House Poised To Slice Into Perdue Budget

By TRAVIS FAIN - tfain@macon.com
Macon Telegraph
January 28, 2010


ATLANTA — Gov. Sonny Perdue’s budget proposals are balanced on hundreds of millions of dollars in unpopular ideas, and killing them off will require hundreds of millions worth of spending cuts that leaders in the Georgia House of Representatives say they intend to make.

Where those cuts will come from, House leaders either aren’t sure or won’t say. But the effect on some state departments could be massive, and House Appropriations Committee Chairman Ben Harbin made it clear Wednesday “there are no sacred cows” in this year’s budget.

The House’s first target is Perdue’s proposal to place a 1.6 percent tax on hospital revenue. That essentially would charge paying customers to help fund the state’s Medicaid health-care program for the poor. That tax, and a similar one on managed care providers, would raise an estimated $345 million for the state in fiscal 2011.

It’s a major building block in Perdue’s $18.2 billion budget proposal for next year. But Harbin said he doesn’t think it will ever pass the House, where the Republican majority has taken a stand against tax increases.

“We’re going to make the cuts (to do away with it),” Harbin, R-Evans, said Wednesday. “Every department, I think, is going to have to take cuts.”

There are no obvious $100 million cuts in the budget, Harbin acknowledged. The state budget has already yielded more than $2 billion in state revenue cuts over the past two years, an effect of the recent recession.

Perdue and his economists predict some revenue growth in the next year. Perdue hopes it’s enough to stop furloughing teachers and other state employees after July 1. But these new cuts contemplated by the House would be game-changers.

“We’ve pulled the easy fruit,” Harbin said Wednesday.
“Now we’ve got to climb up into the tree. ...Every program is in play.”

Perdue’s administration has said it’s willing to consider other options, but after several months of budget preparation, it doesn’t see any good ones. The only other way to offset the need for new hospital tax revenues it has suggested has been a 16.5 percent cut in the Medicaid reimbursement rate paid to hospitals, doctors and other health-care professionals.

That “would be devastating,” Perdue’s communications director Bert Brantley said Wednesday. Many doctors probably would stop accepting Medicaid altogether, Brantley said. Hospitals with no choice but to stay in the program would lose millions or pass the loss on to customers.

And since the 1.6 percent tax would allow the state to draw down federal money for Medicaid, the pass-along cost to paying patients likely would be much higher if reimbursements are cut.

Another key budget proposal that’s proving unpopular is the governor’s plan to take some of the loans the state has made to help local governments fund water and sewer projects and sell them to private entities. It would be like a bank packaging mortgages together to raise cash. The state would get nearly $300 million to balance the budget next year, and the buyers would collect the debt later from the local governments.

It’s not clear how much the companies and other buyers stand to gain over the life of the deal, but it could be as much as $275 million over the $300 million they’d have to pay in cash up front, figures from the governor’s office suggest.

These Georgia Environmental Facilities Authority loans are a major source of financing for government infrastructure projects across the state. Perdue has promised loans still would be available, albeit in amounts akin to 2005 levels instead of the higher amounts of more recent years.

But many outside the administration are concerned that selling off a revolving source of funding for a one-time cash infusion will devastate the program and force more local governments into the more expensive private borrowing market.

That means Wall Street bankers and “very expensive bond attorneys,” said Todd Edwards, who focuses on these issues for the Association County Commissioners of Georgia, a group that works with county governments.

“The bottom line: This means higher (borrowing) prices for local governments, taxpayers and rate payers,” Edwards said.

Harbin said House budget writers aren’t rejecting the GEFA proposal outright, but they are “going to ask some tough questions” about it.

But, as with the hospital tax proposal, Perdue’s office said the governor has tried to choose the best of a lot of bad options. Packaging the GEFA loans would net the state nearly $300 million for fiscal 2011. The hospital tax would bring in an estimated $345 million more, plus the 3-to-1 match in federal dollars, pushing its full impact over $1 billion.

Education spending makes up 57 percent of the state budget. How, Brantley asked, do you cut hundreds of millions from the budget without seriously impacting that?

Democrats would like to see the state do a better job of collecting sales taxes, possibly by allowing local governments to take over some of the process and certainly by merging state databases with local business license records to better catch scofflaws. Those ideas seem to be gaining steam among the Republican majority at the Capitol, and proponents believe it could net the state hundreds of millions in the coming year.

But no one can be certain how much that actually would raise or how fast.

Teachers, who are planning on furlough days in the coming months and increases in class sizes, just want the bleeding to stop, Jeff Hubbard, president of the Georgia Association of Educators, said Wednesday.

Hubbard called on legislators to bring in new revenue, despite the Republican majority’s repeated mantra that raising taxes in a struggling economy is the worst thing government can do.

Hubbard said his organization wants to see a new half-cent sales tax for education, and he doesn’t care what it’s charged on.

“It could be hotels, it could be rental cars ... they could do it in conjunction with the tobacco tax,” he said.

“(The education budget) is not even hemorrhaging,” he said. “It’s not even bleeding. I would call (this tax) a tourniquet.”

To contact writer Travis Fain, call 361-2702.

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