By Mike Klein
The final breath has been drawn by this year’s Georgia General Assembly. Here is what lawmakers did on seven issues that are closely tracked by the Georgia Public Policy Foundation. This article discusses state charter schools, digital learning, criminal justice and juvenile code reform, pension and tax reform and health care reform. All of these will require more work going forward and in some cases, much more work starting soon.
State Charter Schools
This November voters will decide who got it right: Lawmakers four years ago when they created a state charter schools commission or the state Supreme Court last spring when it ruled that the commission was unconstitutional. The very fact that voters – not the state Supreme Court and not legislators – will settle this question was by no means assured during the session.
House Resolution 1162 faced a significant hurdle to achieve a two-thirds House super majority and it almost collapsed in the Senate. Opposition came from some of the state’s largest school systems and organizations that represent school boards, superintendents and teachers. Those groups were focused on how to stop voters from having a chance to decide the question.
They might have prevailed until the Senate’s two longest serving members – Democrats George Hooks and Steve Thompson – delivered powerful Senate floor speeches to explain why they would vote yes. Hooks, Thompson and two other Democrats joined all 36 Republicans to vote for the constitutional amendment resolution. Another “yes” vote in November would start development of a new commission whose bones are contained in House Bill 797.
The commission could approve virtual or brick-and-mortar schools. Students could live within defined local boundaries for traditional schools or statewide for virtual schools. The commission would consider applications only from groups that were already rejected by local school boards. Those same local boards would be permitted to explain why they rejected the application.
New and existing state commission charter schools would receive only state dollars. Traditional schools would be paid operating expenses figured on the state’s school funding formula for the lowest five school systems based on assessed valuation, plus a capital expenditures amount. Virtual schools would receive two-thirds of the amount given to traditional schools for operating expenses. Schools that offer blended learning – online with a teacher – could receive some capital funding at the discretion of the commission.
“No” from voters in November would render House Bill 797 unnecessary.
Resources: House Resolution 1162. House Bill 797
Digital Learning
State-based digital learning is about to explode in Georgia. Two bills are responsible.
House Bill 175 actually was introduced and passed the House last year. This year it passed the Senate. The bill would establish a clearinghouse of online learning courses that would be managed by the Georgia Virtual School (GAVS) at the Department of Education. Courses could originate with public school systems – such as Cobb, Forsyth and Gwinnett school systems that have robust online curriculum – or from other sources that could include online learning companies.
This clearinghouse structure has the potential to create vast amounts of content that could be available to any student who has online access anywhere in the state. Georgia Virtual serves about 10,000 students with courses that supplement their traditional bricks-and-mortar classroom work. The expectation is that Georgia Virtual could serve 100,000 students within just a few years.
Senate Bill 289 takes digital learning another step forward; it directs the state board of education to ramp up high school digital learning resources for today’s current sixth graders before they are incoming freshmen in fall 2014. The original Senate bill said those students who are scheduled to graduate in spring 2018 would be required to take at least one online learning course before high school graduation but that language was changed to “maximize the number.”
The clearinghouse would also be managed through the Georgia Virtual School.
Resources: Senate Bill 289. House Bill 175.
Criminal Justice Reform
When the final ink was dry, everyone agreed it is time to move forward with widespread reform. The House voted 162-0 and the Senate 51-0 on final legislation that will emphasize treatment programs over hard-time incarceration for some property crime offenders and low-level drug users. From the beginning supporters said these are not going-soft-on-crime strategies.
New ideas adopted this year recognize the state cannot continue to absorb more than the $1.5 billion per year that it spends on prisons, parole and probation. State prisons hold 56,000 inmates and each day local jails contain hundreds to thousands of inmates who are waiting for an empty state bed. Georgia also has 22,000 adult parolees and 156,000 on felony probation.
These ideas will take years to fully incorporate. They include new and expanded accountability courts, especially drug and mental health courts that will reroute eligible offenders into treatment programs with severe oversight. New definitions and penalty levels were established for several property crimes including theft, burglary, shoplifting and forgery.
The state will move toward prosecution of drug offenses based on the type and weight of drugs to clarify the distinction between casual users, sellers and traffickers. Child abuse laws were tightened as were requirements for reporting suspected sexual abuse and suspicion of human trafficking.
Criminal justice reform is not a single year issue. It will take money and time to develop public and private resources. Sheriffs and the county district attorneys are concerned about the impact of reform on their budgets, facilities and staffs. Everyone already knows this will take a steep learning curve and some corrections are likely. Governor Nathan Deal kept the Special Council on Criminal Justice Reform intact and it is expected to have new assignments this year.
Resources: House Bill 1176. Georgia Public Policy Foundation Issue Analysis.
Juvenile Justice Reform
The outlook was bright when the House voted 172 – 0 to pass ambitious legislation that would rewrite nearly every section of the state’s juvenile code. But the outlook proved to be too bright when the Governor’s Office said it wanted more financial analysis and the current bill died.
Much like adult criminal justice reforms, the bill emphasized treatment over incarceration when appropriate for juveniles. It also made changes to policies that regulate foster care, permanent placement hearings, adoption codes, family mitigation hearings, children who are status offenders and the rights of parents. None of the changes would have been enacted until July 1, 2013.
Advocates – and there are many inside and outside government — believed they could work out funding details before July 2013 and during the next General Assembly. That strategy came up short at the Governor’s Office and the bill never reached the Senate. It has been at least five years since hard work was begun to rewrite the code and it will be at least one more.
Resources: House Bill 641. Georgia Public Policy Foundation Issue Analysis.
Pension Investment Reform
Pension investment management is an ongoing hedge that current employee contributions and investment returns will continue to generate the cash flow required to pay benefits. Public sector pensions nationally have started to come under pressure as baby boomers began to claim retirements while equity investments were losing billions of dollars and other state revenues were shrinking. Georgia has taken a small step forward to help stabilize its pension system investment returns.
Senate Bill 402 would permit the Employees Retirement System to allocate up to but not more than 5 percent of its available assets into alternative investments that include venture capital pools and other private placements specifically named in the legislation. ERS had $14.9 billion invested on June 30 of last year, about two-thirds in equities and the remainder primarily in U.S. Treasury notes or bonds. Currently, the 5 percent threshold would be about $750 million. The Teachers Retirement System is exempt and it is not allowed to make similar investments.
Many independent analyses have concluded Georgia public sector pensions are better funded at a higher percentage than most other states but Georgia does have a liability position and it needs to close the gap between funds available and owed over time. Georgia is not breaking new ground; it is adopting an investment strategy already authorized in every other state.
Resources: Senate Bill 402. ERS 2011 Audit.
Tax Reform
The results here were mixed and tax reform requires more work.
Pro-business and economic development changes adopted this year include the elimination of sales tax charged on energy used in manufacturing, agricultural tax relief, reduction of the sales tax paid on jet fuel purchases (to help all commercial airlines) and some other modernization of the tax code. Pro-family changes that will prove to be politically popular include reduction of the marriage penalty on state income taxes and a guarantee that the first $65,000 of income earned by retirees (plus Social Security) will be continue to be exempt from state income taxes.
The motor vehicle revenue structure will change. The state will charge a title fee rather than state and local sales tax on new car purchases after March 1, 2013; essentially, that is a wash. But the state will no longer impose the much hated annual ad valorem value tax on vehicles purchased starting in March next year. The state will continue to impose ad valorem tax on millions of existing vehicles so in practicality, it will take years to fully convert this system.
For the second straight year the Legislature took no action to reduce state personal income tax rates that peak at 6 percent, which are among the highest rates in the southeast. Tax reform also did not address possible state sales tax rate or corporate income tax rate questions. House Speaker David Ralston has said personal income tax rate reform should be a priority.
Resources: House Bill 386.
Health Care Reform
Not much happened in the Legislature because Georgia is waiting for an early summer U.S. Supreme Court decision in the Patient Protection and Affordable Care Act case.
Georgia is among 26 plaintiff states that are asking the Supreme Court to throw out the law which became the legislative centerpiece of President Barack Obama’s domestic agenda. The nine Supreme Court justices have the option to keep the law as is, throw it out entirely or select bits and pieces to uphold or reject, including the contentious individual mandate. Health care dominoes will begin to fall into a more predictable pattern after the opinion which is expected in late June.
This issue affects every Georgian — and every American — whether you work for or own a business, purchase your own health insurance, use public sector insurance or have decided you do not want health insurance. Starting in 2014 you could be forced to obtain insurance or pay a federal fine, and larger numbers of your state and federal tax dollars could be needed to support public sector insurance programs.
For example, existing health care law would expand the number of Medicaid eligible Georgians by 650,000 to 750,000 within two years. The anticipated cost to the state in new dollars would be $2.5 billion over ten years, paid for somehow by someone, most likely taxpayers. If upheld, the law would also force Georgia to create a health insurance exchange that it currently does not have, or to accept one that is created and overseen by the federal government.
Several pieces of Georgia legislation were introduced this year that could become the basis for a state-based health care solution if the federal law or portions of it are ruled unconstitutional. None of this year’s Georgia bills passed the General Assembly but they could be resurrected as a package or individually next year. How all this plays out depends on how the Supreme Court feels about the greatest expansion of the federal government into health care since Medicare.
Resources: Georgia Public Policy Foundation Issue Analysis and our Commentary about state health exchanges.
Save The Date: Monday, January 14, 2013 for the next General Assembly.
