Funding Dearth Opens Opportunity Under the Gold Dome

By Kelly McCutchen

Kelly McCutchen, President, Georgia Public Policy Foundation

Kelly McCutchen, President, Georgia Public Policy Foundation

Not everything is off limits to Georgia’s government in an economic recession. On the contrary, the challenge forces Georgia to explore opportunities for fundamental reforms that improve efficiency and effectiveness in the long run. Below are ideas that, if implemented, could help position the state ideally for the future.

First, the state can enhance bipartisan criminal justice reforms enacted in 2012 by reforming the juvenile justice system and by protecting innocent owners and their property rights through a reform of civil asset forfeiture law.

Then, there’s an ideal opportunity to improve access to justice for victims of medical negligence with patient-centered tort reform. The medical malpractice system works well for trial lawyers and insurance companies but barely for patients harmed by malpractice. A non-litigious system could compensate more victims and reduce medical errors. Even better, it could save Georgia taxpayers $1 billion a year.

The state should also embrace Florida’s successful patient-centered Medicaid reform for disabled citizens. With customized benefits and multiple options, patient satisfaction and health outcomes improved. Estimates show savings of more than $100 million.

Georgia needs to create tax equity for employees of small businesses. The tax exclusion for employer health care purchases is the single largest federal tax expenditure. It is more than double the value of the mortgage deduction, or an average of $1,500 per person. If you work at a small business and don’t have access to employer-provided health insurance, you unfortunately receive zero tax benefit. An easy fix is to enable employees to pay for their individual insurance through existing employer “cafeteria plans.” Their health insurance premiums would be withheld from their salary before taxes, just like contributions to other benefits such as child care.

It is unwise to renew the hospital bed tax without corresponding cost-saving reforms. The $230 million tax, enacted three years ago to draw down extra federal funding, was sold as a temporary solution. This state’s Medicaid program is $700 million in the red without the tax. At the very least, legislators should enact long-term cost-saving measures so they can call this a temporary tax with a straight face.

Start shifting a portion of the “4th penny” to statewide transit and paratransit services. Georgia motorists are paying this tax on motor fuel but it is not being spent on transportation. Given budget constraints, a small shift in funding would be a show of faith toward eventually allocating the entire amount to transportation projects.

Georgia could help attract and retain high-quality teachers by offering alternatives to outdated defined-benefit pensions. Since 2008, all state employees other than teachers have been able to choose a hybrid pension plan, a combination of a small, defined benefit pension and a portable, 401(k)-style defined contribution plan. Recent studies have shown the most effective teachers prefer such plans. New teachers and state employees should enroll in the existing Georgia Defined Contribution Plan, while existing teachers would have the option of joining the hybrid or the defined contribution plan.

Redirecting a small portion of school construction bonds would fund fiber-optic connections to enable broadband Internet access for every student in the state. The movement in education toward digital learning reduces emphasis on buildings and onto high-quality Internet connections. Education is critical to economic opportunity; rural students must not be left behind. The technology would also enhance health care in remote areas via telemedicine.

Increased flexibility in existing funding would help cover priority needs. Georgia spends more money per student on education-related capital projects than all but nine states. A flexible local sales tax substituting for the Education Special Purpose Local Option Tax (ESPLOST) would allow local governments to split revenue among any combination of education capital projects, transportation capital projects or temporary shoring up of operating budgets for schools in dire circumstances.

These reforms directly impact citizens’ lives and their concerns: keeping them safe, lowering the cost of health care, improving our schools, enhancing mobility and making sure government lives within its means. Businesses often use an economic downturn as an opportunity to make fundamental changes in their strategy. Similarly, there is no better time than the present for Georgia to implement bold changes and lay the groundwork for a strong economic recovery.

Kelly McCutchen is president of the Georgia Public Policy Foundation, an independent, state-focused 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 (January 11, 2013). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

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