Legislature Reconvenes To Make Cuts

This week’s Courier Herald column:

Georgia’s legislature will reconvene Monday to finish the 40-day session that was abruptly suspended March 13^th – officially the 29^th legislative day – as the state began to shut down for the Covid-19 pandemic.  With 11 business days remaining, legislators must pass a budget prior to the July 1^st beginning of the state’s fiscal year. 

Any other bill that has passed either the House or Senate prior to the recess is game for consideration.  In these unusual times, one might even consider that bills not yet on the table could be viewed favorably if they address matters that have become a priority since March.  It doesn’t take a lot of parliamentary maneuvering to cannibalize an active bill for the cause, when required.

As for the budget, the state got some relatively good news from May’s revenue report.  Tax collections were off 10.1% from a year earlier, which is an improvement over April’s drop of 35.9%.  State agencies have been asked to prepare for 11% across the board cuts, which is also an improvement on earlier directives asking for 14%.

Most are aware the Georgia is required by law to balance the state’s budget.  There are also other legal, constitutional, and political limitations that box legislators into cuts should additional federal assistance not arrive.

While the state entered the shutdown with approximately $2.7 Billion in the rainy day fund, legislators must leave 5% of the prior year’s revenues in the reserves – with 1% remaining available to be used in the next mid-year supplemental budget.  Thus, only a bit more than half of what is on hand can be used to fill next year’s budget hole. 11% of this year’s budget would be about $3 Billion.

As for additional revenue, it’s an election year and Republicans still hold both chambers of the legislature plus the Governor’s mansion.  While it’s possible to see some excise taxes and user fee “adjustments” close some of the revenue gap, you wouldn’t want to place any wagers on broad tax increases. 

That’s not to say that additional revenue sources aren’t on the table, or at least won’t receive consideration.  Casino gaming and horse racing proposals have been floated as ideas for both job creation and additional tax revenues.  Both measures would require statewide ratification if they were to pass both chambers to let Georgians ultimately decide the fate of either. 

Given the difficulty in getting hemp cultivation in Georgia started, it’s probably less likely that you’ll see full scale marijuana legalized, medical or otherwise.  Though other states have been down this road (and raking in state revenue because of it), expect legislators to find easier “difficult decisions” to close the revenue gap while just over four months from a general election.

As for the potential of excise tax increases, Georgia’s cigarette tax is among the lowest in the country at $.30 cents per pack.  Even neighboring North Carolina – a major tobacco growing state – is higher at $.45 per pack.  For those of you that keep asking how two of our neighbors have no income tax and pay for state services, Florida’s cigarette tax is $1.34 per pack.  

There remain proposals to cut tax credit programs, but each would have immediate impacts.  If the state were to cut back or eliminate the Student Scholarship Organizations, taxpayers would end up paying even more for these students to return to public schools than the cost of the tax credits that fund their scholarships.

Likewise, Georgia’s film and entertainment industry is poised to gear up fast to produce a backlog of fresh content while California and New York remain partially closed to film, and limitations on international travel make production in other tax havens abroad uncertain. 

The film industry was a key part of bringing Georgia out of the last recession – especially in Delta-employee concentrated south metro Atlanta.  With airline layoffs forestalled by federal assistance until October, the economic effects of the Covid shutdown won’t be known for months.  Now is not the time to risk inflicting additional economic pain by knee-capping this region’s other major industry.

One cut that will receive particular attention isn’t budget related.  House Speaker David Ralston has signaled his intention to cut Georgia from the small number of states without a hate crimes statute. At a time when many state services will have to be cut due to the intersection of law and math, this is one cut that should receive favorable odds.