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Crawford: Georgia headed for a fiscal fiasco

POSTED: August 21, 2008 5:01 a.m.

When Gov. Sonny Perdue called in reporters a few weeks ago to discuss the revenue numbers at the end of the state's fiscal year, he tried to be as calm and reassuring as possible.

The news, he admitted, was not good. Georgia's tax collections had dropped off sharply in the last few months and the state found itself on June 30 about $600 million short of having enough money to pay all the bills that accumulated over the previous 12 months.

Perdue said the $1.5 billion in the state's reserve funds would provide enough money to balance the books for fiscal 2008 and still leave about $900 million for future shortfalls that might develop.

"There is no emergency," Perdue said confidently.

He may have been a little premature in that statement. As the weeks have passed and the fiscal experts have crunched the numbers, the financial picture for state government is looking more uncertain.

Perdue and the legislative leadership were too optimistic when they wrote the budget for the current fiscal year. They assumed that state revenues would grow by 7.4 percent, a ludicrous assumption, it now appears, because revenue collections actually decreased during fiscal 2008 and have shown no signs of turning up during the current economic troubles.

The Georgia Budget and Policy Institute estimates that the state could end up $2 billion short of collecting enough taxes this year to pay for all the programs in the budget. That's nearly 10 percent of the total budget, and it could mean that hospitals will be closed, state employees dismissed, Medicaid payments cut off, and funding reduced to local school systems.

As a result, the political leadership now finds itself in a perilous position. They are trying every way possible to avoid calling a special legislative session during the fall, when all members of the General Assembly will be smack in the middle of re-election campaigns.

Who wants to admit to the folks back home that they messed up so badly on the budget they have to spend thousands of taxpayer dollars on a special session to fix it?

Perdue initially told his department heads to recommend 3.5 percent reductions in their spending for this year. He's now upped that to 6 percent and is requiring agencies to be ready to cut their budgets by as much as 8 percent or 10 percent.

After a conference call with legislative leaders Friday afternoon, all the parties were insisting that they could get through this stormy period without having to call a special session. We'll see how long they're able to stick to that promise.

As bad as the state's financial situation is, it would have been much worse if the legislative leadership had not been so bitterly divided last session over tax cut proposals.

During the session's final hours, Speaker Glenn Richardson and his House colleagues were trying to push through a bill that would have eliminated the annual ad valorem tax on auto license tags. Lt. Gov. Casey Cagle and his Senate negotiators, who had proposed a cut in state income tax rates, never could reach agreement with the House on the issue and ultimately no tax cut bill was passed.

Richardson went ballistic and delivered an angry speech to House members on that final night, laying all the blame for the failure of the tag tax bill on Cagle and demanding that Georgians replace Cagle as lieutenant governor.

I'm sure Cagle had his own political reasons for not going along with Richardson and the House on eliminating the auto tag tax, but it is fortunate for Georgians that he took that stand.

If the tag tax had been eliminated, it would have cut annual state revenues by another $700 million or more. That could have pushed the shortfall for the coming year to more than $2.5 billion, rather than the $2 billion that is now being predicted. Then you would have really seen a crisis in state government worse than anything since the Great Depression.

As much as all taxpayers like them, there's no time to think about tax cuts right now; the state is going to struggle just to keep its budget balanced. We have a tough year ahead of us.

Tom Crawford is the editor of Capitol Impact's Georgia Report, an Internet news service at that covers government and politics in Georgia.



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