Agencies scramble to deal with budget fallout

Brandon Larrabee, Morris News Service

August 12, 2008

The state's darkening financial situation has state agencies scrambling to come up with deep cuts to their budgets less than a month before they are supposed to send their spending plans to Gov. Sonny Perdue.

Perdue recently issued a last-minute change to instructions for the budget blueprints after a slump in state revenues that could open up a $1.6 billion or larger hole in the spending plan lawmakers passed back in April. The governor ordered a cut of 6 percent for most state agencies and plans to deal with reductions of up to 10 percent. Medicaid will face a 5 percent reduction and state aid to local school districts will be sliced by 2 percent.

Those cuts are much larger than the 3.5 and 4 percent cuts agencies were originally told to expect in this spending year, which began July 1, and the next fiscal year, respectively.

And plans for dealing with the reductions have to be finished by Sept. 2.

Advocates worry that the answers to the budget riddle will come in the form of fewer needed social services and state job cuts. And it will likely influence tuition rates being discussed for students who will enter college in Fall 2009.

About the only thing state lawmakers have tried to take off the table is any discussion of a tax increase -- even though some say that raising state revenues might be the wisest course.

Deeper cuts alter plans
When Chancellor Erroll Davis asked colleges and universities across the state to send him plans for a 5 percent budget cut, even before Perdue's announcement, it was seen as a way to provide flexibility for officials with the University System of Georgia. Executives could accept the cuts they liked and try to avoid the worst measures.

Last week, Davis and other officials huddled several times last week to figure out how to cut even more than the 5 percent. Diane Payne, a spokeswoman for the university system, said the agency hoped to avoid asking schools to cut even more, at least under the 6 percent scenario.

At least one school, Georgia Tech, was already floating the idea of steeper tuition increases to try to balance out shrinking state funds under the 5 percent cut, even as it acknowledged the idea's shortcomings.

"Since tuition appears to be a likely place to generate revenue, the cost of attendance may become out of reach for both non-residents and residents of Georgia, which directly impacts the affordability goal outlined by the USG," the institute said in a plan submitted to state officials.

The Department of Community Health, the state agency that oversees Medicaid, will now wait until Aug. 28 to consider its budget instead of trying to approve the spending plan at its scheduled Aug. 14 meeting, spokeswoman Matia Edwards said in an e-mail.

The late word of the cut is particularly devastating for local schools, said Joe Martin, head of the Consortium for Adequate School Funding in Georgia, an organization of 50 school districts suing the state to force lawmakers to spend more on education.

"The obvious reality is that school's already begun and budgets have seen set and people have been hired and salaries have been committed, so where does a school system turn?: Martin asked. "And I don't know that anybody has an answer."

'Other places to get the money'

The cuts have prompted some observers to call for state lawmakers to return to Atlanta for a special legislative session and, at the very least, repeal tax breaks they approved earlier this year for everything from wood residuals used to manufacture ethanol to tax incentives for high-deductible health insurance plans.

That could spare the kind of Medicaid reductions that could lead to new eligibility restrictions and fewer services being provided to patients, said Linda Lowe, a consumer health advocate.

"It's outrageous that anybody's thinking about doing any cut at all," she said. "There are other places to get the money. We ought to be going back and having a special session and rescinding those special-interest tax cuts that were done this past year with no thought of where it was going to come from."

Besides, cuts to government spending takes money out of the economy, said Alan Essig, head of the Georgia Budget and Policy Institute, a think tank that pushes for more spending on social programs.

Lawmakers, though, have all but ruled out an increase in taxes. In fact, legislative leaders have met to try to spare a state property-tax credit from the budget knife.

"I think that a tax increase should be the very, very last thing that's ever considered, and I think that's why we're looking at doing what we're doing right now," said House Appropriations Chairman Ben Harbin.

Jared Thomas, head of the Georgia chapter for the anti-tax group Americans for Prosperity, said an economic downturn was no time for a tax hike.

"Everybody knows you don't tax yourself back into prosperity," he said.

Related Content:

• Budget ax falls today on Perdue's education initiatives
• Beyond charges, policy differences separate Senate candidates
• Group: Money, partisanship cloud judicial elections
  

---