By Benita M. Dodd and Kelly McCutchen
The wailing and gnashing of teeth under the Gold Dome might easily persuade some Georgians that drastic measures are needed for lawmakers to bridge the budget gap for fiscal 2004. Certainly, some advocates for women, children and seniors predict devastation of needed government services without a tax increase.
Even the governor threw up his hands after the House rejected a proposed tobacco tax increase to help fund a $400 million shortfall in Georgia’s $16.3 billion budget for fiscal 2004.
“If they don’t want to agree, what do they want to do?” he said at a news conference.
The last thing lawmakers want to do is succumb to deadline pressure and pass an arbitrary tax hike when alternatives abound. The House vote wasn’t a defeat of the governor’s budget; it’s an opportunity for politicians to carefully rethink a pattern of big government and runaway spending.
Lawmakers who take up the gauntlet can find a veritable cornucopia of spending cuts, enhanced government and protections for the needy – all the while ensuring that taxpayers won’t give up more of their hard-earned dollars in these trying economic times.
Georgians are skeptical of claims that the only way to head off a looming budget crisis is by government reaching deeper into taxpayers’ pocketbooks, and they said so in a recent poll. Ninety percent of respondents strongly agreed that “Before approving another tax, politicians in the state legislature should do a better job of managing existing funds and programs more efficiently.”
(The poll of 800 registered voters, conducted March 23-26 by American Viewpoint Inc. of Alexandria, Va., had a 3.5 percentage-point margin of error.)
The numbers speak for themselves:
An analysis by the Andrew Young School of Policy Studies at Georgia State University found that between 1991 and 2000, the state budget grew by 75.51 percent (from $7.63 billion to $13.3 billion). In that period, population growth was just 17.6 percent and the cost-of-living index (Consumer Price Index) increased just 25.9 percent. Fiscal 2004’s budget of $16.3 billion is just one more mile marker along the road of an out-of-control government; a spending limit law is a vital roadblock.
Georgia lawmakers need to consider Colorado’s law, which limits the state budget’s annual growth to the inflation rate plus the percentage change in population; the excess must be refunded to taxpayers unless voters let the state keep it.
Unfortunately, some Georgia politicians are reluctant to excise state government’s bloat. Georgia has 561 government employees per 10,000 residents, compared with Florida’s 502 per 10,000. A Georgia Public Policy Foundation analysis estimates that simply by operating with the same number of per-capita government employees as Florida, Georgia could save more than $700 million a year – even accounting for a $2,000 average pay increase for each employee.
For fiscal 2004, a furlough of non-essential state employees one day a month could cut state spending by $66 million. In the private sector, where employees aren’t rendered immune from economic downturns by taxpayer appropriations, Coca-Cola has cut 500 Atlanta jobs; Delta Air Lines has said 1,000 recent voluntary layoffs may not be deep enough.
Proposals from Democrats and Republicans, as well as state audit findings, focus on more than $1.5 billion in common-sense cuts and savings.
First and foremost, however, politicians need to exploit the “rainy day” fund. There’s a reason it’s officially called the Revenue Shortfall Reserve; there’s no reason for legislators to continue to hoard the balance of the fund – $420 million – which more than makes up for the budget shortfall and the governor’s hoped-for tobacco tax revenues. As the fabulous Aesop pointed out, the true value of money is not in its possession but in its use.
Concerns about the bond rating are misguided; Georgia had a zero balance in its Revenue Shortfall Reserve as recently as 1991 without negatively impacting the state’s bond rating.
Another opportunity for bridging the gap is evident in the Georgia Environmental Facilities Authority, which holds assets of around $250 million. Most of that money deserves to be returned to the general fund.
Created in 1983 specifically to provide low-interest water and sewer loans to local government, the authority is a poster child for government mission creep.
GEFA’s mission statement now is to “responsively and responsibly provide environmental and energy efficiency financing, coordination and education to governmental units and non-profit organizations so that they can use available resources in an environmentally sensitive manner for all Georgians.” That includes co-hosting an environmental conference (Greenprints, with Southface Energy Institute) and, since 1991, administering a “Wheels to Work” program providing transportation aid to people leaving the welfare program.
While some local governments may be concerned about the availability of low-interest loans, GEFA’s business report admits it is only the fourth-largest financier for Georgia local government, with ample private-sector and government competition, and it represents just 7 percent of local borrowing. Aside from the lack of a threat to local borrowing, there’s a clear advantage to reining in this authority.
Proposed budget cuts in the Department of Community Health have produced the greatest outcry. But through a combination of a $5 Medicaid co-payment and health-care management programs while reducing optional Medicaid coverage, Georgia can cut more than $300 million from the budget and provide better care.
Nor is “education” immune from cost savings for taxpayers without hurting children.
Sometimes, all it takes is changing the way the state does business. Increasing the allocation for Tuition Equalization Grants (scholarship funds for private colleges) would increase student choice and reduce the burden on Georgia’s public universities.
Or requiring nursing homes to draw prescriptions on a weekly basis instead of monthly would reduce unnecessary medication; even if a nursing home bed is freed in the first week of the month, the patient’s remaining (state-funded) medication is discarded.
The cuts are out there, if the administration is willing. Taxpayers must refuse to roll over and play dead.
Proposed Budget Reduction – FY 2004 Georgia Budget
|Revenue Shortfall Reserve (“Rainy Day Fund”)||$420,000,000|
|Shift Georgia Environmental Facilities Authority funds||200,000,000|
|Shift funding for school enrollment growth to supplemental budget||148,000,000|
|Increase co-payments for Medicaid recipients to $5||142,000,000|
|Reduced payments to overfunded insurance plans||109,233,030|
|Better management of “sickest of sick” Medicaid recipients||88,000,000|
|Shift OneGeorgia funding to Medicaid||70,834,093|
|Furlough non-essential state employees one day per month||65,000,000|
|Various recommended agency reductions||57,000,000|
|Disease management program for diabetes||54,000,000|
|Emergency room access management program||50,000,000|
|Program to reduce low birth weight babies||42,000,000|
|Increase co-payments for State Health Benefit Plan||35,000,000|
|Reduction in optional Medicaid benefits||26,500,000|
|Eliminate funding for Greenspace Program||15,000,000|
|Sale of state property||11,500,000|
|Efficiencies in management of state construction projects||9,000,000|
|Faster deposit of tax payments||8,000,000|
|Savings in administrative services||5,000,000|
|Improve nursing home prescription reimbursement system||1,820,000|
|Teacher certification and renewal fee||1,250,000|
|Source: Democratic budget proposals, Republican budget proposals and state audit findings.|
Benita M. Dodd is vice president of the Georgia Public Policy Foundation. Kelly McCutchen is executive vice president of the Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.
© Georgia Public Policy Foundation (April 4, 2003). Permission to reprint in whole or in part is hereby granted, provided the authors their affiliations are cited.