South Georgia at the State Capitol
The 2009 Fiscal Year – Problems and Possible Solutions
By State Sen. Greg Goggans
Policymakers and the public are becoming aware of the shortfall in the just completed fiscal year and have grasped the fact that substantial funds were used from the Shortfall Reserve Fund to balance the state’s books at the end of June. They are also aware that a substantial amount remains in the fund ($902 million) as we begin the fiscal year. Citizens do understand that the economy has rapidly slowed and consequently state revenues have declined even faster and more deeply than first believed.
There is a feeling that revenues are flat going into this year and that the budget may have to be cut to keep expenditures on an even keel. However, a common misconception is that a combination of state budget cuts (excluding education and Medicaid) and the use of funds from the State Reserve fund will be sufficient for the next year.
That scenario could play out exactly like the description above, but that is far from a certainty. Here are some points to consider:
1. The trend line of revenues for the past few months is generally down and with no leveling – meaning that we do not know if the bottom of the slide has been reached. In 2002-03, the state went through an entire year of negative revenue figures.
2. The 2009 budget contains about $700 million in new spending based on original adjusted year-long growth rate projections. But, we start the Fiscal year $763 million short due to last year’s revenues not meeting the FY 2008 estimate. So, the shortfall is really the total of those figures, approaching $1.5 billion. Of course that figure would be reduced by any positive growth in the next 12 months.
This is where we stand today. What could increase the shortfall would be ongoing negative revenue collections month by month. These numbers, then, assume a flat or no growth rate in the coming year, which is certainly not a sure thing.
Governor Perdue has asked Executive Branch departments to begin formalizing 3.5 percent budget cuts in the FY ‘09 Budget. But with education and Medicaid currently exempt from these reductions, these cuts will only accumulate about $250 million dollars. For example, 3.5 percent is a $40 million cut to the Department of Corrections. The Board of Regents’ 3.5 percent amounts to an $80.5 million cut. These cuts are substantive but they may not be enough.
The public should be reassured that the state has weathered stormy weather before and survived by using reserves and judiciously but fairly cutting budgets. Here are some points to consider in the weeks ahead:
1. The easiest cuts to be made are those cuts of new funds not yet expended. The new funding added in the 2009 budget for whatever reason are easier cuts to make than those of existing programs. Some growth areas of the 2009 budget are: DHR $70 million plus, Department of Education, $420 plus million, Board of Regents, $150 million plus, Department of Corrections, $60 million, Department of Community Health, $110 million, just to name some of the top agencies in new funding.
2. Is this a good time for a zero-based budgeting analysis of programs across state government to find non-productive or wasteful programs, and can departments be depended upon to make those decisions?
3. Another possible area of savings might be to delay or reduce capital outlay bonds for new construction of schools, colleges and state buildings. While this totals over $112 million in cash, one negative impact would be the loss of stimulus to the economy from the construction expenditures.
4. Included in the new spending is, of course, pay increases totaling some $253 million for teachers, faculty and state employees. These funds will go straight out into the community through expenditures, but, nevertheless, that is a large number included in new funding in the ‘09 budget.
There is plenty of evidence that Georgia will rebound strongly. The question is just how soon. Georgians should not fear the future because this state’s best days are ahead of us, even as we ponder difficult short-term decisions. It’s just time to tighten the belt.
As always, I’d like to thank members of the Senate staff, who contribute regularly to my column. Please contact me in my office at the Capitol with your questions, comments or concerns.
Sen. Greg Goggans represents the 7th Senate District, which includes Atkinson, Bacon, Berrien, Clinch, Coffee, Echols, Lanier, Pierce and Ware counties and a portion of Cook County.
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