The Bill Comes Due
Pity the poor Georgia legislator. And pity Gov. Sonny Perdue as well. When they try to balance the state budget next February and March, they will be faced with a task that will make the Iraqi quagmire look simple by comparison.
Here are some of the things they will have to find money for: The health insurance plan for state employees is in the hole by $400 million; it will require $130 million to annualize a 2 percent pay raise for teachers and state employees that takes effect Jan. 1. The state needs $180 million for Medicaid to cover inflationary increases in medical care, $115 million to handle growing enrollment in K-12 public schools, $108 million for growing enrollment in the public universities and $25 million to absorb the additional students who are going to technical colleges.
Add to that the costs of a lawsuit recently filed by a consortium of rural school systems that contend the state is not meeting its constitutional requirement to provide an “adequate” education to public school students. The facts are on the plaintiffs’ side – Georgia languishes in 49th place on measures like average SAT scores while Perdue and the legislators have cut state funding for schools by $400 million to $500 million for the past two years. If a judge rules for the rural school systems – and chances appear good that he or she will – then the state may have to pony up another half billion dollars for schools.
Don’t forget corrections. Alabama was successfully sued in federal court over unsafe and crowded conditions at a women’s prison. A similar lawsuit could be on the way for Georgia, where the governor and lawmakers have cut the Department of Corrections’ budget by $75 million, even as the number of inmates continues to grow toward a record level of 50,000.
This means, then, that state officials could have to find anywhere from $1 billion to $1.5 billion in new money for a budget that they were barely able to balance for this year. Now, it’s true that state tax collections finally appear to be on an uptick after a three-year economic slowdown, but even a record growth in revenue wouldn’t plug that shortfall – and Georgia is not anywhere near a record growth rate.
What’s happening here is that the bill is finally coming due for more than a decade of tax breaks and giveaways that both Democrats and Republicans in the General Assembly eagerly embraced. Just about any type of business that asked for special tax treatment got it. There were jobs and retraining tax credits, tax credits for companies located at the port facilities, bank tax credits for companies that acquire other businesses, and research tax credits. There was even a $2 million annual tax credit for Brown & Williamson in an attempt to keep its Macon cigarette factory operating (the factory is being closed anyway).
Generous tax breaks for Georgia’s consumers were also enacted during this period. The sales tax was removed from purchases of groceries, and legislators gave the counties money to finance a state homestead exemption worth about $380 million a year.
Even during the 2003 session, as they struggled to balance the state budget, lawmakers adopted (and Perdue signed) a sales tax exemption for Home Depot founder Bernie Marcus’ Atlanta aquarium.
No one, evidently, stopped to think what the budgetary consequences of all these tax reductions would be when the next recession occurred. That recession hit with a vengeance in 2001, the surplus disappeared and state officials were forced to make drastic cuts in spending on schools, prisons, health care and other services that governments are expected to provide.
They’ve made all the cutbacks. They’ve used all of the available accounting gimmicks. They’re reaching the point where the courts could step in and order them to start spending more on vital services. Perdue and the legislators will have to take back some of those tax breaks or pass a tax increase – which is the political equivalent of choosing between electrocution or lethal injection.
Our political leadership has learned the hard way that there is still no such thing as a free lunch. At some point, the bill comes due.
It’s time to pay up.