Gov. Nathan Deal is making it clear that the era of state budget cutting isn't over, asking state agencies to find another $553 million in reductions through June 2014.
About half of that would come from higher education and from public health — $108 million from the University System of Georgia and $170 million from the Department Community Health, which handles Medicaid and PeachCare — while most k-12 school funding is exempt. Agencies are still weighing their responses to the order, issued last week, but some will consider layoffs.
The order — marking the fifth consecutive year that the governor's Office of Planning and Budget has told department heads to come up with additional reductions — reflects continued weakness in the state's economy and concern that it won't improve dramatically before 2014. This year's requested cuts are larger than last year's.
Sen. George Hooks, D-Americus, former chairman of the Senate budget committee, called Deal's call for new cuts "scary."
"It's going to be tough because all they [agencies] have done is cut, cut, cut," Hooks said.
Mercer University economist Roger Tutterow said Deal is taking a sensible approach since costs are rising and the state is still collecting less money than before the recession.
"Economic growth remains sluggish," Tutterow said. "The challenge for the economy is not whether it goes into recession but whether it can break out of this period of sluggish growth."
State officials last week were sent instructions for preparing their spending plans for the rest of fiscal 2013, which ends June 30, and for fiscal 2014. Those plans must be submitted to the governor by early September. He will then make recommendations to the General Assembly for lawmakers to consider when they return in January for the 2013 session. All the proposed cuts won't necessarily be included in Deal's recommendations, but if the past is any guide, many of them will be.
The major portion of K-12 school funding is exempt. Most other agencies were told they must submit 3 percent spending cuts for the rest of this year and for 2014. Medicaid and PeachCare for children, which serve about 1.7 million Georgians, would have to offer up 5 percent cuts in fiscal 2014, which begins next July 1.
Combined, the cuts would save about $553 million, according to Debbie Dlugolenski Alford, director of the Office of Planning and Budget.
In her memo to agencies, Alford said the state's leadership remains "optimistic that Georgia will continue to see a steady economic recovery. While revenues are expected to grow moderately, so too are the basic needs of our growing state. We must be prepared to meet these needs while also planning for contingencies should revenues fail to grow as projected."
State tax collections -- most of which come from income and sales taxes — jumped during the second half of last year but then slowed as the economy struggled during the first half of 2012. Collections increased 4.8 percent for the fiscal year that ended June 30, just enough to cover the state's budget.
To pay for this year's budget, the state would need more than 5 percent growth in collections.
In many states, tax collections have recovered from the recession. The Rockefeller Institute of Government in Albany, N.Y., said Thursday that overall state revenue nationwide is ahead of where it was in 2008.
That's not true of Georgia, which was battered worse than most when the housing bubble burst. State tax collections were lower in recently completed fiscal 2012 than they were in 2006.
Lawmakers have been loath to raise taxes to make up the difference. Georgia ranked 50th in the country in per capita state tax revenue in 2011, according to the U.S. Census, and legislators are proud of the state's low taxes. However, enrollment in schools, universities and health care programs have continued rising, increasing pressure on the state budget.
Senate Appropriations Chairman Jack Hill, R-Reidsville, said he's optimistic about the state, but it makes sense to take a cautious approach to state spending because there are a lot of uncertainties -- from potentially massive federal budget cuts to rising health care costs. In addition, the national economy and job growth have been slow, he noted.
"There is a nervousness out there in all sorts of ways," Hill said. "I certainly understand their cautiousness."
But Hill added, "These are budgets that are really thin. There isn't any fat."
State agencies have been doing little but cutting budgets since the summer of 2008, when then-Gov. Sonny Perdue began preparing for the full brunt of the recession. Officials in the K-12 school system say they have endured more than $4 billion in "austerity cuts" since then, and everything from universities and prisons to parks and regulators have had to find ways to save money.
Most state agencies besides the University System have slashed jobs. Colleges have raised tuition and student fees to make up for the cuts, and they have added about 5,000 employees since the start of the recession.
This time around, the governor's budget office is asking the system to find cuts of $54 million this year and $54 million more in fiscal 2014. John Brown, vice chancellor for fiscal affairs, said universities and colleges will be asked to protect programs that directly affect the system's more than 300,000 students. "Reductions should first come from central and nonacademic functions," he said.
Officials with the Department of Community Health said they are exploring options but don't yet know how they will come up with about $170 million in spending cuts over the next two years. The agency announced in June it planned to ask the General Assembly for $300 million to make up a shortfall this year.
John Ellis, assistant commissioner of the Georgia Department of Community Affairs, told his board this week that everything, including staff cuts, is on the table in his agency.
Alan Essig, executive director of the Georgia Budget & Policy Institute, an Atlanta think tank, said budget cuts are becoming an annual occurrence because the state simply doesn't raise enough money to pay for rising expenses in areas like health care, education and basic services. He said there is a "structural deficit" that can be cured by rapid economic growth, major, permanent cuts in spending, higher taxes, or some combination.
Most of the state's spending is in health care, education and prisons, and while some of those areas have been cut, nobody is advocating dismantling them. Few lawmakers in either party raise the possibility of new taxes, and they may be even less likely to consider them after primary voters soundly defeated the proposed transportation sales tax in many parts of the state this week.
"I think this is the new status quo," Essig said. "Every year there will be more budget cuts. We have kind of hit bottom, but we keep cutting a little [more] each year."
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