January revenues show continuing weakness:
Revenues for January were down 8.7 percent over those in January 2009. Individual income taxes were -16 percent and net sales taxes from the Christmas buying season were basically flat at a positive 0.4 percent. Motor fuel taxes were down 22.6 percent, and corporate income taxes were a positive $23.6 million, or 633 percent, over 2009.
Year-to-date total revenues are down 12.9 percent through the first six months of FY2010. Individual income taxes are down 12.3 percent. Sales taxes overall are at a -13.7 percent and motor fuel taxes are down some $91 million or -16.5 percent. Corporate taxes show a minus 16.89 percent or -$59.5 million under the first six months a year ago.
Effects on the FY10 and FY11 budgets
The January revenue numbers pose more problems for the 2010 amended budget now being considered by the House and Senate and highlight the weaknesses in the governor’s proposed 2011 budget.
First, in the amended FY10 budget, the $1.44 billion shortfall figure the amended budget was based on, is now about $1.6 billion down after the swing of numbers from January revenues. It also calls into question the expectation that the remaining five months of FY10 will be flat as the governor’s budget relied upon.
Don’t look down — this is scary
The issues in FY2011 are numerous enough to make a list:
The governor has estimated growth in state revenues at 3.58 percent for the FY11 budget totaling $558 million. If the governor revises the revenue estimate downward, how is that hole to be filled?
The governor has proposed a 1.6 percent provider fee on hospitals and CMOs. This fee would then be matched by federal Medicaid funds and produces a $345 million revenue addition. If this bill does not pass the legislature, there will be a hole in the FY11 budget.
The jobs bill that passed the U.S. House has an extension of Medicaid Enhancement funds of $387 million that the governor has built into the FY11 budget. The version passed by the U.S. Senate does not. The post-Massachusetts mood does not offer a lot of encouragement especially at that level of funding. Even if we do not address that issue in the FY11 deliberations, that issue, if unaddressed by Congress, will surely be a FY11 amended issue.
The securitization of part of the infrastructure loan portfolio of the Georgia Environmental Facilities Authority produces a one-time gain of $288 million. This is being used to fill the budget deficit. As it is presently planned, this action is frowned upon by bond underwriters who rate Georgia’s bonds.
The thinking is that bonds of highly rated or potentially highly rated large counties and cities can be sold and still have room to continue the program of loaning communities water and sewer infrastructure funds. A better use would have been to have used those proceeds to pay down debt and increase available debt capacity. Any change in that plan leaves another budget hole.
The legality of supplanting private college grants (TEG) and some scholarships from state funds (some $33.7 million) with Lottery funds is very close to the clause where supplanting is clearly prohibited by the Georgia Constitution. The largest grant, the Tuition Equalization Grant, along with the other scholarships, is a pretty big number to replace in state funds in FY 2011 if the Legislature disagrees with the governor’s plan.
Circling back to the shortfall in FY10, whatever that shortfall in FY10 is starts out the FY11 year in July with an additional hole that big as well. So we will be right back where the state was this past July with a budget well over what tax collections can support.
And what about some of the cuts in the governor’s budget that the Legislature might have some interest in replacing and where will the funds come from for programs like National Board Certified Teachers, RESA and ETTC funding, county health department grants, school nutrition, and the aforementioned scholarships zeroed out in FY11, just to name a few that there might be interest in….
The real nightmare is in the future if the state truly has not stopped plunging — the 2012 budget when all stimulus funds will be depleted and there will be basically no onetime funds left to meet the shortfall. If by then the state has not begun to grow appreciably, there are catastrophic consequences.
Next week — some options for all to ponder….
Watch for the annual questionnaire seeking your input on the issues!
I may be reached at
234 State Capitol, Atlanta, GA 30334
(404) 656-5038 (phone)
(404) 657-7094 (fax)
E-mail at Jack.Hill@senate.ga.gov
Or call toll-free at
1-800-367-3334 day or night
Reidsville office: (912) 557-3811