The muted lull between the Georgia General Assembly’s March Sine
Die and the January 13th reconvening of legislators has been
relatively quiet publicly. Behind the
scenes, there has been a philosophical and practical struggle over Georgia’s
budget – all within the ranks of the majority Republican party.
In late summer, Governor Kemp requested most state agencies
prepare cuts of 4% to current year spending and 6% for next year’s budget in
the event of a possible downturn in tax revenue collection. The Governor also wants to continue to
deliver on his pledge to give educators a $2,000 pay raise to complete his
pledge of $5,000 total. Then there’s the
matter of another state income tax cut that is scheduled to kick in next year.
Georgia’s budgets have to balance every year. New spending and cuts to revenue means either
cuts to spending elsewhere, or new revenue streams must be identified.
It’s not unusual to see some friction between new elected
officials in the executive branch wanting to demonstrate results to voters who
feel “taxed enough already”, and a legislature that has spent the last decade
digging out from a recession who has put the lion’s share of revenue growth
into K-12 education, transportation infrastructure, and growing healthcare
costs. There have been few frills along
Legislators do have numbers to refute any claims that they
have been big spenders. According to the
Federation of Tax Administrators, Georgia ranks 43rd in state taxes
collected per capita. When local taxes are also figured in, Georgia ranks 42nd
according to the Tax Foundation.
Georgia’s problem is that Republican primary voters want to
grade the state on a curve. Neighboring Florida,
Alabama, South Carolina, and Tennessee take in less from state residents per
capita than does Georgia.
Georgia is also the fourth fastest growing state in the country. That puts us much closer in spending needs
and infrastructure investments to North Carolina, which ranks 34th
in state taxes per capita and 32nd when local taxes are
Georgia’s elected officials are stuck in a difficult
position where we continue to increase investment in our biggest areas of state
spending, and need to demonstrate to their base that they are simultaneously
decreasing the size of government. As an added pressure, they would like to
maintain the state’s AAA bond rating to show they’re doing both prudently.
It would be much easier if there was a budget line item for “fat”. Instead, many of the areas targeted for cuts
are labor intensive. Most state
employees spent the last decade hearing “no money for raises this year” again
and again. Now, with a 3.5% unemployment
rate, they’re not only hearing that raises are unlikely, but that furloughs are
a strong possibility. It’s going to be
hard to retain the best and brightest under this scenario.
As legislators and executive branch staff begin to look at
their options, it’s increasingly likely that additional revenues may be needed
to pay for future income tax cuts. “Broadening
the tax base” remains an acceptable conservative solution to most when spending
levels can be justified.
Options on the table with varying degrees of probability
include increasing state cigarette taxes, which are the 48th lowest
in the country and lower than all neighboring states – and almost $1 per pack
below those in Florida. Casino gaming is
getting another long look, which would bring new revenues from a new employing industry
without extending any tax incentives. The longest of longshots would be expansion of
marijuana legalization, which states like Colorado have demonstrated a stable
new revenue stream.
New revenue sources aren’t yet the priority of anyone in
this discussion. As it becomes clearer
that tax cuts combined with increased spending in the largest state budget
areas would mean deep cuts elsewhere, a lot of other options will suddenly seem
palatable to keep all the promises made while balancing the budget.