Gov. Nathan Deal told Georgia agencies not to ask for new spending during the upcoming year, but it turns out the cost of holding the line is still really, really high.
Even with his admonition, the board of the Department of Community Health — whose programs provide health care to about 1 in 4 Georgians — approved a request Thursday for about $240 million more in spending over the next year and a half, in part to cover increased costs for Medicaid.
That’s on top of $550 million more in requests for spending next year from the Department of Education, which oversees k-12 schools, and the University System of Georgia’s Board of Regents.
About $344 million of that would go for increased payments to the Teacher Retirement System, the pension plan for teachers and University System staffers.
Those three requests, if included in Deal’s budget proposal that will be released in January, go a long way toward eating up the new tax revenue that the state is expected to bring in as the economy grows.
But the requests are also pretty much what Deal’s budget staffers and top lawmakers expected. They knew the rising costs of education, pensions and Medicaid — the state-federal health care program for the poor and disabled — would drive next year’s state budget, which could near or top $26 billion.
As he has in the past, Deal gave agencies an opening to ask for more, allowing agencies such as the Education Department to include in their budget proposals higher spending tied to growth in enrollment and the cost of services.
But the consequences of those rising costs may be that money isn't available for other things lawmakers would like to do, such as giving decent pay raises to teachers and state employees, or cutting income taxes, a top priority of many Republican legislators and statewide political candidates.
"You've got $900 million or so of (new) revenue and when you look at the big items we have to fund first, there is not a lot left for discretionary spending," said longtime Senate Appropriations Chairman Jack Hill, R-Reidsville. "It's pretty predictable that the big spending is going to be things based on our workforce needs, education and health services.
“If you are going to run a state that meets its obligations, you are not going to have a lot of extra revenue.”
Hill said the big requests don’t necessarily rule out attempts to cut taxes next year, which is an election year.
The large spending increases have some officials raising questions.
“It does concern me for the future sustainability of this,” said Roger Folsom, the vice chairman of the Department of Community Health board, who added that the agency should look to improve preventive care for those on the state health programs to prevent higher costs in the future. “We have to look at the budget three, four, five years down the road. This is significantly important for the future of this state.”
Lisa Walker, the agency’s chief financial officer, said rising costs in providing health care and pharmaceuticals likely are driving increases in Medicaid. But Medicaid rolls — there are more than 1.8 million Georgians in the program — also have been on the rise during the past decade.
The DCH’s requested increase Thursday was smaller than last year’s.
In the education agencies, enrollment increases typically are the biggest driver for rising costs. Having more students — typical in a state such as Georgia with a growing population — earns school districts and colleges more money because the state allocates funds based on enrollment. So the state typically spends an extra $150 million or so a year just to pay for the new students and the teachers and programs that educate them.
But next year, under the budget recommendations, the state would increase spending to colleges and school districts more to cover the cost of propping up the Teacher Retirement System than for increased education programs for schools.
Education groups say the retirement system is a great incentive to attract and retain teachers. The pensions are funded through a combination of employee contributions, investment returns and more than $1.5 billion a year in taxpayer funds.
Because of mediocre returns on investments in some recent years and a shrunken employee base paying into the system, the state had to pump an extra $223 million into the TRS this year to improve its financial security. The Atlanta Journal-Constitution reported in June that the system could need an extra $350 million to $400 million next year, eating up 40 percent to 45 percent of all new tax revenue.
Meanwhile, the AJC reported this week that the number of former education staffers and state employees earning state pensions over $100,000 a year has more than doubled in the past six years.
By comparison to the DCH and the Education Department, some big-money agencies have sent in limited requests for increased spending.
The board of the Department of Human Services, which handles everything from children protective services to food stamps, approved a request Wednesday asking for an increase of about $40 million next year for out-of-home care services for children, for per diems to foster parents — a top priority of state officials — and for other related programs.
The Department of Transportation — which is flush with road-building money from a gas-tax increase a few years ago — is only asking for a net increase of $3 million.
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