Tuesday, July 27, 2010

Governor Cuts State Services Again in Beginning Days of the Fiscal Year

The Office of Planning and Budget is withholding four percent of funds from already stressed state agencies, and has asked agencies to propose budgets for cuts of four, six, and eight percent on top of this year's large cuts. The Georgia Budget &Policy Institute's latest report, Georgia Once Again Faces Budget Shortfall: Governor Orders Hundreds of Millions of Dollars in Additional Budget Cuts, details the financial impact of these three levels of cuts.

Georgia is in the first month of its 2011 fiscal year, yet it is already facing a potential budget shortfall of between $413 million and $613 million. This shortfall is on top of the $2.5 billion in budget cuts already implemented since pre-recessionary FY 2009. This budget gap is due to several factors:

1) the U.S. Congress has not extended the enhanced Medicaid match which would have provided Georgia $375 million;
2) the state transferred $37.7 million in Education Stabilization Recovery Act funds budgeted for FY 2011 into FY 2010; and
3) there is a projected shortfall in the State Health Benefit Plan of as much as $200 million.

The education QBE funding formula is exempt from the withholding allotment. In addition, the Department of Education has been instructed to submit a FY 2011 Amended Budget proposal with a two percent QBE budget cut.

Lawmakers had already cut the fiscal year (FY) 2011 budget by over 12 percent since FY 2009, despite a growing population, increasing infrastructure problems, and significant needs for services from those families hardest hit during the recession.

"Particularly concerning is the fact that vital state agencies that educate and protect our children, protect the health and safety of vulnerable Georgians, and plan the state's economic development have already faced crippling cuts," said Alan Essig, the Institute's executive director and author of the latest policy report.

"Most of the additional cuts can be avoided if Congress passes the enhanced Medicaid funding which our state is counting on."

Even if congress approves the enhanced Medicaid match, all Recovery Act state stabilization funds expire the end of June. According to the Georgia State University Fiscal Research Center the state of Georgia will be facing a structural deficit of between $1.8 billion and $2 billion in FY 2012.

"We have high expectations that the recently formed Tax Council will develop recommendations to solve Georgia's immediate fiscal crisis as well as fix Georgia's long-term structural deficit," said Essig. "Its decisions affect Georgia's economy and its people."

Also, read an update of an analysis by Deputy Director Sarah Beth Gehl that details tax legislation passed during the 2010 legislative session, Adding Up the Fiscal Notes 2010: Governor Vetoes Revenue Drains on Future Budgets, but Signs Bill That Reduces Low Income Tax Credit.

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