January 25, 2010
More painful budget cuts ahead
A series of Appropriations Committee hearings Jan. 19-21 began the legislative process for amending the state budget for the remainder of fiscal year 2010, which ends June 30, and the budget for fiscal year 2011, which begins July 1.
Gov. Sonny Perdue released his budget recommendations, which propose reducing the current year's budget from $18.6 billion to $17.4 billion to reflect severe declines in state revenue collections. With state services already cut to the bone, these new reductions average 8 percent among state agencies, including another $299 million slashed from public school funding (bringing the total school cuts for this year to $710 million) and three additional furlough days for educators and other state employees.
More education cuts will have a devastating effect on many school systems that are "teetering on the edge" financially, according to State School Superintendent Kathy Cox. She warned that some systems are already in the red, leaving local school boards with no choice but to expand class sizes up to 40 students or increase local property taxes, or both.
The governor is also reintroducing his plan for a 1.6 percent tax increase on hospitals and other health care providers to partially make up for an estimated $506 million deficit in the Medicaid program. Lawmakers rejected the governor's so-called "sick tax" last year out of concern the extra costs would be passed on to patients' health care bills and/or force some already-struggling rural hospitals to close their doors.
Under the plan, hospitals would be taxed 1.6 percent on their net revenues, whether they receive Medicaid reimbursement or not. The facilities handling the largest volumes of Medicaid patients would come out ahead financially, but the vast majority of hospitals would lose money, according to an analysis by the state's Office of Planning and Budget. For example, the tax would cost Gwinnett Medical Center upwards of $1.4 million, according to the study.
The changes to the FY 2010 budget are based on the governor's forecast that state revenues, which have been on a steep decline for more than a year, will be essentially flat over the next six months. Another dip in the economy, he said, will necessitate even further cuts in state spending.
For the FY 2011 budget, the governor is forecasting a 4.2 percent increase in state revenues and proposing $901 million in additional state debt to pay for construction and other capital outlay projects. I am among the legislators and economic observers who are concerned that growth rate is unrealistically optimistic, with the state not expected to reach 2007 revenue levels again until 2014. If we instead planned on flat growth, it might prevent so many cuts and the need for deep budget adjustments next year.
Jobless Rate Increases: Statewide, the unemployment rate jumped to 10.3 percent in December, matching the record high jobless level registered last July. The percentage of Georgians without jobs was significantly higher than the 7.5 percent recorded in December 2008, with the number of payroll jobs down by about 175,000.
Texting While Driving: With the General Assembly scheduled to reconvene Jan. 25, the public safety issue of texting while driving is expected to move onto the legislative agenda. Two proposals have been introduced in the House of Representatives that would make it illegal to send or read text messages on a cell phone while driving, with fines for the offense running as high as $300. Nineteen other states have outlawed texting while driving.
