Leaner State Budget a Better Fit

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.

  • For example, DCH reports that half of the babies born in Georgia are Medicaid babies, and 26 percent of those are diagnosed as “other than normal” because of low birth weight and other complications. Hospital costs are up to 70 times higher for a low-weight newborn; a prenatal program would save $42 million.
  • A diabetic program and a disease management program for the 4.5 percent of recipients (58,000 people) who account for 50 percent of the Medicaid budget would save another $134 million.
  • An intervention program to help avoid the 29 percent of Medicaid emergency room visits deemed non-emergency would save Georgia another $50 million.

Nor is “education” immune from cost savings for taxpayers without hurting children.  

  • Charging teachers $20 for certification and their five-year renewal would level the professional certification playing field while producing new revenue of $1.25 million.
  • Increasing co-payments for participants in the State Health Benefit Plan, 60 percent of them teachers, would save another $35 million.
  • Dissolving the redundant Office of Education Accountability would save $2.6 million; incorporating it into the Department of Education would at least eliminate the office rent and some positions.

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
Telecommunications savings 13,500,000
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
Total $1,572,637,123
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.