By Kelly McCutchen
The General Assembly gathers in Atlanta next week facing a deficit of well over $1 billion. Across-the-board budget cuts are no longer sufficient to bridge the budget gap. Georgia needs more innovative, transformative ideas. The budget would appear to limit the state’s options, but there are still several progressive reforms that won’t break the bank.
Tax Reform: Pro-growth tax reforms that shift taxes to consumption and away from taxing work and investment would improve Georgia’s competitive position without costing money. Simplifying the tax code would also have positive effects. Finally, providing local governments with the flexibility, with voter approval, to temporarily shift sales tax proceeds to operations could avoid damaging property tax increases.
Regulatory Reform: In 2006, Governor Perdue signed an executive order creating the Governor’s Small Business Regulatory Reform Initiative, putting in place a process to ensure proper review of new regulations. But Georgia can and should be much more proactive in identifying existing regulations that are outdated, burdensome or redundant and need updating or elimination. Georgia’s new governor should expand the scope of this initiative and enlist the help of Georgia’s small business community.
Pension Reform: Nearly every public pension fund has outperformed Georgia’s over the past decade. A task force of financial experts working with the Commission for a New Georgia recommends broadening the asset allocation of our pension funds, as every other state in the nation has done. Diversification is designed to reduce overall portfolio risk and increase returns over time. An increase in investment earnings would protect benefits for future retirees and reduce contribution requirements for teachers, whose mandatory contribution rate has gone up by more than 10 percent over the past two years.
Criminal Justice Reform: One Georgian in 13 is under some form of correctional supervision – the highest rate in the nation. According to the Georgia Constitution, protecting “person and property is the paramount duty of government.” Georgia should be tough on crime and it should also be smart. The state of Texas has saved more than $2 billion and reduced their recidivism rate by adopting a series of common-sense measures. Georgia should move forward with programs designed to bring corrections costs under control, reduce crime, make victims whole and put more offenders on the path to becoming productive, taxpaying citizens.
Tort Reform: This critical driver of health care costs was left unaddressed by the recent federal health care law. Defensive medicine needlessly drives up costs without improving patient safety. Studies indicate that statistically, Americans are just as likely to be a victim of medical malpractice today as they were 30 years ago. Georgia should take a serious look at reforms such as medical malpractice review panels.
Expanded Online Education Options: Budget cuts have forced many schools to eliminate arts, foreign language and Advanced Placement course offerings. The Georgia Virtual School (GAVS), managed by the Georgia Department of Education, provides a wide variety of online courses taught by certified teachers to any school in the state. Unfortunately, the number of classes offered by GAVS is capped. Georgia should eliminate the cap and every student to take advantage of these high-quality, online courses.
Incentives for Healthy Behavior: About half of all health care costs are related to behavior. Implementing health care incentive programs for state employees would save $180 million in the short term, and as much as $1.5 billion over five years, according to an actuarial projection. Incentive programs provide rewards to individuals who make measurable progress in improving their health. Their success has been demonstrated in the private sector. Now it’s time for the state’s largest health care plan to take action.
Health Care Price Transparency: Actuaries and consumers both believe that more transparency within the U.S. health care system is the key to bending the cost curve downward, a recent survey found. With the state insuring over 600,000 lives, Georgia is well positioned to jumpstart price transparency. This wealth of real time claims data can be used to provide state employees with the true average market price for everything from drugs to MRIs to medical procedures. Georgia would become a national leader in this area and the state’s health care costs would shrink.
Georgia should continue to push the reforms that have made this one of the best managed states in the nation, but innovation is the best opportunity for true reform. Tax, regulatory and tort reform will create the right conditions for innovation in the private sector while the state pursues innovation in the areas of criminal justice, education and heath care.
Kelly McCutchen is president of 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 (January 7, 2011). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.