November Revenue Report: Even with Revenue Growth, We Can Expect a Shortage

Job one for the governor and legislature is making sure Georgia takes every step possible to help create jobs and build a strong economy.

Doing that requires investment in education, transportation, public safety, and other necessities. So last Friday it was good to hear that revenue rose by 7 % in November and is up 6.8 % for the first five months of the fiscal year that started July 1.

This means Gov. Deal appears to have more revenue to work with than he expected when the FY 2012 budget was originally adopted.  His preliminary mid-year budget revenue estimate calls for only a 1.2 percentage point increase in the revenue estimate, or approximately $200 million.

Now for the reality check.  Even with additional revenues, there is a significant gap between what we have and what we need, so we could still face spending cuts in the mid-year budget. The Department of Community Health alone faces an approximate $262 million mid-year shortfall.  During the summer, the governor acknowledged the shortfall and asked for 2 % cuts in agency budgets (excluding Medicaid and the K-12 QBE funding formula).

Looking ahead to FY 2013 which starts next July 1, the story is similar. Enrollment growth in K-12 schools and the university system, as well as such obligations as providing health care and meeting other needs mean the state needs nearly $1 billion in revenue growth in the next fiscal year.  The governor’s preliminary revenue estimate calls for growth of about $850 million.  So even with moderate revenue growth we can expect a shortage of several hundred million dollars.

If the response is just to cut — on top of the $3 billion in cuts already taken over the past three years– Georgia’s efforts at job creation and economic recovery will be threatened.  That’s why tax reform that increases revenues and allows smart investments in Georgia’s workforce and infrastructure needs to be on the agenda.  As part of a balanced approach that includes revenues instead of a cuts-only approach that kills jobs, the General Assembly should take the opportunity to get tax reform right when it comes back next month.

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