Budget Task Force Recommends Slate of State Efficiencies

March 19th, 2010 by Leave a Comment

By Mike Klein 

Fewer state government employees, lower salaries, reduced benefit packages and a possible sales tax increase on “selected services” are among about four dozen proposals that a state Senate budget task force proposes could save almost $3.2 billion over five years.   

The panel does not indicate when specific cuts should be phased in.  It also says the state needs to do a better job collecting revenue by making sure sales tax lists are current.  Hall County was singled out for having more than 900 businesses whose names are not found on state tax lists. 

Seven private sector executives worked with the Senate Budget Office to compile the recommendations, unveiled March 16 by Lt. Gov. Casey Cagle and available here:http://ltgov.georgia.gov/00/article/0,2086,2199618_2199664_157503072,00.html. 

None of the panel’s proposals are binding.  Some, such as teacher merit pay, have been proposed before. Measures to create more public–private partnerships have already been introduced as either state Senate or House bills. 

“State government must fundamentally restructure itself to become smaller and more efficient,” said Kelly McCutchen, president of the Georgia Public Policy Foundation and a member of the task force. “Short–term fixes such as furloughs and across-the-board cuts are not enough. Running government like a business isn’t always possible, but there are corporate efficiencies we should adopt.”

Overall, the task force acknowledged a complex and troubling financial picture that reaches far beyond Georgia. It estimated that nationally, state governments will be underfunded by some $350 billion during Fiscal 2011.  Georgia’s $1.6 billion shortfall pales in comparison to California and other states that have budget deficits reaching into the tens of billions of dollars.  

Three billion dollars were trimmed from government spending during the 2009 legislative session. The panel estimated Georgia would need to remove $1.6 billion to balance the Fiscal 2011 budget. That is based on projections of 4 percent revenue growth during the fiscal year that begins July 1. 

The task force report, which emphasized a broad sweep of cutbacks and consolidation over widespread tax increases, proposed that Georgia focus on “broadening the sales tax base” to include new state income from services that currently do not pay sales tax.  One example is automotive repair labor charges: Automotive parts are currently taxed but labor is tax-free.  The report reinforces areas where Georgia policy should be consistent with peer states.  

Georgia spends $3 billion annually to provide government employee health care, or $15 billion over five years. The panel estimated that about 10 percent – some $1.5 billion over five years – could be saved by making health care cost information more easily available and expanding better health practices through financial incentives.   

The panel’s indigent health care proposals strongly center on getting Medicaid patients out of hospital emergency rooms and into federally funded health centers. Non-profit clinics already save Georgia $400 million per year; health care workers who volunteer for nonprofit clinics would receive liability protection. The panel proposed renegotiating prescription drug rates, especially for generic medications.   

University system proposals are large, with $363 million in estimated savings. There would be more focus on shared services between the University System and the Technical College System. Proposals include transferring remedial education from four-year schools to two-year colleges and reviewing and adjusting university tuition rates as necessary. Universities would be accountable for attaining endowment fund-raising benchmarks. 

The estimate for public school savings is much smaller, at $43 million. The panel says voters should be allowed to designate education special local option sales taxes (E-SPLOSTs) for operating expenses. Such revenue currently is constitutionally restricted to capital improvements. 

Public school teacher retirement fund contributions would increase to 6 percent and the plan would be converted from a defined benefits model to defined contributions, with employees making their own decisions about how to invest, as they do in most private sector plans. 

Automatic teacher salary increases would be frozen in favor of merit-based pay. (Gov. Sonny Perdue proposed a similar model.) The task force also says Georgia should place more emphasis on the successful Georgia Virtual School model. 

Recommendations included focusing on whether Georgia needs to own 15,000 buildings, lease 1,800 properties and oversee 1.1 million acres of land. A current focus on downsizing state government would continue with an objective to emphasize core missions, reduce nonessential functions, share services, consolidate agencies, reduce total employment, reduce salary compensation and reduce employee benefits. 

Giving overburdened Georgians more hope, legislation has been introduced in the House to establish a Special Council on Tax Reform and Fairness for Georgians and a Special Joint Committee on Georgia Revenue Structure to investigate long-overdue opportunities for tax reform in the state.

Mike Klein is a communications specialist with the Georgia Public Policy 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 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 (March 19 2010). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.



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