State fiscal economist predicts ‘slow but steady growth’

Georgia’s economy should see slow but steady growth over the next few years as the job and housing markets continue to improve, the state’s main economist told lawmakers Tuesday.

However, with tax collections still below what they were before the Great Recession, Gov. Nathan Deal told the same group of legislators that they won’t be seeing many new initiatives this year.

“We do not have as elaborate an agenda this year as we have had in previous years,” Deal told members of the House and Senate budget committees.

Deal and Ken Heaghney, the state’s fiscal economist and a Georgia State University research professor, led off a week full of state budget hearings, where lawmakers will review what’s in the governor’s spending plans for the upcoming 18 months.

Heaghney said that tax collections — an indication of the state of the economy — will be up 3.9 percent the rest of fiscal 2013, which ends June 30. The economy will pick up during the second half of the year and revenue should increase 4.9 percent next fiscal year, allowing the state to add about $550 million in spending, he said.

Heaghney told legislators that the state’s job growth is outpacing the national growth rate, and that “housing appears to have turned the corner, both nationally and in Georgia.”

Georgia is seeing an increase in information technology, business services, manufacturing and transportation jobs.

“We’d expect growth to pick up in the middle of 2013 and then accelerate the rest of the year,” he said. “In 2014, we should see much more rapid growth than we’ve seen prior to this year.”

Higher taxes, a sluggish global economy and the federal debt crisis will continue to weigh on the economy, he said, dampening consumer spending and adding uncertainty to the equation.

“This all creates an environment where there is still a lot of economic uncertainty,” Heaghney said. “We try to plan for that, but there are a lot of different ways the economy could move.

Deal last week proposed a $19.8 billion status quo budget for the upcoming year that provides $830 million in construction projects but no new major programs.

Deal’s two budget plans — one for the fiscal year that ends in June and one for the next year — cut spending in most areas but add hundreds of millions of dollars to growing public health care programs.

They include more than $300 million to pay for growth in k-12 school enrollment and provide extra money to poorer school systems.

Under Deal’s budget, which must be approved by lawmakers, the state would borrow about $400 million for new school and university facilities.

Two of the biggest college projects: $58.8 million for a new law school/humanities building at Georgia State University and $45 million for a cancer research building at Georgia Regents University in Augusta.

The spending plan also includes $70 million for water and sewer projects — including money for new reservoirs — $50 million for dredging the fast-growing Port of Savannah, and $11.75 million for the College Football Hall of Fame, which is relocating from Indiana to Atlanta.

The spending plan counts on lawmakers to pass legislation that would enable the state to continue collecting the “bed tax” — a fee hospitals pay to prop up the Medicaid system. The measure passed the Senate last Thursday, and it is expected to win approval in the House. Without it, the state would have a hole of almost $700 million in its budget and likely be forced to drastically cut payments to doctors, hospitals and other health care providers.

“We cannot afford to have a $700 million hole in the Medicaid budget,” Deal told lawmakers.

Democrats complained that Deal and the Republicans have been doing little more than trying to fill holes and slash spending the past few years.

“The Governor said his goal is to make Georgia the No.1 place to do business, but this cannot be achieved if you place cornerstones of internal economic prosperity on the chopping block,” said Sen. Horacena Tate, chairwoman of the Senate Democratic Caucus.

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