More painful state budget cuts ahead

January 22, 2010

As a member of the House Appropriations Committee, I was involved in a series of budget hearings this week, beginning the legislative process for amending the state budget for the remainder of fiscal year 2010, which ends June 30, and the budget for fiscal year 2011, which begins July 1.

Gov. Sonny Perdue released his budget recommendations, which propose reducing the current year's budget from $18.6 billion to $17.4 billion to reflect severe declines in state revenue collections. With state services already cut to the bone, these new reductions average 8 percent among state agencies, including another $299 million slashed from public school funding (bringing the total school cuts for this year to $710 million) and three additional furlough days for educators and other state employees.

Serving on the K-12 Education Appropriations Subcommittee, I am deeply concerned that more state funding cuts will have a devastating effect on many school systems that State School Superintendent Kathy Cox says are "teetering on the edge" financially. She warned that some systems are already in the red, leaving local school boards with no choice but to expand class sizes up to 40 students or increase local property taxes, or both.

The governor is also reintroducing his plan for a 1.6 percent tax increase on hospitals and other health care providers to partially make up for an estimated $506 million deficit in the Medicaid program. Lawmakers rejected the governor's so-called "sick tax" last year out of concern the extra costs would be passed on to patients' health care bills and/or force some already-struggling hospitals to close their doors.

Under the plan, hospitals would be taxed 1.6 percent on their net revenues, whether they receive Medicaid reimbursement or not. The facilities handling the largest volumes of Medicaid patients would come out ahead financially, but the vast majority of hospitals would lose money, according to an analysis by the state's Office of Planning and Budget.

The changes to the FY 2010 budget are based on the governor's forecast that state revenues, which have been on a steep decline for more than a year, will be essentially flat over the next six months. Another dip in the economy, he said, will necessitate even further cuts in state spending.

For the FY 2011 budget, the governor is forecasting a 4.2 percent increase in state revenues and proposing $901 million in additional state debt to pay for construction and other capital outlay projects. I am among the legislators and economic observers who are concerned that growth rate is unrealistically optimistic, with the state not expected to reach 2007 revenue levels again until 2014.

The state's budget crisis has been made worse by the nearly $650 million in revenue lost through corporate tax breaks since 1999. Unfortunately, there has been no cost/benefit analysis of these tax breaks. Senate Bill 206 has been introduced as a means of implementing some badly needed accountability regarding the success of these tax breaks, and I support quick approval of this legislation.