State revenues for the first six months of this fiscal year are running 8.1 percent ($588 million) ahead of the FY 2010 revenue collections. More than $127 million of the growth is accounted for by a decrease in the number of refunds distributed. Discounting fewer refunds distributed, actual revenue growth is 4.5 percent.
The governor's FY 2011 revenue estimate projects an increase in revenues of 4 percent ($610 million). It seems highly likely that the fiscal year will end in a surplus of several hundred million dollars, which the governor has stated will be used to begin rebuilding the Revenue Shortfall Reserve.
According to the governor, his FY 2012 revenue estimate is a modest 3.75 percent. The governor included in his FY 2011 base $288 million in one time revenues from the GEFA monetization. Not taking into account the one time revenues from the GEFA monetization and comparing growth in taxes and fees, the revenue estimate actually projects a more substantial increase of 5.8 percent compared to FY 2011 projected collections. However, to drive a surplus of $300 to $400 million in FY 2012 to continue rebuilding the Revenue Shortfall Reserve, revenues would need to grow between 7 and 8 percentHouse and Senate CalendarThe House and Senate are scheduled to go into session for the seventh legislative day on Monday, January 31.State Budget: FY 2011 Amended and FY 2012
ProcessGovernor Deal released his proposed budgets on January 12, 2011. The House and Senate appropriations subcommittees will meet throughout the week on the Amended FY 2011 Budget. (Download the proposed budgets.)GBPI Analysis The governor's FY 2012 budget proposal is disappointing in that it does not take a balanced approach to solving the state deficit. The budget contains additional cuts to education, with significant cuts to higher education, as well as cuts in services to our most vulnerable populations. A balanced approach to the fiscal crisis that includes additional revenues would assure that the factors most important to economic growth in the state, such as higher education, receive the necessary resources for Georgia toprosper.The following are GBPI analysis:
Governor's Proposed Health Budgets Governor's FY 2012 Education Budget Proposals: The Cuts Continue Human Services is "Down to the Bone": Highlights of the Governor's FY 2012 DHS Budget SB 1 - Zero Based BudgetingDuring the 2010 session of the General Assembly, SB 1 passed the General Assembly but was vetoed by Governor Perdue. On January 27, the State Senate voted to override the veto by a vote of 52-0. SB 1 requires that in any given year the governor's budget report includes zero-based budgeting for no more than one-third and no less than one-quarter of all programs. Each budget unit will be required to include in its budget estimate an analysis summarizing past and proposed spending plans organized by program and revenue source. The House is not expected to take up the override, but instead is expected to move forward this session on another Zero-Based Budgeting bill (HB 33).Fiscal and Tax PolicySeveral Options Would Lessen the Tax Shift Proposed in the Tax Council's Recommendations
The Special Council on Tax Reform and Fairness for Georgians released their recommendations on January 7. The recommendations include some much needed changes that will help our tax system better reflect today's economy, such as the move to expand the sales tax to services. Although many of the recommendations mirror GBPI's own recommendations for tax reform, there are also some concerning elements, such as the imposition of state sales tax on groceries and the resulting shift of taxes onto those least able to afford it.
GBPI offers adjustments that would lessen that tax shift:
- Maintain the grocery exemption and lower the income tax rate to 4.5 percent rather than the 4 percent recommended by the Council;
- Lower the state sales tax rate to 3.5 percent and lower the income tax rate to 4.5 percent rather than 4 percent;
- Re-craft the proposed personal income tax credit into a robust, refundable low income tax credit and targeted standard deduction.
Download GBPI's analysis here, and look for GBPI's editorial in Sunday's Atlanta Journal-Constitution.
TABOR Bill Passes Senate Finance Committee
The Senate Finance passed Senate Resolution 20 on Wednesday. The constitutional amendment would restrict state spending to a formula of population plus government inflation, similar to Colorado's TABOR.
In 2005, Colorado voters suspended the TABOR formula for five years to stop the many harmful budget cuts that had occurred under TABOR. Since Colorado adopted TABOR in 1992, more than 20 state legislatures have rejected TABOR, and it has been voted down in every state in which it reached the ballot, according to the Center on Budget and Policy Priorities. Business leaders, elected officials from both parties, and higher education officials, among others recognize that TABOR has limited Colorado's ability to fund critical services. Click here to watch a video on this issue. Senate Resolution 20 moves to the Senate Rules Committee.
First Tax Expenditure Report ReleasedThe budget included a new feature this year that brings more transparency to spending made through the tax code. Georgia has more than 100 tax exemptions and credits; however, prior to this budget, the state did not have an annual accounting of the cost of these programs. Senate Bill 206 passed last year and requires that the governor's budget sheds light on tax code spending through an annual tax expenditure report. Legislators will have an opportunity to see where the tax code spending happens and debate whether those dollars would be better spent in direct spending on services or in lower tax rates for the rest of taxpayers. State leaders will nowneed to explore what additional reporting and evaluation should occur so that tax breaks aren't just transparent but also accountable to Georgians.
Friday, January 28, 2011
Georgia Budget and Policy Institute Weekly Legislative Update