the wealthiest Georgians, not the state's middle-income or poorest residents.
The administration also faces rising costs for things such as rising school and health care program enrollment.
Moody’s Investor Service, one of the top national bond rating agencies, sent out a research report Tuesday praising Kemp’s decision to get ahead of any potential recession in Georgia.
“The willingness and ability to successfully balance the budget — including through expenditure cuts — is a hallmark of a strong credit profile,” it read. “The state is planning to cut taxes and raise teacher salaries, so advance spending cuts to maintain balance, and indeed maintain fiscal strength should a recession begin in the next couple of years, underscores the state’s responsible governance.”
The Kemp administration directed state agencies to identify cuts to their budgets for fiscal 2020, which ends June 30, and fiscal 2021.
The amount agencies were told to identify in cuts to their budgets this fiscal year.
The amount agencies were told to identify in cuts to their budgets for the next fiscal year.
Some enrollment-driven programs — such as k-12 schools, universities and Medicaid — will be spared.
The state’s current budget of $27.5 billion in state funds allocated:
Department of Education
Department of Community Health
University System of Georgia
Department of Transportation
Department of Behavioral Health
Department of Corrections
Source: State budget for fiscal 2020
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