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Hill: Where the budget stands
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As the April revenue figures come out this week, maybe this is a good time to quickly review both the 2009 amended and 2010 general budgets, also an update on where the state stands in revenue collections through April. Finally, it bears repeating the critical position the state is in over the next fiscal year and beyond.

Dr. Carolyn Bourdeaux, director of the Senate Budget and Evaluation Office, released a review this week that succinctly outlines both the amended 2009 budget and the 2010 general budget with sources and uses of funds. This column is derived from that information.

Amended 2009 budget
At $18.9 billion, the amended budget projected a $2.68 billion (-13.3 percent) shortfall from the original FY09 budget as passed one year ago and signed by the governor. Unbelievably, the final amended 2009 budget is 6.8 percent less than the FY08 final budget. This shortfall, starting last summer with Gov. Perdue ordering the withholding of allotments to agencies across state government, was met in the end by using $627 million in stimulus funds, $408 million in reserves (including $387 million from the revenue shortfall reserve) and $1.6 billion in cuts.

A total of $579 million was drawn from surpluses that had accumulated in the State Health Benefit Plan.  Because the Legislature was vitally interested in the HTRG (Homeowners Tax Relief Grant) being funded, the leadership proposed a series of cuts to help make up that $428 million for the HTRG. Prior to the stimulus bill being passed by Congress, the legislative leadership proposed a $95 million cut to local k-12 systems that could be taken as furloughs for teachers possibly from post planning days. As days passed, the stimulus bill passed which included a total $3.15 billion in federal funds. The House and the Senate proposed in their budgets and in the final appropriations bill to utilize stimulus funds to fund the cut required to pass on the HTRG as well as to fund $50 million in austerity cut reductions. It now appears from press reports that the governor does not intend to use the stimulus funds for that cut of $145 million as the budget outlines, so systems may be getting a huge cut in the final quarter of the fiscal year with few post planning days left to furlough teachers.

2010 general budget
State funds in this budget total $18.6 billion. Comparing this budget to the original 2009 budget proposed by the governor in January 2008, there is a $3.3 billion shortfall (-16.5 percent) that had to be addressed.  Gov. Perdue has wisely projected a continuing decrease in state revenues for 2010 of -8.9 percent under the FY08 budget two years ago and –2 percent under the final amended 2009 budget.

Here is how the shortfall was met through reserves, cuts to agencies, federal stimulus and increased Medicaid match funds:
Reserves - $476 million (Includes $258 million from the Revenue Shortfall Reserve)

Stimulus funds - $661 million

Increased Medicaid match - $735 million

Agency cuts - $1.26 billion

Along with other cuts plus the adds discussed below.

The added complicating factor that made this such a difficult task was the fact that there was growth in Medicaid ($140 million) and growth in k-12 education formula ($98 million) and in the formulas used for higher education because of increased enrollment ($151 million) as well as $204 million to cover a pre-existing shortfall in Medicaid. The pay raises given to educators in the 2009 budget along with college faculty had to be annualized which was part of the new k-12 and higher education spending. The shortfall plus the growth amount was covered by the budget cuts mentioned earlier. These cuts included $219 million from the teaching formula for the Board of Regents, $309 million in cuts to the QBE formula for k-12 schools, $124 million in Medicaid reductions, and the elimination of the $428 million HTRG for 2010. The net budget cuts totaled $1.4 billion

Also costly were the replacement of the 10 Medicaid cuts proposed earlier to hospitals and 6 percent cuts to other providers, as well as the $29 million restoration of cuts to the school nurse program and the $23 million for trauma expected to be replaced by the “super speeder” fines.

When you look back and see how large the numbers are in retrospect, it seems amazing these two budgets were balanced without more repercussions.

The outlook for the last three months
If present trends continue and no altering or flattening of the slide in revenues occurs, Georgia will use up all or much of the $565 million in reserves to balance the states books at the end of this June. If the revenue line does not flatten or turn up over the next few months, the governor and Legislative leaders could be looking at a special session to reduce appropriations even more. A next round of cuts could drastically alter state services as the public has come to expect them.
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