The $19.9 billion budget Gov. Nathan Deal signed Tuesday emphasizes the new normal in state government: just getting by.
For the fiscal year that begins July 1, Deal signed a spending plan that is more of what Georgians have come to expect since the beginning of the Great Recession. Nearly every state agency is cutting back; any extra money that comes in as the economy improves is going to fill holes or make modest improvements in public health and public schools. No raises for the 200,000 state employees and teachers. New construction paid for with borrowed money.
It’s been that way since mid-2008, when the recession began affecting state government tax collections, and it’s unclear that even an uptick in the economy will change the arithmetic any time soon. While, collectively, state governments have been taking in more money than before the recession began, Georgia has been a laggard, with tax collections last year below where they were in 2006.
“What we are facing now is a sort of slow growth where the revenue in the state does not seem to be growing fast enough to keep up with the growth in Medicaid and the education (funding) formulas,” said Carolyn Bourdeaux, associate public management and policy professor at Georgia State University and a former Georgia Senate budget director. “This is sort of a low-grade fever of structural deficits.”
Which turn the fever takes — whether it breaks or gets worse — is of signal importance to millions of Georgians. The nearly $20 billion the state will spend during the upcoming year ($40 billion if federal and other revenue is included) helps provide education for about 2 million students and health and nursing care for more than 1.6 million people. It funds road improvements and prisons, economic development initiatives and cancer research, business regulation and water and sewer projects.
For years Georgia’s economy was growing faster than the national average, and state spending increased as well. Lawmakers passed an $8.9 billion budget for fiscal 1994. That grew to $12.5 billion in 1999 and $21 billion by the start of fiscal 2009. But when the housing market collapsed, state revenue — largely sales and income taxes — tanked as well.
The state responded by slashing spending and cutting jobs, like many businesses. Cost of living raises were eliminated, and haven’t been seen since early in the recession. Some agencies saw their budgets cut 40 percent or more.
More Georgians needed help paying for health care during the recession, and more kids needed to be educated. There was less money to do both, so lawmakers scrimped where they could.
While collections have slowly improved during the past three years, in 2012 they were still $1.6 billion below 2007 levels.
Lucy Dadayan, a senior policy analyst for the Nelson A. Rockefeller Institute of Government in Albany, N.Y., said while some states are recovering from the deep declines caused by the recession, the extent of that improvement varies dramatically. Just over half of states reported higher tax collections in 2012 than before the recession. But when inflation is taken into account, collections remain below 2008 levels. And Georgia was one of the harder-hit states.
The recession ended three years ago, but the damage it inflicted on state tax revenue will continue for years, says a recently released report co-authored by Dadayan.
The National Conference of State Legislatures, in its recent budget update for states, said, “No strong indication exists that states are entering a robust recovery phase.”
The budget Deal signed Tuesday includes about $600 million more in spending, but that is largely eaten up by higher costs for Medicaid and other health programs, K-12 education and employee pensions. While the budget fills holes in those programs, many agencies were being cut, including the state’s technical colleges, which will get about $19 million less next year.
One of constants in recent years has been the state’s willingness to continue borrowing for construction projects. The largest chunk of the $800 million in new bond money goes to K-12 schools, universities and technical colleges.
Deal’s predecessor pumped up bond spending as a kind of stimulus to create construction jobs. The budget Deal signed Tuesday includes $11.75 million for the College Football Hall of Fame; $58.8 million for a new law/humanities building at Georgia State University; $19.8 million for a new science building at Clayton State University; and $4.4 million in renovations to Sturgis Library at Kennesaw State University.
House Appropriations Chairman Terry England, R-Auburn, said he expects to see improvements in state finances as the housing market begins to rebound. But he doesn’t think the state will get back to where it was financially in the 1990s and most of the 2000s — at least, not for a while.
“I don’t know it’s going to improve at a rate that frees our hands to add back things we cut out,” England said. “I don’t know we are going to be able to afford to get back to those (pre-recession) levels.”
After signing the budget Tuesday, Deal reiterated that he plans to keep a close eye on state spending. He told reporters that April tax collections showed a 13 percent increase. But whether that portends a trend or is a fluke, Deal said, the state isn’t going on a spending spree.
“I’ve always said the greatest challenge to governance is to restrain yourselves in good times,” he said. “In hard times, restraint is a matter of necessity. In good times, it is a matter of discipline.”