Road work, raises could be big pieces in growing Georgia budget

More than 200,000 teachers and state employees may see their biggest cost-of-living raises since the Great Recession and construction crews could be working overtime to keep up with the spending Georgia lawmakers approve this year as the state budget hits record levels.

With tax collections up and new fuel and hotel levies bringing a fresh windfall, Gov. Nathan Deal’s spending plan for the upcoming year could easily top $23 billion.

For cautious state leaders, the extra money provides a challenge because advocates for publicly funded programs — in areas such as education, social services and transportation — have pent-up demand after nearly a decade of statehouse budget-slashing.

When times are tough, it’s not hard for state leaders to say no. But it’s not been as easy the past few years as the economy improved, and this session — with tax collections spiking 9 percent in the first five months of the fiscal year — will present an even bigger challenge .

“I always found it easier to write a budget when it’s lean than when it is putting on weight,” said George Hooks, a historic preservation lobbyist who once was chairman of the Senate Appropriations Committee.

State Sen. Jack Hill, R-Reidsville, the current Senate budget chairman, said, “There are new and really original proposals coming from everywhere this year.”

The state budget helps fund the education of more than 2 million students and provides health and nursing care for about 2 million Georgians. The state funds road improvements and prisons, economic development initiatives and cancer research, business and environmental regulation, parks and water projects. It creates thousands of private-sector jobs through construction projects.

Nationally, the financial picture is mixed for states entering 2016, said Sujit CanagaRetna, a senior fiscal analyst at the Council of State Governments. States with heavy reliance on oil and natural gas production, such as Alaska, Louisiana and Oklahoma, are hurting big time.

On the other hand, he said: “There are some states doing pretty well, and Georgia is one of them. On balance, here in Georgia we are faring better than other states.”

Budgeting for governors and top lawmakers is an exercise in tamping down expectations, no matter how strong the economy is. But Deal wants to use the record tax haul to make clear his priorities and set the tone for the 2016 session, which begins Monday.

“We’re finally getting some breathing room, hopefully we are going to do some catching up on things we haven’t been able to catch up on for a number of years,” said House Appropriations Chairman Terry England, R-Auburn.

Much of the extra money is committed to road and bridge projects because the General Assembly promised that’s where it would spend nearly $1 billion in tax and fee hikes it approved last year.

But the governor also plans to put big money into three areas: education, pay raises and reserves.

Reserves are the least sexy of the three, but Deal wants to leave office in January 2019 with $2 billion sitting in the state’s savings account. That will give his successor, and bond rating agencies, peace of mind that the state is on solid financial footing.

Georgians will hear much more about the increases Deal plans for schools and pay raises, especially on the campaign trail this summer and fall, when all 236 lawmakers face re-election.

A special committee on education that met over the interim recommended the state add an additional $258 million a year to the budget for schools and an additional $209 million as soon as possible.

Deal is expected to recommend the initial increase and may tack on some extra. Most if not all districts should see a boost in funding.

Other than select state employees, such as judges, most teachers and state employees have seen little in the way of cost-of-living pay raises since the start of the Great Recession.

Deal included a little something in agency and school budgets last year for small raises, although districts were given the choice of spending the money on other needs.

While the final figure won’t be public until Deal announces his budget plans Wednesday, he is expected to call for bigger raises this year, somewhere in the range of 2 percent to 4 percent for most employees and teachers, with special, larger pay increases for those working in some low-paying jobs, such as prison guards, where turnover is high.

As in past years, Deal will give school systems the money for teacher raises, but districts will decide how to spend it.

Hill said he’d rather have the governor propose a set pay raise for teachers, instead of giving districts the option of deciding how to spend the money. He noted that in his South Georgia Senate district last year, about half of the systems didn’t pass on the extra money for raises. But Hill said he understands the governor’s desire to give districts more flexibility over how they spend state funding, especially after going through years of cutbacks.

Two other areas where Deal’s budget will spend big are health care — a rising cost each year — and construction.

Deal is expected next week to announce hundreds of millions of dollars worth of road and bridge projects — so-called “shovel-ready” because work is expected to start quickly. A big chunk of extra transportation money will be included in the midyear budget — the one that takes the state through June 30.

The governor will also include hundreds of millions of dollars worth of construction borrowing in the spending plan for fiscal 2017, which begins July 1. The money will go mainly for new school and college projects. One of the projects — the construction of a new Lanier Technical College campus in Deal’s home county of Hall — is expected to cost about $100 million over the next few years.

Since 2016 is an election year, lawmakers may also debate using some of the extra money flowing into state coffers to cut taxes or “reform” the tax system by lowering income taxes and hiking sales taxes.

But Deal and most state leaders haven’t gotten behind such efforts so far, and the 2016 session will probably end in late March or early April with the same kind of last-minute, special-interest tax breaks that win approval every year.

Hill, for one, doesn’t have a lot of enthusiasm for messing with the state’s current tax setup — which relies heavily on state income and sales taxes.

“In the end, everybody can take a good look at Georgia and look at the states that have (financial) problems and see we have a pretty well-balanced economy, we have a pretty well-balanced tax structure,” Hill said.