Georgia View: The New Normal

Georgia sales tax and income tax revenues remain in free fall. County tax digests shrink as homes are foreclosed or decline in value. Only the revenues of the Georgia Lottery, selling hope and HOPE, trend up, but still not fast enough to meet HOPE scholarship and Pre-K demand.

Welcome to the new normal. As any state legislator, mayor or county commissioner can tell you, this year’s revenues are next year’s budget.

As it is unlikely that Congress will reload or even release the same level of billions in federal stimulus assistance in 2011, the gap between current program and government services demand and existing sources of revenue is only expected to widen.

Our economy is beginning to thaw, yet hiring, construction and new building, a few of Georgia’s longtime strengths, are lagging other major economic indicators.

Georgia’s next governor, whatever the party, will find the cupboard is not only bare, but that the prior chef has left an IOU behind.

And as grueling as budget preparation was for many cities and counties, as well as for the state in 2010, 2011 will be worse.

Roughly 75 cents of every Georgia tax dollar is spent on salaries. The next governor will need to either consider laying off several thousand state employees or implementing across-the-board pay cuts (with the potential for salary restoration in better times).

Furloughs will remain part of this mix, but also expect a major look at state employee benefits, such as the rollover of unused vacation days into later retirement benefits, or higher premiums and co-pays, for what is now a reasonably cushy and comparatively strong state employee healthcare plan.

Hospital revenue sharing with the state was traded against the potential revocation of sales tax exemptions for nonprofit hospitals, and instead of Medicaid fee reimbursement cuts. Expect a re-visitation to the latter (sorry, Doc), and potentially a return of sales tax or a flat fee on prescription and OTC pharmaceuticals.

Georgia Democrats want to use state government funds and bonds as a catalyst on projects like making schools and government buildings more energy efficient. (This is a Roy Barnes proposal.) Federal energy home weatherization grants have been around for decades, administered by local housing authorities. Unfortunately those programs were also plagued by fraud and graft, with many homeowners never actually receiving the promised benefits of more energy-efficient homes.

The GOP wants to reduce a variety of taxes, and make Georgia friendlier for capital formation and small businesses. (Several candidates espouse this.) That sounds good, but unless this includes a new system for credit scoring, it may not help. Most small- to medium-sized businesses would love to borrow and expand, but they just can’t get a loan.

County school boards and superintendents need to think more outside of the box. Schools will close, and there may even need to be an effort to recruit parents into the classrooms as volunteers. Private schools and public schools with strong PTAs learned the many benefits of this tactic decades ago.

Although we are not entering another Great Depression, this prolonged recession may last another year or three, requiring a previously unconsidered level of personal and self-sacrifice. Our leaders may need to lead hard discussions on what are the most essential services, versus those we can postpone until better times return.

We all may love the arts, golf courses, parks and even county- and state-run water parks, but those needs pale in comparison to having teachers in the classrooms, beat cops on the street and sufficient medical resources to care for the elderly and economically challenged.

The fall elections may seem a long way away, but those buys you aren’t making today and the smaller income you reported back in April are already setting the table for 2011. Expect a much more limited menu and a bit less than friendly, quick service.

Categories: Georgia View