Thursday, October 23, 2008

Budget wonkiness and realities

Seeing how we're rightfully scrutinizing the statements and positions of folks running for the Georgia General Assembly, one of the issues dominating the discussion is that of the budget shortfall.

The typical response I've heard from most Republicans - and many Democrats too - is that we have to keep taxes low, control spending and wait for the resulting economic growth that will be a boon to our state revenues. This, of course, doesn't exactly add up for many reasons with the most prevailing one being the fact that Georgia, like most states, operates under a balanced budget.

Revenue growth, aided by tax cuts, is not a reliable strategy for covering shortfalls and balancing state budgets. In non-recession years, our revenue growth has averaged eight percent a year for the past 20-plus years according to The Georgia Budget And Policy Institute.

Let's say you had a shortfall of roughly $750 million, which about half of what we currently face. You'd need that eight percent growth to cover that plus any increases you'd see in educational enrollment or cost-of-living increases for teachers and state employees.

And that just focuses on the status quo ...

This 8 percent growth in revenues does not include inflationary increases for healthcare (Medicaid, PeachCare, State Employees Health Benefit Plan), new debt service to pay for infrastructure needs (schools, water and sewer, prisons, maintenance of state owned buildings including hospitals), increases in Department of Corrections budget due to growth in state prison population, or state employee retiree health plan obligations (OPEB).

You'd need revenue growth of more than 11 percent to cover all of this. On top of that, you'd need more to pay for any improvements or upgrades to things like education, mental health or child welfare.

The research notes that only one time in the past 20 years has Georgia had 10 percent revenue growth and, given that we're in the midst of the biggest economic crisis since The Great Depression, I don't see us eclipsing this mark any time soon.


Post a Comment

<< Home