By allowing ads to appear on this site, you support the local businesses who, in turn, support great journalism.
A look at budget math
Placeholder Image

Georgia’s FY09 budget is a 343-page document that outlines a spending plan for a $21.2 billion state funds budget. Of this $21.2 billion, only $19.1 billion are state general funds, which are generally free from constitutional or legislative restrictions.

$21.2 billion (state funds)
minus $1.04 billion (motor fuel funds)
minus $0.88 billion (lottery proceeds)
minus $0.16 billion (tobacco settlement funds)
minus $0.02 billion (brain and spinal injury trust funds)
$19.10 billion (state general funds)

State general funds are comprised mainly of tax and fee income and can be spent for any legitimate state expense. State motor fuel funds can only be used to provide and maintain roads and bridges. Lottery Proceeds can statutorily be spent for “educational purposes and projects only” but basically fund the HOPE scholarship and the pre-kindergarten school program. Tobacco settlement funds represent Georgia’s share of the national tobacco settlement. Georgia generally has chosen to allocate these funds for health and rural economic development purposes only.  

How the state spends its money
Here are some of the broad policy areas and the amounts the state spends:
• Education (K-12 and higher education) — $11.86 billion, over 56 percent of the state budget
• Health care — $2.51 billion, just under 12 percent of the state budget
• Public safety — $2.03 billion, just under 10 percent of the state budget
• Human resources — $1.75 billion, over 8 percent of the state’s budget
• Debt service – $1 billion, over 4 percent of the state’s budget

How budget cuts are being made
By now, everyone is familiar with the state’s predicted $1.6 billion shortfall (which may be optimistic given recent economic news and current economic conditions). Currently, many are discussing a $2 billion shortfall. The difficult part of managing a revenue shortfall is deciding what to cut while still complying with various legal and policy restrictions.  

The governor has exempted K-12 education formulas from the full 6, 8, or 10 percent cuts. Instead, the governor has ordered 2 percent cuts from the approximately $7.65 billion in education formula funds such as Quality Basic Education, equalization, pupil transportation and others. The money spent through these programs is equal to 45 percent of the state’s budget. Similarly, the governor has exempted Medicaid spending, which is $2.3 billion, from full cuts. Instead, he has ordered a 5 percent cut to this program.

Here is how we arrive at the amount to which a 6 or 8 percent cut can be applied:  
$19.1 billion (state general funds)
minus $8.5 billion (for education formulas, which will be cut at 2 percent)
minus $2.3 billion (for Medicaid, which will be cut at 5 percent)
minus $1 billion (for debt service, which cannot be cut)
$7.3 billion (from which to make remaining cuts)

Because local contributions have to be considered as part of the education numbers, each 1 percent reduction from the education formulas yields around $76 million. Each 1 percent cut to Medicaid yields around $23 million. Each 1 percent cut across the rest of the budget yields about $73 million.

$1.6 billion (predicted shortfall)
minus $0.157 billion (2 percent cut to education)
minus $0.114 billion (5 percent cut to Medicaid)
$1.329 billion (remaining shortfall)

For 2009 at least, one-time funds are being applied to the shortfall which reduces the amount that has to be raised from the 6 or 8 percent cut. Now it would seem that there is $1.329 billion left to cut from the remaining $7.3 billion of state general funds, but the governor reduced the amount needed from budget cuts by applying one-time funds to the deficit as shown below.

$1.329 billion (remaining to be cut after education and Medicaid)
minus $0.057 billion (deferring state employee pay raises)
minus $0.1 billion (reduce other post employment benefits contribution)
minus $0.225 billion (utilize State Health Benefit Plan surpluses)
minus $0.04 billion (shift reservoir money from cash to bonds)
minus $0.07 billion (other one-time reserves in the budget)
$0.832 billion (left to be cut from state agencies)

So, the governor and legislature have to cut about $832 million from the $7.3 billion as shown above.  This is an 11 percent cut to state agencies. To further reduce the amount of agency cuts, the governor proposed to take $428 million from the Homeowners Tax Relief Grant, which would reduce the amount of the across the board cut to state agencies in the remaining $7.3 billion to around $404 million, or about 6 percent. This is the proposal that most of the agencies are operating on right now.  

If the situation were to worsen and the state had to find an additional $400 million to cover a $2 billion hole in the budget, this would be the equivalent of another 6 percent cut across the board to all agencies except education and Medicaid unless those were cut additionally.

On the good news side, the Department of Audits reported this week that the Revenue Shortfall Reserve had increased from $1.1 billion to $1.2 billion from funds that agencies managed to save at the end of FY08. Most of these efficiencies came from changes in the state’s administration of the Medicaid program.  Leaders are reluctant to use much of the reserve until the depth of the downturn is clearer.  

I may be reached at
234 State Capitol, Atlanta, GA 30334
(404) 656-5038 (phone)
(404) 657-7094 (fax)
E-mail at
Or call toll-free at
1-800-367-3334 day or night
Reidsville office: (912) 557-3811