What Is Goin’ On?

Alan Essig gives us his thoughts on the Georgia budget. The Georgia Budget and Policy Institute seeks to improve the fiscal responsibility of our state government. That’s quite a job these days!

I must admit I was surprised to find out that the 2008 Supplemental Budget, which the legislature passed and the Governor signed, doesn’t balance. According to Alan, it exceeds the Governor’s revenue estimates by some $65 million. When the legislature passed the supplemental budget they used parliarmentary procedure to force the Governor to either sign or veto the budget within 6 days. That meant the Governor would have to make a decision before the legislature adjourned. Apparently, the Governor did not want a nasty fight like they had last year and signed the supplemental budget even though it did not balance.

Alan was highly complimentary of Gov. Perdue and the fact that he had managed to accummulate more than $1 billion in reserve funds for the State. For those of you that don’t know, these reserve funds are like a savings account that the State can utilize when there is a budget shortfall. Each year the governor is required to make an estimate of anticipated revenue. The legislature is required to limit State spending to the revenue estimated by the Governor which results in the balanced budget required by the State Constitution. However, by being conservative in estimating revenue, the budget is kept low and if revenues exceed the governor’s estimate, the excess revenue is placed in the reserve fund, money the State collected, but did not spend.

Both the House and the Senate are considering tax cuts. In the House it is the remnant of the Speaker’s Great Tax Plan, which now targets eliminating the propety tax on automobiles. This would result in a budget shortfall of about $700 million in revenues. Alan suggests that it be made up with an increas in the cigarette tax of $1 per pack. Currently, Georgia collects a cigarette tax of about $.35 per pack, one of the lowest in the country.

In the Senate it is Lt. Gov. Casey Cagle’s proposal to cut the income tax by 10%. According to Alan, the Senate’s tax cut would result in a $220 - $230 million budget shortfall. I might add that in a recent interview with Casey Cagle, he indicated that a 10% cut in income taxes would stimulate the economy enough to generate the additional revenues. Alan says state income tax cuts do not stimulate the economy. That only happens, if it happens, with federal tax cuts because the federal government doesn’t have to live with a balanced budget.

Alan also agrees with Governor Perdue that both the Senate and House tax cuts are irresponsible, particularly when we may be heading toward a recession. Alan points out that Georgia ranks 49th and 50th among the states in low taxation and expenditure. That sounds great, but it also means we are lowest among the states in spending for education and health care.

Alan points out that 75% of the state budget is spent on education, Peachcare and Medicaid and prisions. With our high moral standards, Georgia loves to put people in jail for non-violent crimes and keep them there a long time. In fact, Georgia is second only to that Republican bastion of Texas when it comes to the percentage of the population behind bars.

And those prsioners get free health care. The older the prison population becomes, the sicker they get and the more our budget is going to be devoted to prisons, all to the detriment of education and health care for our children and elderly and poor.

What does the future hold? Alan says the housing crisis has not affected Georgia as much as other states, even though we are still one of the highest states in foreclosure rates. Tax cuts at this time jeopardize our economic future. According to Alan, the problem for Georgia’s future is to figure out how we are going to pay for the level of education, the infrastructure and transportation we need to support a population growth to 14 million people. Thus far, our annual budget does not take into consideration what we need to provide for and plan for the future, but is limited to looking at what government cost last year and what can we do to not increast the budget this year.

Sounds like a recipe cooked up by politicians seeking re-election, rather than leaders seeking to safeguard our future and that of our children. So, what else is new?