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Hope remains strong for coastal economy

POSTED: December 12, 2011 5:41 p.m.

The state of Georgia is expected to meet its budget for fiscal year 2012, though more cuts could be looming for state agencies.

State Sen. Jack Hill (R-Reidsville), chairman of the Senate Appropriations Committee, said the state is on track to meet the budget, which is about $18 billion. However, the governor has asked all departments, except for Education and Medicaid, to explore 2 percent cuts.

Hill, who often has a fistful of charts to display at the annual Effingham Chamber of Commerce Eggs and Issues breakfast, said he didn’t bring those along this year because the state’s outlook is improving.

“I’m not carrying around charts because things are better,” he said. “We’ve had about 16, 17 months of gradual revenue growth.”

The continued growth in the state coffers has allowed the state to restore its rainy day fund. But it’s only at about $400 million, which Hill was too low.

“That’s only about eight days of operating expenses,” he said.

The state’s total budget is about $30 billion, and nearly $11 billion comes from the federal government, in addition to the $18 billion state general fund budget.

“Federal funds are all in our business,” Hill said. “Anything Washington does, does affect us. Whatever changes they make will have some repercussions on our state.”

The veteran state senator also pointed out that the Social Security transfer payments to Georgians alone are as much as the state’s entire revenue stream for a fiscal year.

Another worry is the unemployment insurance trust fund, which is running a deficit of about $730 million, Hill said. The state made an interest payment last month of $21 million, but that only covered about nine months.

The unemployment insurance trust fund is not an obligation of the state but of the state’s businesses. The federal government, however, has started going up on the rate it will collect from businesses, and the rate could double, according to Hill.

The federal government has already started going up on the rate they will collect from businesses.

“A lot of the unknowns that we’re facing give us pause,” he said. “One of the biggest unknowns we face is in Washington and how the cuts they will make and are already making are going to affect us.

“There is a face on every cut the federal government will be making,” Hill added, referring to the climate of tighter controls on spending.

Tax reform measures, which died in the final days of the 2011 General Assembly session, are expected to be revived next month.

The Special Council on Tax Reform and Fairness, created in 2010, submitted its recommendations to the General Assembly last January. State lawmakers convened the 2011 General Assembly without acting upon the council’s plan, which would have slashed the personal income tax rates while hiking taxes on goods and services.

The recommendations needed to get passed by the House before going to the Senate for a vote, but never came before House members for their vote.

“There will be another effort for tax reform,” state Rep. Jon Burns said. “We were working with five-year-old information, basically. With some legislation that was passed, we were able to get more realistic information from the Department of Revenue.”

Burns said the state could look at allowing different uses for special purpose local option sales tax receipts, currently restricted on the local level for being used on operations and maintenance, with a sunset provision on any legislation enacted.

“I think everything is on the table as we look at revenue enhancement,” Burns said, “and I don’t mean new taxation, per se. Is it a tweaking of sales tax money and how and where they are used for a short period of time?”

Burns also offered a warning on proposed federal rules that would limit the amount of coal to be used to generate electricity. Three of Georgia Power’s biggest power plants, in terms of kilowatt hours generated, are coal-fueled.

“How we generate power in this state, the energy that runs our needs for new jobs is already costly enough,” he said. “New regulations are going to mandate that they won’t be able to generate power with coal, our most abundant natural resource, unless they make some financial investments that are not common sense. It is an unfunded mandate driven not by law but by bureaucracy.”

Lawmakers also are continuing to delve into education funding, and state Rep. Ann Purcell said the funding levels for the Quality Basic Education formula are not where they had been expected.

She also said there is a push to get the capital outlay projects fund back into the general fund, where other counties will have a better chance of tapping into it.

“There were so many fast-growing communities across the state,” she said. “But the way the distribution was made for capital outlay programs, we were cut short in Effingham County. We were busting at the seams, as we are today.”

Despite the dire overall economic outlook, Hill sounded an optimistic tone for the Coastal Empire. Consumer confidence has slipped in the last few months, he noted, but he also believes the state will start to separate itself from a stagnant national economy.

“There are a lot of positives going on in the state,” Hill said. “We’re going to overcome this; it’s going to take some time. There are lots of positives around the state and a lot of economic development announcements. I think the outlook for the Coastal Empire and Effingham County, compared to the rest of the state and the rest of the country, is very positive.”

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