NOTES FROM THE SENATE
WARNING: This column may contain statistics — you should always remember that “statistics comes to the aid of those who don’t lie well!”
One of the hard choices state leaders had to make during the recession and rapid fall in revenues was how and who to cut in the state budget. Considering Georgia’s decline in revenue that reached $4 billion state general funds, there were always those who supported raising taxes to meet the contingencies. Leaders in Georgia chose to reduce spending and live within our means. The bond underwriters recognized this effort and Georgia maintained its AAA bond rating even when the Shortfall Reserve was used up and revenues continued to decline. States like North Carolina who passed temporary tax increases eventually had to reduce budgets because the tax increases did not return prosperity any sooner and may have inhibited it.
I relate this to bring up the subject of cutting budgets — how painful it can be and the thought process it drives in some people who would like to be excluded from that annoyance. I can remember a state agency head in my office in the beginning of the budget crisis saying things like “you can’t cut us, we are all people.” Actually the bulk of government is “all people” and you cannot reduce expenditures much unless you reduce payroll whether by attrition, retirements, furloughs or reductions in force. And as the recession worsened, the cuts deepened and there was virtually no argument that meant anything, you just had no choice.
I believe the management of state government through the recession was government’s finest hour and the skill and management agencies put forth to continue essential services with less resources demonstrated a resilience that the bond underwriters both recognized and rewarded with the state’s continued high rating. During this time of budget cutting, two functions were protected: Medicaid, an entitlement and K-12 Education. Not only was Medicaid protected, but the percentage of the state budget going to the Department of Community Health, (DCH), mainly Medicaid, increased from 12 percent before the recession to around 15 percent today, an increase of $683 million during a time of falling revenues.
K-12 Education funding was complicated by the fact that incredibly, the state continued during the recession to grow in population and thus enrollment. Therein lies one of the major differences between Alabama’s education budget process and Georgia’s. Georgia funds education based on enrollment of children in seats for a day, a Full-Time Equivalent, FTE. A school system is allocated funds automatically for enrollment increases based on twice a year counts. Alabama actually combines enrollment considerations but recognizes a cap on a fifteen-year average growth rate in revenues. Therefore, despite any changes in student growth, spending on education cannot go over the cap set by the Education Rolling Reserve Act (ERRA). In a fast growing state like Georgia, increasing funding as enrollment increases is the only way a system can be fairly funded. As stated earlier, one of the complicating factors during Georgia’s recession was the continued growth and the enrollment increases that required new funds. So, even as cuts were made, though smaller than other agency cuts, the state was increasing funding for growing systems based on FTE growth. A growing school system in my district actually maintained relatively flat state funding (-1 percent) during the recession because, although there were cuts to their budget, at the same time they were receiving new funds for growth in enrollment.
Alabama’s “stove-pipe” separate education budget, based on earmarks, became its own problem when it was not allowed borrowing from one budget to another. So when the recession hit Alabama and falling revenues affected the education budget, they had no alternative but to unilaterally reduce or “prorate” appropriations to systems. This, in effect, not only cut existing budgets but hurt fast-growing systems worse since funding post-recession became a product of enrollment and a revenue growth cap. FTE growth in Georgia during the recession totaled 73,099 FTE’s and systems received new funding of about $360 million.
I may be reached at
234 State Capitol, Atlanta, GA 30334
(404) 656-5038 (phone)
(404) 657-7094 (fax)
Email at Jack.Hill@senate.ga.gov
Or call toll-free at
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Reidsville office: (912) 557-3811