Tax hikes, and layoffs, needed to balance Ga. budget

Jay Bookman: 

When Gov. Sonny Perdue introduced his proposed 2011 budget in January, he balanced it in part by including a “bed tax” on hospitals, projected to raise $300 million in new revenue. The reaction of his fellow Republicans was dismissive.

Once again, some whispered, Perdue was showing his political roots as a former Democrat.

Real Republicans knew that tough as it might be, the state deficit would be closed exclusively by spending cuts. Pledging devotion to conservative principles, Lt. Gov. Casey Cagle, House Speaker David Ralston and top appropriators in both the House and Senate committed themselves to rejecting tax hikes.

However, after slashing the state’s current budget to keep pace with falling revenues, and after seeing the impact of slicing hundreds of millions of additional dollars from the 2011 budget, the tone has begun to change. Having seen the nightmare numbers themselves, legislative leaders are coming to accept, as the governor had earlier, that cutting our way to a balanced budget would do unacceptable violence to Georgia, particularly to those most vulnerable in very tough times.

That realization has been accelerated by increasingly bleak indicators about revenue. From the moment Perdue introduced his 2011 budget, it was understood that it might be built on a foundation of sand. Revenue projections that allowed the governor to claim that his budget was balanced seemed too optimistic, a conclusion that subsequent estimates have only confirmed.

In other words, the chasm between state revenues and state obligations is growing larger by the day, and it will not be a temporary problem. The Georgia economy is not expected to start adding jobs until next year, and even then recovery will come slowly. It will be many years before tax revenue recovers to previous levels.

In fact, the true dimensions of this long-term crisis have been disguised temporarily by more than a billion dollars in federal stimulus money; that is set to disappear come 2012, which will force still deeper cuts in essential programs.

Former Secretary of State Karen Handel, now running for the GOP nomination as governor, made a legitimate point Thursday when she noted that we face a structural deficit that from the spending side can’t be addressed by temporary furloughs. Permanent layoffs have to be part of the equation.

It’s also important to note where the state stood before this crisis began. Georgia was 49th in the country in state taxes paid per person; it was also 49th in the country in transportation spending per person. As a consequence, traffic congestion is now a major threat to economic growth. Our state’s mental-health system, established to care for the most helpless among us, is so under-budgeted that it is under a federal court mandate to improve.

As Col. Bill Hitchens of the Georgia State Patrol told legislators, the state also has just eight troopers per 100,000 residents, the lowest number of troopers in the country per capita. We’d have to triple the number of troopers in uniform just to reach the national average.

In addition, according to the Georgia Budget and Policy Institute, the percentage of personal income that goes to support state government has been declining for 20 years now.

In normal times, most Republicans and even many Democrats would call that a success. But at what point, if any, does that kind of trend line cease being beneficial? Is there a tipping point when revenues decline so much that the state is no longer able to perform the minimally acceptable functions of government?

GOP leaders in Georgia seem increasingly concerned that such a tipping point exists, and that this is it. But they are wary about how that news might be received by voters back home.

In a sense, the situation faced by legislators mirrors that faced by Perdue when he first proposed a tax increase to help balance the budget.

The governor and staff had studied the numbers; they had looked into the abyss and they understood the enormity of the problem. Only when legislators went through that same painful process did they come to understand Perdue’s position.

Now legislators have to try to communicate that message to their own constituents, many of whom have been led to believe that there is never a justification for raising taxes.

However, the people of Georgia also understand that these are extraordinary times. They are mature enough and smart enough to know that tax hikes are not being contemplated to balance the budget, but rather to take the edge off of deep, painful spending cuts that will do the real work of matching revenue to expenses.

It is a last-ditch option, but we’re standing at the last ditch.

Posted via email from Jim Nichols for GA State House