Governor Nathan Deal opened three days of House-Senate appropriations hearings by taking exception to media reports that suggest his budget is a significant spending increase.
Deal proposed a $19.2 million Fiscal 2013 budget, up from $18.3 million this year. Increases would fully fund anticipated K-12 enrollment growth, required pension and the state health care benefit obligations, improve Medicaid funding and enable the state to purchase new prison beds “for those who truly need to be locked up,” the Governor said.
“Other than funding these areas of growth, my budget calls for funding increases of three-tenths of 1 percent,” Deal told assembled legislators at the State Capitol, “not the figure that you have seen in some of the media reports.” Deal added $4.2 million to support residency slots for physicians, $10 million for One Georgia rural economic development, $10 million for accountability courts and $3.7 million for school nurses.
The Governor said 14,000 state positions were taken off the books since last year and the total state workforce is down 7.7 percent since 2001 to about 96,800 employees. “When adjusted for inflation per capita spending in my budget recommendation for fiscal year 2013 is 20.5 percent less than Fiscal Year 2002,” Deal said. “In that same time period state population grew by approximately 1.5 million. Therefore, we are providing more services with fewer resources.”
The State Personnel Administration would be phased out under Deal’s 2013 budget with its staff and resources transferred to other state agencies. There would be sweeping changes at the Department of Labor. DOL state funds would be reduced by $23.3 million and many services would be transferred to other agencies. Deal has also proposed selling state fixed wing aircraft and transferring Georgia Aviation Authority budget, staff and resources to other agencies.
“There are no new taxes being proposed and this is small government that is focused on doing the things that government is expected to do and to do them well,” Deal told legislators.
Using phrases like “relatively good news for a change” Georgia state fiscal economist Kenneth Heaghney testified that recovery to pre-recession levels is still three years away, the state housing industry is still weak and Europe could be a big drain on the U.S. and Georgia economies for years to come.
Heaghney presented a mixed but overall an upbeat report. “All in all, the news has been good,” the Georgia State University economist told the Senate-House Joint Appropriations Committee. “The outlook is positive. We do expect the economy to strengthen.” He said state monthly tax revenues have been consistently stronger and that trend is expected to continue.
Heaghney said several factors will determine the pace of recovery. “Consumers are still trying to adjust to declines in their housing wealth and their equity wealth. We see Europe probably falling into recession,” he said. “China’s growth is slowing so there is a slowdown in the overall global economy. There are still headwinds and we expect the recovery to be improving but still not the kind of robust growth we’ve seen coming out of other recessions.”
Heaghney said the national economy ended last year with upticks in GDP growth and lower jobless claims along with improvement in manufacturing, professional and business services, education and health care sectors. He said the U.S. broader national economy was resilient despite oil price instability, European and U.S. debt crises and the Japanese earthquake.
Heaghney predicted state government revenue will not return to pre-recession levels until Fiscal 2015. Here is what he said about the state housing downturn: “It’s really tough to find any good news in Georgia.” Heaghney said real estate values declined 3 percent nationally last year but 12 percent in Atlanta. “That suggests that probably distressed sales are making up a bigger portion of the market.” Heaghney predicted bank foreclosures will increase going forward.
Despite those realities, Georgia continues to demonstrate slow but steady economic growth. State government month-to-month revenue increased for 18 straight months until last month when it posted a decline because of unusually high December 2010 corporate audit payments. Fiscal year revenue is up 5.2 percent with an expectation that it will continue to improve.