By: Health Insurance
Submitted: 2010-02-01 10:12:12 | Word Count: 858
For those with any optimism about Georgia's economy, don't talk to Alan Essig. As the head of the Georgia Budget and Policy Institute (GBPI), he's in a good position to speak on the revenues and projections of the state's budget. And it's not pretty.
"For fiscal year 2010 [which ends June 30], the state is looking at a $4.6 billion budget deficit," said Essig, who was speaking during a recent education conference. When the legislative session ended last year, they had only been looking at $3.2 billion. This is all including $2 billion in budget cuts and $1.4 billion in Federal stimulus money.
[ advertisement ]
And going into 2012? Essig is anticipating a deficit of $2.6 billion.
"You roll over all the cuts you've already done, all the additional cuts you do in 2010 and most of those cuts are rolled over into 2011. And then you have to cut the budget by another $2 billion plus. It's not a pretty picture."
Georgia is constitutionally required to balance its budget.
Essig said things are in such a bad shape that legislators will have to start thinking seriously about something that has been ignored in Georgia for several years now: increasing taxes.
His reasoning is simple. Of the state budget, 96 percent of it is spent on education, health care, public safety, transportation, human services and debt service. Education takes up fully half of the budget.
The remaining 4 percent includes the other 20 agencies and the legislative branch, totaling just under $700 million.
"You could wipe out that 4 percent, cut everything, wipe them off the face of the earth, fire as many as 13,000 employees who work for those agencies and still only save one-quarter of the budget deficit we're facing in FY2010."
Of course, a cut like that is not going to happen, so where is the money going to come from? One place is education, which has already seen cuts of almost 11 percent since 2009 (more than $1 billion), and further cuts have been proposed by Gov. Perdue including eliminating numerous programs, as well as lowering for the seventh straight year the amount of money the state will pay for the education of each student in public schools. With salaries making up 80 percent of education budget, there's only so much that can be cut. Furloughs, less school days, larger class sizes and layoffs are all options.
The other place to cut are the health care services, notably Medicare. According to Essig there are two ways to save money on Medicare. The first is to just cut services, which means fewer low-income pregnant women, elderly, disabled and children will be helped, which will add to the state's uninsured numbers. The other way is to decrease the amount paid to health care providers – hospitals and doctors – by up to 20 percent. Georgia already has one of the lowest reimbursement rates in the country.
The governor has already proposed increasing taxes on these services, notably with a "hospital bed fee" on hospitals and a fee on the Collateralized Mortgage Obligation (CMO's) of insurance companies. Essig insists that cutting the budget is a necessity. There is no way around it.
However this will never be enough and he maintains that – and this is where he will likely differ with the politicians – taxes will have to be raised and tax cuts will have to be marginalized.
"[Tax cuts] will do nothing but increase the deficit," Essig said. "Especially into FY2012 when you're increasing the deficit by hundreds of millions of dollars, which some of these tax cuts will do, education will take a large percentage of filling the deficit. You can't save hundreds of millions of dollars without cutting education.
"There are two tax issues floating around in the General Assembly. The first is further or additional tax cuts. And then every year there are dozens of bills of new tax breaks – sales tax exemptions for this or that – that cost the state $50-100 million every year. In the crisis we're in, perhaps it might be a good idea to stop doing that for a year or two."
Essig says the state just can't afford revenue cuts in the middle of the worst recession in memory.
But what are the odds of the officials under the Golden Dome seeing things how Essig sees them in order to solve the budget problem?
"There is an awareness now more than ever. No one is questioning how deep the hole is," Essig said. "But it is extremely difficult to get the general assembly to have an honest discussion about taxes. It becomes a matter of politics and ideology. Especially in an election year."
