Do more with less, Georgians advised
By JAMES SALZER
The Atlanta Journal-Constitution
Published on: 09/25/04

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Heidi Moore was stunned when she saw the latest list of spending cuts and premium increases proposed for the state's health-care program for the poor and disabled.

Moore, from Alpharetta, said she had been told the state would not institute a premium for a program that allows her son to get Medicaid services, but it may wind up being pushed when the Legislature reconvenes in January.

And after a year of increases in state tax collections, she did not expect more spending cuts - as much as $327 million - in the health-care program.

"I definitely thought it was going to be better this year," said Moore, whose son Jacob was born with Down syndrome. "I think we were shocked when we saw all the cuts. It was one of those things where we said, 'Here we go again.' "

Since Gov. Sonny Perdue took office in January 2003, finding a budget shortfall and declining state revenue, state agencies have slashed about $1.7 billion in spending.

The latest round of proposed cuts range from closing state parks and passing along $150 million less to school districts to eliminating tobacco prevention programs.

The difference this year is that the proposed cuts are coming while the state has been reporting big increases in tax collections. State revenue collections have gone up 13 of the past 15 months. In August, they jumped 13 percent, an increase twice what is needed to fund the current state budget.

But the state plans to cut programs even more because of the math, Perdue said in a recent interview.

Most revenues for Georgia's $16 billion annual budget come from sales and income taxes. Barring a major calamity, such as a terrorist attack, the state expects collections to grow little more than 6 percent in fiscal 2006, which starts July 1. At that rate, the state would raise an extra $972 million in 12 months.

Rising costs in the state employee health-care program and in Medicaid, which serves about 1.4 million Georgians, will eat up $761 million of that, the governor says.

The 2 percent pay raise due Georgia's 200,000 employees and teachers will cost an additional $155 million, Perdue said.

"So we have $56 million left to fund any other growth in education, corrections, transportation, the environment or any other parts of state government," the governor said.

Annual midyear funding for increases in public school enrollment usually comes to about $130 million - more than enough to wipe out the rest.

Perdue is expected to recommend another pay raise for fiscal 2006. And in the case of an emergency, the state has almost no reserves, because the government has used them to stay afloat the past two years.

The latest cutbacks might not be needed, Perdue said, but he wants to be prepared. "Nothing is guaranteed."

"We got into this habit in the '90s of thinking the economy was going upward, upward, upward and then realized all of a sudden in March of 2000 that, well, golly, it is subject to gravity," the governor said. "We are really just starting to come out of that [downturn] in Georgia."

The state's fiscal problems might go deeper than a temporary dip, said Alan Essig, an independent budget analyst and former Georgia State University researcher.

"I think we are going to be in this permanent fiscal crisis until we do something," Essig said. "This kind of dance the politicians are doing, saying that we can grow our way out of this, is not going to happen."

Perdue doesn't dispute the theory that the state's fiscal problems are long term.

"We are not going to suddenly emerge out of the woods into the happy-go-lucky days of spending that we once had," the governor said. "It will be a continuing managing process as health-care costs continue to consume virtually all the growth we can reasonably expect. We're going to have to manage tough every year."

A series of tax cuts in the boom years of the 1990s left Georgians paying less of their income to the state, Essig said, while a rapidly growing population needed more services.

That trend accelerated this decade. For instance, the University System of Georgia saw its enrollment jump 41,000 students during a three-year period. The University System's budget is the third-largest in state government.

Some of the costs have been passed on to property taxpayers or, in the case of the University System, to parents and students who pay higher tuition.

Neither the governor nor lawmakers have shown any interest in raising state taxes.

Perdue created a temporary budget hole last month when he decided not to use an accounting gimmick - shifting the final employee payroll of the fiscal year from June 30 to July 1 - to push the cost into fiscal 2006 and save the state money this year. The governor said he backed the idea during the 2004 session because legislators were going to do it, but he knew all along that he would not employ it once the General Assembly left town.

His decision means that agencies have to make up the payroll difference - about $179 million. Funding cutbacks are especially damaging to government entities that employ large numbers of workers, such as state colleges. "I think the governor got some bad advice," said Speaker Terry Coleman (D-Eastman).

The Board of Regents, which oversees the University System, is expected to consider next month a midyear tuition increase of 10 percent, to help pay its portion.

Perdue said he is concerned about how the tuition increases will affect parents and students.

But the University System should be cutting back, he said, the same way other agencies have had to the past few years.

University System officials argue that they have made reductions, but Perdue and lawmakers say they have a tough time pointing to specific cuts.

"We're in the mode where we have to look to the future," Perdue said. "I expect our educators, our Department of Technical and Adult Education, and our University System to do like everyone else is doing - do more with less."