State Budget Growing, But Targeted

This week’s Courier Herald column:

The first week of the annual meeting of Georgia’s General Assembly is filled with a lot of ceremony and pageantry. The annual Wild Hog Supper welcomes legislators back to Atlanta. The Georgia Chamber of Commerce’s annual Eggs & Issues breakfast allows the Governor, Lieutenant Governor, and Speaker of the House telegraph issues they find of importance. The Governor then gets to expand his remarks with the annual State of the State address.

Those are words. Powerful words with influence to back them up. But still words.

Then, the Governor issues his budget recommendations with the state’s annual revenue estimate. This estimate – the projection of tax dollars that the state will receive during the next fiscal year beginning July 1st – is the amount the legislature can budget.

The one mandatory constitutional responsibility of the General Assembly is to pass a budget. The Governor’s recommendation and revenue estimate turns the rhetoric into math. And then the work begins.

Headlines upon the Governor’s budget release trumpeted it as the largest in state history. Nominally this is correct. Some perspective is in order to see how Georgia’s budget – and its population – has changed since the 2008 peak before the great recession.

Georgia’s budget reached a high water mark of $20.5 Billion in state tax revenues in 2008. Two years later, Georgia had furloughed state employees and made other cuts with revenues bottoming out at $17.4 Billion in 2010. Now seven years later, the Governor projects revenue for FY 2017 at $23.7 Billion.

Before concluding that we’ve increased spending by $6 Billion, however, we should note that spending didn’t really get cut all the way to $17.4 Billion. The state burned through a billion and a half dollars in the “rainy day” reserve funds and added a couple billion in federal stimulus dollars to get through the hardest years.

Education spending continues to be the fastest boat lifted with the rising tide of increased revenues. K-12 spending has increased from a low of $6.8 Billion in 2010 to a proposed $8.9 Billion for FY 17. This includes a proposed additional $300 million in proposed spending for teacher pay raises this year.

Most other state employees have gone more than 8 years with a single raise of 2% or less once during the period since the financial crash. This should change this year with state employees also sharing in 3% raises.

These raises don’t come cheap. It costs approximately $135 Million for every 1% raise for state employees. Quick math says this nominal raise to reward employees for sticking through the lean years and keep positions competitive will cost the state over $400 Million. The state will be spending more.

With unemployment rates down to normal levels, the job market has become competitive in Georgia again. As such, many state agencies are having issues with employee turnover.

Certain positions in some state agencies such as the Department of Corrections, Juvenile Justice, and Behavioral Health will get additional raises to aid stability and reduce training costs for new employees. This is similar to a program Agriculture Commissioner Gary Black implemented to stem the costs of hiring and training inspectors when he took over his department. Additionally, the Department of Family and Children’s Services’ budget will allow for a significant number of new caseworkers to achieve a more reasonable workload per agent.

The other department that will be a large budget beneficiary will be the Department of Transportation. HB170 was passed last year to fund new transportation investment. Those funds – including the former sales taxes on gasoline that previously had been diverted to the general fund – will first be appropriated this year.

In a continued demonstration that “maintenance” was and is a critical need, the Governor has again proposed adding $100 Million in bond proceeds to accelerate bridge replacement in addition to the new funds raised from motor fuels taxes and hotel fees.

The increased spending hasn’t exactly been lavish or a return to the days where a local hall of fame was awarded to chosen committee chairmen. Those who prepare the budgets note that this is no longer a budget that reflects years of triage, but still began with each department asked to submit a plan for flat spending. The result is targeted spending increases based on specific needs or, as House Appropriations Chairman Terry England called it, “a rebuilding year”.

Georgia has come a long way since the 2008 crash. We’ve added about 900,000 new residents. We’ve added about 50% more people to our Medicaid rolls 10% more students to our University system. We’ve doubled our investment in transportation infrastructure and are spending more on education than ever. All of these push the cost of government up.

Some final perspective: When adjusting for inflation, the per capita taxes collected at the state level have decreased 9% since the peak of 2008. Spending cuts in the wake of the crash were largely across the board, with education taking a lesser cut. Spending increases have been targeted, with education taking the greatest share.

Charlie Harper is the Executive Director of PolicyBEST, a public policy think tank focused on issues of Business & Economic Development, Education, Science & Medicine, and Transportation. He’s also the publisher of GeorgiaPol.com, a website dedicated to State & Local politics of Georgia.