State Revenue Still Spirals Downward

By Aaron Gould Sheinin
The Atlanta Journal-Constitution
March 9, 2010

If there is a linchpin to the 2010 legislative session, the moment when the speculation over sink or swim ended, it most likely was when e-mail in-boxes all over the Gold Dome started pinging Monday with bad news from Gov. Sonny Perdue.

The news is the same as it has been: Tax and fee collections are down for the 15th consecutive month. In other words, a child born the last time the state saw positive revenue growth ought to be on solid food by now.

This is the moment lawmakers, teachers, students, hospitals and anyone else touched by state government or state revenue have been waiting for. If the numbers were good, the word was the cuts might not be as bad. If the numbers were bad, well, as the top budget-writer in the House said Monday: If the state doesn’t have to do something, it no longer will.

The answer: Revenue collections in February were down 10 percent over the same month a year ago. The significance of that isn’t immediately obvious. But February 2009 was so horrendous, many denizens of the Capitol figured it couldn’t, or wouldn’t, get worse. February 2009, after all, saw tax collections fall 35 percent from the previous year.

“The only thing growing is unemployment,” said Rep. Ben Harbin (R-Evans), the chairman of the budget-writing House Appropriations Committee. “If we don’t need to be doing it, we’re probably going to stop.”

The immediate impact won’t be clear for a day or two, when Perdue makes his next move. The way the state budget process works, the governor sets a revenue estimate for each fiscal year, or how much money he and his economists believe the state will bring in. Lawmakers use that estimate to write a budget. But, when the actual revenue collections fall short of the estimate, cuts to spending are necessary to ensure a balanced budget.

Perdue is expected to announce a lowering of his revenue estimate for the current fiscal year and for fiscal 2011, which begins July 1, sometime this week.

The current estimate for cuts to the 2011 budget? More than $1 billion, which comes on top of more than $3 billion in cuts the past two years.

“What this means is exactly what we’ve been preparing for,” Lt. Gov. Casey Cagle said. “These are unprecedented economic times that we face. You have to prioritize what the essential government functions that we do that are going to have to go by the wayside.”

But, on a hopeful note, Perdue’s office said that of February’s $62.2 million drop in revenue, about $50 million is due to a spike in income tax refunds. More taxpayers are filing electronically than a year ago, the Department of Revenue said.

Things also looked less dire for the state’s higher education system. After two weeks of fighting and proclamations that the system was all but doomed to disproportionate cuts, one key lawmaker said Monday that colleges and universities will fare better despite the new revenue numbers.

“It’ll be a manageable cut,” said Rep. Earl Ehrhart (R-Powder Springs), who chairs the higher education budget subcommittee.

“What we’re going to come out with,” he said, “is something significantly less” than the projected $300 million cut that led to fears last week of thousands of layoffs at colleges and universities, massive tuition increases, and an end to popular programs.

But if higher education is spared, the cuts must come from somewhere. Unless, as some have suggested, lawmakers look to other sources of new revenue.

Alan Essig, executive director of the nonpartisan Georgia Budget and Policy Institute, said the state should consider a combination of cuts and modest tax increases. Essig suggests a 1 percent income tax increase on all Georgians making above $400,000 a year.

“The expectation was February was the month we would start to increase revenues,” Essig said before the revenue numbers were released Monday. “I think the governor was expecting that month-to-month growth starting in January. Based on February [2009], it should be up considerably. If it’s not, it’s a bad sign.”

But tax increases are a difficult sell in a Republican-controlled General Assembly in an election year. If any tax has a chance this year, it could be a proposal to increase the levy on cigarettes by $1 a pack.

A Capitol rally by the Georgia Alliance for Tobacco Prevention kicked off a tug-of-war between those hoping to increase cigarette taxes and opponents who will hold an anti-tax rally Tuesday.

More than 100 health care professionals and members of the faith community showed up Monday, many of them wearing “Pass the Buck” badges with dollar bills pinned to them.

The proposed tax would raise an estimated $354 million annually and — proponents say — decrease the number of smokers.

But Ehrhart and others said revenue figures released Monday show the tax is not a dependable source of revenue. The state’s tobacco tax collections dropped by 20 percent in February (from February 2009), and are off by 30 percent for the fiscal year.

“That ought to be the death knell for that concept,” Ehrhart said. But House Speaker David Ralston (R-Blue Ridge) wasn’t willing to go that far.

“I’ve said we’re open to talking about all sorts of issues,” he said, before quickly adding that he generally opposes tax increases and worrying, like Ehrhart, that tobacco revenues are not stable.

If not taxes, the money to fill the hole in the current budget will come from more cuts and the use of one-time money taken from a variety of sources. It’s likely lawmakers will bring forward federal stimulus money they had hoped to use next year. But, as Cagle said, doing so “means the cuts in ’11 are far, far more severe.”

Cagle believes lawmakers also will consider raising certain user fees.

“There is no silver bullet in this,” Cagle said. “You have to address it on the expense side of the ledger.”

Staff writer Jim Tharpe contributed to this article.

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