Midstate officials discuss how fiscal cliff could affect local economies

pramati@macon.comDecember 13, 2012 

With a fast-approaching year-end deadline to avoid the budget conundrum known as the fiscal cliff, Middle Georgia governments acknowledge their financial concerns in the final days of 2012.

Some governments, such as the city of Macon, are under the assumption that Congress will reach an agreement with President Barack Obama to avoid the fiscal cliff, which would trigger tax hikes and spending cuts in early 2013 that many economists say could plunge the country back into a recession.

Macon’s interim Chief Administrative Officer Dale Walker, who has a 30-year background in local government finance, said it’s impossible to guess the impact on the city if a compromise isn’t reached.

At the moment, city officials are treating the controversy as political rhetoric, he said this week via e-mail.

“As one economist indicated, they will most likely come to an agreement on how to kick the political can down the road for another year,” Walker said.

Only if the spending cuts and tax hikes actually go into effect will the city go into “reactionary mode,” working out how to deal with as-yet-unknown financial restrictions, he said.

“The magnitude is difficult to predict, as it could come in many forms,” Walker said. “We will probably lose the ability to secure grants, perhaps funding of those grants we have existing, or reduced state funding that has a federal flow attached.”

If the cuts occur, they will be widespread. But the greatest impact in Middle Georgia will be felt at Robins Air Force Base. The first year of sequestration -- steep, across-the-board spending cuts -- is expected to trim 9.4 percent from nearly all aspects of defense spending, with the exceptions of military salaries and the Department of Veterans Affairs.

Base officials, though, have said little about their contingency plans for the cuts.

When asked what kind of plans Robins is making in the event of sequestration, base spokeswoman Chrissy Miner said by e-mail, “We are going to continue normal operations based on our current laws and policy set out by the Office of Management and Budget.”

Retired Maj. Gen. Robert McMahon, now head of the 21st Century Partnership, which works to support Robins, previously said that if sequestration kicks in, a number of civilians at Robins would be furloughed for an undefined period of time.

“What that number is and how long it is, no one can tell you today, but clearly that would be the impact,” McMahon said in October.

Steve Layson, chief administrative officer for Bibb County, said it’s tough to make specific plans because it’s still not entirely clear exactly what would happen.

“We’ve not talked about it as a group or even in individual conversations that I’m aware of,” he said Thursday.

Tommy Stalnaker, Houston County commission chairman, said it’s hard to pin down the specific ramifications of automatic federal cuts.

“We’re not putting it on a piece of paper, but we are discussing it internally very much,” Stalnaker said.

But unless an agreement is reached, Bibb County surely will see some effects, Layson and Stalnaker said.

“When you have ripple effects, those are going to come down to the county level,” he said. “I can’t say how big of a reaction there will be, but I can’t see how it cannot affect anyone.”

Immediate loss of funds isn’t a great concern, though the county does get some federal grants for various projects, Layson said. More likely, the impact would be indirect and long-term: slower business growth and hiring due to higher taxes, lower consumer spending because of financial uncertainty and generally less money circulating locally, he said. That eventually would cut sales and property tax revenue for Bibb and other governments around the region.

“It could significantly decrease the buying power in our community, and that would affect sales taxes,” said Lee Gilmour, Perry’s city manager, who added that consequences in the city would also be mostly indirect.

Houston County’s special purpose local option sales tax recently restarted for another six years and has the most money earmarked for the county’s individual cities than in previous sales taxes.

Most Middle Georgia counties, including Bibb, depend on sales taxes for capital projects. Bibb County just restarted its SPLOST this year.

Layson said funding cuts also could impact other county revenues.

“If the federal government is spending less money, many times they will put that burden on the shoulders of the states, and the states often turn around and hand that burden on to counties and local governments,” Layson said.

Houston County school officials said they are paying close attention, saying sequestration would be devastating in a couple of different ways. Not only would the system be facing a reduction of about 8.2 percent in all title funding, Superintendent Robin Hines said, but also the county as a whole would suffer because of the cuts to Robins Air Force Base.

“Certainly, the military would be a huge cut,” he said. “It would affect all areas of the community.”

That would include about $1.6 million in federal funding the Houston County school system gets for the children of military personnel.

Hines said about $25.7 million of the school system’s $300 million budget comes from federal grants and programs. Of the federal funding, $10.5 million deals with school nutrition programs, which would not be affected by the fiscal cliff, he said.

But the rest of the money, from which the school system uses to help pay teachers, could be affected, which would mean hiring freezes and increases in class size. In addition to Title I funds, Title VIB funds -- which are used to help special needs students -- would face austerity cuts.

“Across the nation, some (school systems) will see their workforce reduced,” Hines said. “You run the risk of schools that are economically disadvantaged, which could be reduced.”

Hines said the cuts come in addition to austerity cuts from the state. Over the past 10 years, Hines said, the school system has lost $188 million in austerity measures.

“It’s certainly concerning to us,” he said.

In October, Houston County commissioners and Warner Robins passed resolutions calling for Congress to prevent the automatic cuts.

Gilmour said Perry didn’t pass such a resolution because the city expects the community’s congressional leaders to do what’s best for the nation.

“Mayor and council have no doubt that our federal delegation appreciates ... the severity of the impact, and we are trusting they will act accordingly,” Gilmour said. “And they don’t need our advice on how to do that.”

Stalnaker said he has been informing people he talks to that the consequences of no decision would extend beyond governments. It would impact big and small companies, as well as average residents.

“Whatever negatively impacts the governments will have a negative impact on you,” he said.

Writers Jim Gaines and Christina M. Wright also contributed to this report, which includes information from Telegraph archives. To contact writer Phillip Ramati, call 744-4334.

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