Recovering Georgia economy won’t heal all needs

mlee@macon.comMay 12, 2014 

ATLANTA -- As the economy picks up, Georgia is receiving the state government version of a raise, but plenty of minds -- from educators to savers to road pavers -- already have designs on the new cash flowing in.

Georgia’s tax take is a wiggly line that has taken bumps and dings on its way upward since the end of the recession. Last week, Gov. Nathan Deal published revenue figures for April of about $1.68 billion. That’s about $50 million short of what Georgia collected in April 2013.

Still, Georgia’s tax take for the first 10 months of the fiscal year is up by 4.7 percent since the same time last year. The fiscal year ends in June.

Recession is not quite an in-or-out thing. It’s one of the steps in an economic cycle that also includes recovery and expansion, said Kenneth Heaghney, the state fiscal economist.

Georgia is in recovery or expansion “depending on your variable,” he said. Looking at employment, Georgia is recovering. Looking at people’s income, Georgia is expanding.

As the state’s official forecaster, he told the Legislature in January that the state’s economic scenario for the next 18 months was very positive. Then as now, he also cautioned that some things are not measurable or predictable, such as federal policy.

Whether it’s recovery or expansion coming over the next year, it does not mean a lot of new dollars for Georgia’s bank account to be spent on new things, said Alan Essig. He’s worked in state budgeting for years, both as an academic and inside state government.

Now he’s executive director of the nonprofit Georgia Budget and Policy Institute.

The state’s income will be something approaching $21 billion for the year beginning in July, about $600 million more than the year before.

But Georgia is like a person who sustained pay cuts during the worst of the recession and has received both higher bills and modest raises since 2011.

Among the first demands are growing bills Georgia must pay and can do little about. Population growth means more young people who need desks at schools and universities, for example. State retirees’ health care and pensions must be funded. And more people are signing up for Medicaid, the insurance for low-income people, which is part state and part federally funded.

The other main outlay is the roughly $300 million Essig called a “down payment” on the K-12 spending cuts made during tough times. Even after that payment, cash for K-12 schooling is still “short” by more than $700 million for next year compared to what it could have expected without the recession, Essig said.

Politics and policy both will ensure that K-12 education is the first priority for new money, he predicted.

“I could see another $300 million or so next year being put back, which would still leave us $400 million short,” Essig said.

That magnitude of money starts to get Georgia pretty close to spending every bit of its annual raise.

And still more applicants

“I think we will continue to invest in education,” said state Rep. Larry O’Neal of Bonaire, the House majority leader.

But given the economic upswing, O’Neal also said he thinks there’s an appetite in his caucus for potential new spending that can undergird job growth, which besides education could include infrastructure projects like the port deepening at Savannah.

But he’s also been in office long enough to remember the latest peak of state economic health, in 2007, and to have been thankful for the $1.5 billion in rainy day funds Georgia had on hand when it fell into recession the next year.

“Without that, I don’t know what would have happened,” O’Neal said. If there’s some new money to spend, “personally, I kind of err on the side of putting it in the savings account.”

State Rep. Allen Peake, R-Macon, a member of the tax-writing House Ways and Means Committee, exaggerated only a little when he said Georgia spent “every penny” of the rainy day fund during the recession. It eventually got as low as about $100 million and is now back up above $700 million.

“I think it’s important to have a well-stocked reserve,” he said.

Besides the rainy day fund, Peake named three “critical” areas that need proper resources: education, law enforcement and Medicare, the health insurance for older Americans. After that, budget applicants are another tier down. “Some of the cuts we’ve made have made us more efficient,” Peake said.

But there’s a road constituency in the state Legislature too.

A joint House-Senate Study Committee on Critical Transportation Infrastructure Funding will be named and start work this summer on finding new money for major road, rail and bridge builds.

“Georgia’s transportation leadership has predicted that current funding levels can, at best, cover 50 percent of our greatest needs,” reads House Resolution 1573, the legislation that created the 16-member committee, by House Transportation Committee Chairman Jay Roberts, R-Ocilla.

Georgia drivers pay for state road works via a gasoline tax that’s becoming less and less valuable. As cars get more efficient, drivers need less and less gas to go the same number of miles, so they’re paying less in taxes for the same amount of road use.

“Georgia is dead last in transportation spending per capita” in the nation, said Charlie Harper, executive director of center-right, Atlanta-based think tank PolicyBEST. “We are not reinvesting for growth.”

A part of the gas tax now worth about $200 million annually goes into the state’s general bank account. That so-called “fourth penny” has been fought over for years, and the Legislature has been unwilling to hand it over to the road folks.

“I think there’s an appetite to move that fourth penny,” said Harper, adding that he expects legislation on it next year.

By his math, that’s only a portion of what Georgia transportation needs, but “it represents making sure we make best use of existing money before going back to ask for more.”

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