State Lawmakers Consider Tax Increases To Balance Budget

By Aaron Gould Sheinin and James Salzer
The Atlanta Journal-Constitution
Georgia Politics
February 22, 20010

Facing another potential $1 billion budget shortfall, Georgia's legislative leaders are considering a variety of tax and fee increases to balance the state's books.

On the first day of a week of demoralizing budget hearings -- hour after hour of bad news -- top Republicans in the House and Senate told The Atlanta Journal-Constitution on Monday that nearly everything is on the table.

"We are looking at a hospital tax. We are looking at a tax on tobacco," Senate President Pro Tem Tommie Williams (R-Lyons) said. "I'm not saying we'll do them, but we have to consider them."

The simple fact that Republicans are considering any increase in taxes -- in an election year, no less -- emphasizes the size of the hole the state finds itself in.

State revenues continue to drop, and budget writers must find savings or new sources of revenue to meet the hole in the state's finances. The current year's budget has already been cut more than $1.1 billion, and might require additional cuts through the end of the fiscal year on June 30.

The real problem, however, comes with the fiscal 2011 budget, which takes effect July 1. Gov. Sonny Perdue, in his official budget recommendation last month, predicted state revenues would grow by $800 million in 2011. But that includes more than $300 million coming from a controversial plan to levy a 1.6 percent fee -- others call it a tax -- on hospital patient revenue and a 1.6 percent fee on premium revenues of managed care insurers. Another $288 million came from a fund dedicated to helping local governments issue bonds for major infrastructure projects.

When the governor first proposed those methods of raising revenue, many lawmakers said they would not support them. But legislators are now realizing they have to accept the money Perdue found from those sources, cut the budget by another $600 million or find other sources of revenue. A $1-per-pack increase on cigarette taxes, for example, would raise at least $354 million a year, according to state estimates. It was last increased in 2003 when Perdue and lawmakers raised it by 25 cents per pack. Such a tax would be likely to affect other tobacco products.

In addition to potential tax increases, top House leaders said privately Monday they may allow several sales tax exemptions to expire and will consider increasing certain state fees that haven't seen hikes in decades.

"Are there [tax] exemptions we should not have?" said Williams, the Senate president pro tem.

"Are there services that other states tax that we don't have a tax on? Are there fees we are not covering our costs on? Are there agencies that need to be combined? Do we need to lay off state employees? There are all kinds of possibilities."

The questions and potential answers to the state's fiscal crisis are coming as lawmakers begin a two-week break in the annual legislative session. The House and Senate voted last week to take this time to seek a budget solution among the two chambers and Perdue. Democrats last week rolled out a plan to also increase the cigarette tax by $1 per pack, to realize added revenue through improvements in the state's sales tax collections and to put a 1 percent income tax increase on anyone making more than $400,000 a year.

Perdue communications director Bert Brantley said the governor understands the anguish lawmakers are facing.

"The process they're going through now is the process we went through three months ago," Brantley said, "but it's a very public process now."

Brantley said the governor tried to balance the budget without the new fees but decided it was preferable to other alternatives.

The governor, he said, played a kind of "Let's Make a Deal."

"We said, Door No. 1, here's a provider fee and here's the pros and cons," Brantley said. "Door No. 2, here's the tobacco tax. Door No. 3, here's rate cuts to Medicaid providers."

Brantley recognizes there are political implications to any tax increase. Perdue, who faced term limits, isn't running for re-election, so he leaves office in January.

"This budget was not based on the politics of having to go back to the ballot box," Brantley said. "Others do have to worry about that. And that's fine."

The Republican leadership in the House and Senate recognize that elections are nearing. It's one reason the hearings Monday sometimes seemed designed to make the case of how bad off the state's finances are.

Sen. John Douglas (R-Social Circle) laid out the stark situation as he questioned Col. Bill Hitchens, commissioner of the Department of Public Safety.

"More cuts, more cuts, more cuts are going to further degrade our ability to provide for the public safety?" Douglas asked.

"That's correct," Hitchens said.

Hitchens told another legislator that Georgia has the least number of troopers of any state in the nation on a per capita basis.

"We'd have to triple our size to come up to the national average," he said.

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© 2010 The Atlanta Journal-Constitution