By Kelly McCutchen
With state revenues finally ending their freefall and a balanced budget working its way through the House, it’s reasonable to expect the job will be easier next year. Georgia’s fiscal year 2011 budget is balanced. Unfortunately, it’s with nearly $2 billion of federal stimulus funds. That’s money that will not be available next year. And Georgia may have missed several golden opportunities to avoid a repeat of this year’s budget drama.
Unlike most recessions that are followed by a rapid recovery, many experts believe the economy – and state revenues – will recover much more slowly this time around. With the burden of massive new health care spending and significant federal tax increases on the horizon, it’s hard to disagree.
In previous recessions, state government could use rainy day funds and other short-term fixes to bridge the gap before revenue growth returned. This recession was different. Not only did revenue growth decline, revenues dropped below the previous year’s revenues, which has happened in Georgia only a handful of times in its history. Not only did revenues drop, they dropped to 2005 levels – one of the largest declines in the nation.
So what does this mean? A long-term decline in revenues means temporary measures like furloughs and one-time funds simply shift the crisis forward to the next year. Across-the-board spending cuts need to be replaced with strategic thinking. Balancing this year’s budget solves little unless Georgia begins the process of fundamentally restructuring state government to be more efficient.
It is not for a lack of ideas:
- There was discussion of reducing the state workforce by 10 percent, which would save $367 million. Even a 5 percent reduction would save more than $183 million and eliminate the need for the hotly debated hospital tax.
- 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. Many large corporations have saved even more with similar programs.
- At a forum in Atlanta on April 13, officials from Texas described how that state’s prison system has saved more than $320 million by implementing common-sense reforms that have reduced recidivism rates and the need for new prison construction.
- North Carolina recently announced a public-private partnership with IBM to identify and prosecute cases of Medicaid fraud. It is estimated that fraud could account for up to $350 million of Georgia’s $7 billion Medicaid spending, but a bill that would have addressed this issue failed in the Senate.
These measures must be implemented now to have time to influence next year’s budget. The benefit is that the savings multiply over time. Delaying the hard choices only makes matters worse.
Change is difficult, so the natural human response is to delay change. That’s why, especially in government, constant pressure is needed to focus on capturing efficiencies. Distressingly, two bills intended to do just that failed this year.
HB 1134 by Rep. Wendell Willard was modeled in part on the Florida Council on Efficient Government, which has saved Florida taxpayers more than $550 million. An Office of Public-Private Partnerships would have identified opportunities for efficiencies at the state and local level. Even more important, it was to provide technical assistance to local governments in designing competitive program delivery programs. With so many local governments, shared service delivery and outsourcing have the potential to save taxpayers hundreds of millions of dollars and improve services.
HB 236 by Rep. Charlice Byrd, the Georgia Government Accountability Act, would have created a Legislative Sunset Advisory Committee to review the hundreds of commissions and authorities in state government. The committee would also review each state agency every eight years. Just as many laws and regulations become obsolete over time, so do commissions and authorities. This bill would have provided needed oversight and review.
These are all missed opportunities that may well come back to haunt us next year. An optimist can hope that behind closed doors these ideas are still alive and may yet have hope in the waning hours of the legislative session. As campaign season approaches, candidates must explain just how they plan to fundamentally rebuild state government rather than turning to taxpayers to prop up inefficiencies simply because, “That’s how we’ve always done things.”
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 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 16, 2010). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.
By Kelly McCutchen
With state revenues finally ending their freefall and a balanced budget working its way through the House, it’s reasonable to expect the job will be easier next year. Georgia’s fiscal year 2011 budget is balanced. Unfortunately, it’s with nearly $2 billion of federal stimulus funds. That’s money that will not be available next year. And Georgia may have missed several golden opportunities to avoid a repeat of this year’s budget drama.
Unlike most recessions that are followed by a rapid recovery, many experts believe the economy – and state revenues – will recover much more slowly this time around. With the burden of massive new health care spending and significant federal tax increases on the horizon, it’s hard to disagree.
In previous recessions, state government could use rainy day funds and other short-term fixes to bridge the gap before revenue growth returned. This recession was different. Not only did revenue growth decline, revenues dropped below the previous year’s revenues, which has happened in Georgia only a handful of times in its history. Not only did revenues drop, they dropped to 2005 levels – one of the largest declines in the nation.
So what does this mean? A long-term decline in revenues means temporary measures like furloughs and one-time funds simply shift the crisis forward to the next year. Across-the-board spending cuts need to be replaced with strategic thinking. Balancing this year’s budget solves little unless Georgia begins the process of fundamentally restructuring state government to be more efficient.
It is not for a lack of ideas:
- There was discussion of reducing the state workforce by 10 percent, which would save $367 million. Even a 5 percent reduction would save more than $183 million and eliminate the need for the hotly debated hospital tax.
- 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. Many large corporations have saved even more with similar programs.
- At a forum in Atlanta on April 13, officials from Texas described how that state’s prison system has saved more than $320 million by implementing common-sense reforms that have reduced recidivism rates and the need for new prison construction.
- North Carolina recently announced a public-private partnership with IBM to identify and prosecute cases of Medicaid fraud. It is estimated that fraud could account for up to $350 million of Georgia’s $7 billion Medicaid spending, but a bill that would have addressed this issue failed in the Senate.
These measures must be implemented now to have time to influence next year’s budget. The benefit is that the savings multiply over time. Delaying the hard choices only makes matters worse.
Change is difficult, so the natural human response is to delay change. That’s why, especially in government, constant pressure is needed to focus on capturing efficiencies. Distressingly, two bills intended to do just that failed this year.
HB 1134 by Rep. Wendell Willard was modeled in part on the Florida Council on Efficient Government, which has saved Florida taxpayers more than $550 million. An Office of Public-Private Partnerships would have identified opportunities for efficiencies at the state and local level. Even more important, it was to provide technical assistance to local governments in designing competitive program delivery programs. With so many local governments, shared service delivery and outsourcing have the potential to save taxpayers hundreds of millions of dollars and improve services.
HB 236 by Rep. Charlice Byrd, the Georgia Government Accountability Act, would have created a Legislative Sunset Advisory Committee to review the hundreds of commissions and authorities in state government. The committee would also review each state agency every eight years. Just as many laws and regulations become obsolete over time, so do commissions and authorities. This bill would have provided needed oversight and review.
These are all missed opportunities that may well come back to haunt us next year. An optimist can hope that behind closed doors these ideas are still alive and may yet have hope in the waning hours of the legislative session. As campaign season approaches, candidates must explain just how they plan to fundamentally rebuild state government rather than turning to taxpayers to prop up inefficiencies simply because, “That’s how we’ve always done things.”
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 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 16, 2010). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.
