What’s A Few Billion Between Friends?

This week’s Courier Herald column:

With some jobs in politics comes great power. Many of them can be a bit of fun. Others result in getting to tell people “no” a lot more than they would like. Being an Appropriations Chairman in the State of Georgia is one of those.

House Appropriations Chairman Terry England and Senate Chairman Jack Hill have the responsibility of balancing the state’s checkbook. States, unlike the federal government, must balance their budgets every year. It is the job of their committees to prioritize the various wants and needs of other legislators, state agencies, and others who influence the spending process with the revenues available to fill those needs. Deficit spending is not an option.

While some creativity can occasionally be invoked, bond-rating agencies tend to signal when “creative” transcends into “smoke and mirrors”. Georgia is one of ten states to maintain the highest possible AAA credit rating from all major agencies. It’s a rating Georgia managed to maintain throughout the recent economic troubles and recovery. Keeping it has meant England and Hill have often had to say “no” more than “yes”.

This year, Georgia’s revenues are expected to grow almost $1 Billion over last year. Georgia’s strengthening economy and population growth are largely credited for the additional money flowing to state coffers.

And yet, England and Hill aren’t publicly looking at lavish new spending nor planning huge tax cuts. Most of the money, unfortunately, is already spoken for.

While $1 Billion sounds like a lot of money (and, in reality, it is), it represents roughly 5% growth from last year. That’s a bit more than inflation, but population growth also costs money.

K-12 education expenditures by the state increase with enrollment, a direct function of population growth. Enrollment keeps growing in Georgia’s higher education system. That also requires more money from the state.

The State also has to make additional contributions to the retirement system, making up for lackluster returns during the crash late last decade. Like the rest of our employers face, the state will pay more for health insurance for its employees this year than it did last.

Then, there’s Medicaid. The growth in cost for the state’s contribution of Medicaid expenses continues to increase rapidly, having risen from $2 Billion in 2008 to over $3 Billion for 2015. It’s now 15% of the state’s budget and rising rapidly.

The number used as a placeholder for the above programs’ cost increases for next year’s budget is $685 Million. That’s before state employees get any raises, or any other programs receive additional funds.

The revenue projection growth is expected to be between $800 Million and $1 Billion. That leaves $100-$300 Million for the budget chairman to distribute.

In addition to the usual requests for raises for state employees and teachers, there are a few big-ticket items on the table for this year.

Last week, the joint legislative committee studying the need and potential sources for transportation funding released a report with a recommendation for a minimum of $1-1.5 Billion for new transportation funding. ($2.1-2.9 Billion minimum is needed to address capacity/growth issues). That’s per year, every year.

Then we have that Medicaid problem. Despite the state spending more and more money on health care, we still have a rural health care delivery problem as noted by a separate study committee. Georgia’s rural “critical access” hospitals facing a broken funding model, where most lose money on 80% of the patients they see according to an AJC report. The state is looking at as many as 15-30 hospital failures if some form of action isn’t taken. Dollar figures are sketchy, but figure this one could be as expensive as the transportation funding deficit.

Added to the fun for the budget chairs is the fact that the Governor has made reform of the Quality Basic Education funding formula a priority for his second term. The politics of passing a comprehensive reform would indicate that local systems as a whole will be receiving more, not less, money from the state.

In short, the legislature’s budget chairs have a public that will likely hear about $1 Billion in new taxes to solve all of our problems. In reality, they’ll start out with $100 to $300 Million. And they face a list of essential priorities that easily top $3 Billion dollars.

Sometimes it’s fun to have the power. Other times, it’s a thankless job. I hope they were at least told that there would be math. And that they would likely have to continue to say “no” a lot. Or at least, “Not now”.

One comment

  1. saltycracker says:

    The last we read corporate income taxes were down 5.6% and little of the revenue, while sales tax and personal income taxes were up north of 5% and big numbers. Is personal income up as businesses suffer? Nah.

    Maybe these appropriation guys have a too complex tax structure to deal with. Lots of problems, just one is Funding various medical costs including state workers from cash flow/limited reserves won’t work. The tax code is the biggie. Selective sales tax is another. Edu-cracy us another. Revenue needs to go up but can we do it efficiently ?
    The state needs a new business model.

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