This week’s Courier Herald column:
Governor Nathan Deal didn’t spend his Fourth of July weekend on a closed public beach because he and the state legislature didn’t pass a budget. That was Governor Chris Christie of New Jersey.
Both Georgia and New Jersey have fiscal years that begin on July 1st. As the new year rolled around, several states including New Jersey still didn’t have budgets. States have to pass balanced budgets every year, and many are having difficulty getting their books to balance.
New Jersey ended up with a budget of roughly $35 Billion. That’s about $10 Billion more than Georgia’s state revenues, despite the Garden State having roughly 1.5 million fewer residents than we do.
And yet, Georgia managed to balance its budget in March with the Governor signing it into law May 1st. There was little drama or fanfare over this achievement. In reviewing what other states are going through, perhaps some fanfare is deserved.
Governor Deal came into office with roughly two days’ cash on hand in the state treasury. His original goal was to restore the state’s austerity cuts to education and build a cash reserve of $2 Billion for the next “rainy day”.
With a little over a year left in his tenure, the Governor just finished a fiscal year that has other states trying to plug deficits with yet another budget surplus. Each year, part of the surplus has been used to make a mid-year contribution to education funding, and it is expected this year will see the same. After this adjustment, the state is expected to have $2.5 Billion cash on hand.
While that sounds like a lot of money – and to any one of us, it is – it’s important to remember that figure represents just ten percent of the state’s annual budget. Essentially, we now have a little over a month’s savings on hand for the next downturn.
For perspective, the last recession took almost $3 Billion of the state’s cash reserve and stimulus funds to keep the bills paid. Even still, state employees and teachers had to be furloughed. Most state employees went almost a decade without raises. State leaders do worry how quickly we forget how little rainy-day funds last when storm clouds gather.
As such, the new target for the rainy-day fund is closer to 15% of the state’s budget. There are no plans to figure out how to spend the surplus. The bond rating agencies wouldn’t like that too much.
Which brings us to one more thing our state’s leaders didn’t do during this summer. Georgia didn’t spend any time worrying about downgrades from bond rating agencies. Even during the worst days of the recession, Georgia didn’t lose its AAA debt rating from a single rating agency. We’re among a very small and exclusive club of states that can say that.
Illinois, however, had its debt rating lowered to almost junk bond territory after their last budget cycle ended up with higher taxes and more debt to finance existing programs and pensions. Illinois has underfunded pensions among many other structure fiscal issues.
Not coincidentally, Illinois is losing population. Georgia, meanwhile, is growing again. The perennial top ranked state to do business is attracting employers and new employees alike. That’s not a coincidence. The state’s fiscal austerity and long-term outlook are attractive to those making long term investments and long-term living decisions.
Given that our legislators took care of their fiscal responsibilities in March, they’re actually spending their summer and fall on study committees to solve problems in rural Georgia and how to address transit in Metro Atlanta. Both, actually, are opportunities of growth.
With metro Atlanta having over half the state’s population, it’s important to figure out how to share growth – population and economic – with other parts of the state. Rural Georgia must not be left behind.
Metro Atlanta, however, will continue to grow. Its current growth rate is roughly one million residents per decade. And we’re going to have to figure out a better way for those people to move about the region and around the state.
The main constitutional responsibility of the legislature is to deliver a balanced budget. By consistently doing that with surplus funds left over, the state is in a better positon than all of our peers to craft solutions in other areas that will continue to propel Georgia forward as a preferred destination for employers and citizens alike. This is the best way to keep those from other states using their summer vacations loading moving vans to move to Georgia.