Vital state services may face further budget cuts. Most state agencies have seen their budgets cut by an average 14 percent, and many more by 20 percent or higher. So while the state’s revenue growth (6.8 percent) through October is ahead of the 4 percent growth needed for the FY 2012 budget, Georgia’s budget crunch is far from over.
Program such as Medicaid and PeachCare are facing a $210 million shortfall in FY 2012 because of previous years of underfunding. The governor’s preliminary revenue estimate for the amended FY 2012 budget calls for a 1.2 percent increase, which should cover the immediate Medicaid shortfall. Unfortunately, the increase is not quite enough, and leaves little to no money for anything else. Beyond filling the shortfalls, the governor must be conservative in his revenue estimate in order to plan for an end of the year surplus that will be needed to re-build Georgia’s Rainy Day Fund.
As we enter into the 2012 legislative session, we can expect continued budget pressures in the FY 2013 budget. According to Senate Appropriations Chair Jack Hill, Georgia will need almost $1 billion in new funds for:
- shortfalls in Medicaid, PeachCare and the State Health Benefit Plan;
- enrollment growth in K-12 and Board of Regents;
- annual required contribution to the retirement systems;
- agreement with Department of Justice regarding behavioral health; and,
- the phase-in of tax cuts.
The governor’s preliminary FY 2013 revenue estimate calls for 5 percent revenue growth, or approximately $850 million, leaving a potential shortfall of several hundred million dollars.
As Georgia continues to wrestle with the state budget crisis, the governor and General Assembly must remain focused on both the short- and long-term needs of the state. Georgia’s economic and job growth depends on an educated and trained workforce; an adequate health, safety and regulatory infrastructure; and, especially in these tough economic times, a social safety net without holes.
Our policymakers must take a balanced approach to the state budget crisis—one that includes additional revenues. Comprehensive tax reform done right would keep our overall tax structure economically competitive. It would give tax cuts to those Georgians most in need, and raise additional revenues to not only avoid additional cuts to services but begin the process of rebuilding the state infrastructure so vital for economic growth. GBPI’s report, Advancing Georgia’s Tax System to the Modern Day, gives such a road map.