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The governor’s budget recommendations for FY 2013 increase state General Funds to the Department of Community Health (DCH); however, the increase is misleading. The bulk of the new funding restores funding originally diverted from the DCH budget in FY 2011 and FY 2012.
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The governor’s FY 2013 budget recommendations increase state General Funds to the Department of Behavioral Health and Developmental Disabilities (DBHDD) by $45.3 million (5.1 percent) compared to FY 2012. The bulk of this increase funds the continued implementation of the Department of Justice (DOJ) Settlement Agreement reached in 2010. In addition to addressing the DOJ Settlement, the FY 2013 budget increases funding for forensic services, increased employer contributions for state employee health and retirement costs, and to reflect a lower federal Medicaid matching rate in FY 2013.
Funding for the new Georgia Department of Public Health (DPH) began in FY 2012. The agency houses public health programs and activities that were previously embedded in other state agencies. For FY 2013, the governor’s budget recommendations increase state support to DPH compared to FY 2012, however, the new funds primarily pay for higher health care and retirement contributions for state employees.
Even with a slight increase in FY 2013, Georgia’s public health programs will still operate with fewer state funds than in the pre-recession budget of FY 2009. When looking at the 11 non-administrative public health programs that make up the current Department of Public Health, the FY 2013 budget reveals a $17.8-million cut—more than 9 percent— in combined General Fund and Tobacco Settlement support from FY 2009.
Although the FY 2013 budget largely fails to restore years of programmatic funding cuts, it does restore more than $400,000 to the state health lab for sexually transmitted disease (STD) testing that was originally cut in FY 2012.
The governor’s FY 2013 budget recommends $2.8 million less in state General Funds compared to FY 2012. Secondly, there are shifts in state funds for program transfers in and out of the Georgia Department of Human Services (DHS) budget to cover administrative expenses ($11 million) and replace federal TANF funds ($20.5 million).
The FY 2013 budget does not include any state funds to restore the 23.8-percent cuts that DHS experienced from FY 2009 through FY 2012. In addition, the projected loss of $37.3 million in federal Temporary Assistance for Needy Families (TANF) funds will take DHS to a new low.
Earlier this month, GBPI released a report evaluating a tax credit proposal called CAPCO that nearly passed the Georgia legislature last year. A poorly-designed piece of “model legislation” with a dismal track record in other states, CAPCO thankfully seems to have lost momentum. Although despite the fact the Senate voted down CAPCO this week, it isn’t technically dead—it could still reemerge in a conference committee later on.
The thing is, CAPCO was supposedly designed to solve a program that’s actually important for Georgia’s lawmakers to address—the state’s lack of a strong venture capital (VC) market. VC is a vital source of financing for entrepreneurs and startup companies, especially those in technology sectors, and there’s evidence to suggest Georgia needs more of it. Some states have implemented attractive programs to confront similar shortfalls, but in Georgia any discussion of sound “venture capital policy” has been minimal. CAPCO effectively sucked the oxygen from the room.
Until recently that is. A few days after we released our report,we learned that Representative Allen Peake (R-Macon) had an alternative proposal on VC that actually embraces many of the guiding principles we articulated. As we describe in our new analysis of HB 718 , the bills looks to be a thoughtful and well-designed method for pursuing its goal. Modeled heavily on a best practices program in Maryland, the new “Invest Georgia” initiative would be transparent and accountable, entitle Georgia taxpayers to the same returns enjoyed by normal VC investors, and prevent state money from being given away for nothing in return (like CAPCO).
But as with most things, there’s a catch. As written the program would cost $200 million spread over four years, with the fiscal impact rising from $35 million in FY 2014 to $65 million in FY 2017. Given the tight times we’re in, we have to ensure every dollar counts. The proposed program comes on the heels of four years of aggressive budget cuts, with additional cuts to key job creators like technical colleges already included in the FY 2013 budget. Additionally, the governor’s projected shortfall of $320 million for FY 2014 means legislators still have years of tough spending choices ahead of them.
Georgia’s ongoing fiscal crisis demands that any new spending bill, including well-designed ones like HB 718, must be judged within the context of competing priorities. Georgia needs additional VC, sure, but don’t pay for it by cutting from education, job training or other essential investments. Tax expenditures like HB 718 should always be revenue neutral, because otherwise they’re essentially robbing Peter to pay Paul. Georgia’s economy needs new investments in several key areas, ranging from infrastructure to public safety, and we can’t afford them all. The Great Recession and jobless recovery require us to set an especially high bar for choosing where we spend.
There’s a strong case to be made that strengthening Georgia’s VC market could bolster our economy over time, and HB 718 is a well-designed bill based on best practices in other states. Its authors deserve credit. But if lawmakers wish to proceed, they must ensure the program’s paid for by either eliminating other tax breaks on the books or increasing revenue through other means.
Related materials:
CAPCO: A Bad Investment for Georgia
Atlanta Journal-Constitution Education Reporter Maureen Downey discusses GBPI’s recent report, FY 2013 Budget Analysis: PK-12 Education. Read full article.
GBPI Policy Analyst Wesley Tharpe is quoted by Amy Hamilton of taxanalysts.com on HB 718. Download full article.
In an effort to strengthen the state’s venture capital market, House leaders crafted House Bill 718, a proposal currently before the House Insurance Committee, which calls for the creation of an expensive new tax credit program – deemed “Invest Georgia” – aimed at expanding access to capital for Georgia businesses.
Invest Georgia would cost $200 million over four years, with the fiscal impact increasingly each year between FY 2014-2017.The cost to Georgia taxpayers would be $35 million in FY 2014, $45 million in FY 2015, $55 million in FY 2016 and $65 million in FY 2017.
Related materials:
CAPCO: A Bad Investment for Georgia
Bill Analysis: House Bill 718 (LC 34 3201)
Georgia moves closer to venture capital investments
GBPI Executive Director Alan Essig is quoted in the Macon Telegraph on House Bill 718. Read full article.
Comments (2)
GBPI Executive Director Alan Essig is quoted on the front page the Atlanta Journal-Constitution. Read full article.
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