One of the top albums of 2015, according to NPR, is one called “Sometimes I Sit and Think…And Sometimes I Just Sit.” To come up with “Ten Reasons” this year, I really could just sit down and not have to think very hard to come up with positives in Georgia as we look ahead to 2016.
While this column has pointed out areas of concern economically in the last few months, Georgia, by all accounts, seems poised to continue the positive progress of 2015.
As a state heavily invested in import/export activity, we have to consider that the state is connected to and affected by movements in the world economy, but Georgia is fortunate to have a relatively balanced economy that certainly continues to exhibit more positives than negatives. Therefore, I can find no reason not to be “Optimistic about 2016.”
Reason No. 1 — Everything else aside, states rise and fall on revenue growth, which, of course, is tightly wound with economic growth and activity—ask an oil-producing state like Texas, now showing negative growth compared to a year ago. Through 11 months and for the past two fiscal years Georgia has a strong record of revenue growth, which has allowed heavy investment in education and growth in the revenue shortfall reserve. After five months this fiscal year, Georgia’s revenue growth is 9.1 percent overall with the individual income tax category, closely tied to economic growth and payroll, growing at a 7.5 percent rate.
Reason No. 2 — Job growth is strong: In fiscal year 2015, Georgia had the fewest jobless claims filed for any year since 1973, under 15 million. The unemployment rate, falling all year to a low of 5.6 percent in November, now sits only one-tenth of a percentage point from the low-water mark in 2008. Georgia created 92,900 jobs in the last 12 months and 42,600 jobs in the last three months. This is the strongest growth since 1994.
Reason No. 3 — International trade is Georgia’s strong suit: Led by the Georgia ports and the World’s Busiest Airport, Georgia is playing to its strength. The ports completed its fifth straight year of record international trade with a 17 percent increase in FY15, with container traffic up 11 percent and total cargo up 7.8 percent. The Brunswick port continues rapid growth in auto shipping and receiving, increasing 7.8 percent this past fiscal year. Atlanta Hartsfield-Jackson just welcomed its 100th million passenger, never before accomplished by any airport. I’ll take passengers over flights anytime … an airplane never spent a five-hour layover in a bar spending money.
Reason No. 4 — Georgia’s strategies for growth and research are producing results: Some investments take some time and study to see the payoff. The Georgia Research Alliance brings in “Eminent Scholars” and gives them staff and research locations to pursue their work, all through an endowed chair funded jointly by the state and universities. One example recently demonstrated the success of this concept. Varian Medical Systems, the world’s leading manufacturer of devices and software for treating cancer and a premier supplier of X-ray imaging components, announced plans to expand operations in Georgia with a new hub for East Coast and European operations. But it was its earlier purchase of Velocity Medical Solutions, a startup company created in 2006 by researchers at Emory University, that gave them the comfort level the company needed to expand. Being located in Atlanta and working with the start-up company, they saw the value of the association of the relationship with the research university. This expansion will create as many as 100 new high-paying jobs over five years.
Reason No. 5 —“You oughta be in pictures.” And maybe you will be. The success ($1.7 billion in spending) of Georgia’s burgeoning film and TV production industry has resulted in significant capital investment in studios such as Pinewood (due to expand) and the development at Fort McPherson as well as in Effingham County. Georgia is now third in the U.S. in film and TV production. In fact, there are some 26 TV and film projects in production in Georgia this January. A film production of the TV show “Baywatch” will be filmed in Savannah this year. I’m sure the plot will remind us of the deep psychological meanings that were explored in every show when it was on TV.
Reason No. 6 — Georgia’s not an oil producing state. Well, maybe that is not a pure reason to be optimistic, but, on the other hand, all you have to do is look at the struggling oil-producing states and how they are twisting in the wind following the free fall in oil prices. Even Texas, a state that is held up to all as the model in income taxes, now is trending revenue growth at minus 3.5 percent revenue decline year over year. Georgia has a nicely constructed economy, manufacturing (would like more) tourism, shipping, transportation, agriculture and abundant natural resources. For a look at disasters in the making, look at Oklahoma, Louisiana and Alaska’s situations.
Reason No. 7—Agriculture: Some good even in bad times—It is no secret that the farm economy nationally is taking a licking right now and farm income is projected to be down 25 percent this next year. Yet, even as commodity prices on staples such as corn, cotton and peanuts have tanked and look to stay down for a while, in Georgia, there is still room for optimism. Fresh vegetable farming is continuing to grow, no pun intended, and commodities such as Vidalia onions, carrots, sweet potatoes and other specialty vegetables have had good years. Pecans, whose bumper crop was reduced by the fall rains, still is growing in exports and the price is historically profitable. Georgia continues to look like a key player in vegetable production in the future, as California still has no operable water plan.
Reason No. 8 — Housing sales, construction rebounding: It’s been a long pathway back, but it appears that home sales and new home construction are approaching pre-recession levels. Industry periodicals and financial companies are predicting strong sales in 2016, near prerecession 2007 levels, for the Atlanta market. In the Savannah metro area, new home building permits have been steady, at just under 500 per quarter all year, according to Dr. Michael Toma, economist at Armstrong State University.
Reason No. 9 — Georgia, still AAA rated: Why it’s important— On Dec. 4, Moody’s, the bond rating agency published its “2016 Outlook.” In it, the authors projected slowing revenue growth in the next year. What was noteworthy was the combined listing of states rankings by all three bonding agencies, Moody’s, Standard & Poors and Fitch. They noted areas of concern, such as the oil-producing states, and those states with the heaviest reliance on trade with China.
In this listing, Georgia remains a AAA rated state by all three, one of only ten rated this high. One of those, Alaska, is rated “trending negative.” States that have been downgraded over the past months have some telling deficiencies, which highlights Georgia’s leadership achievements. Kentucky was downgraded this fall due to its pension funds being insufficiently funded. Massachusetts, not AAA but just below that rating, was criticized in its bond review for concerns about the state using reserve funds to balance its budget over several years during a period of economic growth. Connecticut was rated a “negative” outlook due to budget issues from weak revenue growth and deferring of pension payments.
Reason No. 10—Georgia’s fuel tax conversion success: Maybe living right had something to do with it, but it’s hard to find anything to complain about with Georgia’s passage of HB 170 and the switch of the taxing of fuel to all excise tax. To begin with, the timing was downright perfect. The conversion to excise tax on fuel added about 6 cents a gallon to the cost of gas. By the time the fuel tax conversion was made, the price of gasoline had dropped by what approached $1 per gallon, so consumers felt nothing but lower prices. In addition, the conversion of about $180 million in fuel tax sales taxes previously going into the general treasury started flowing to DOT, but steady increases in revenue growth saw no noticeable effect in the state treasury. And finally, dramatically lower gas prices probably increased traveling, thereby increasing gallons sold, providing an increase of its own and thanks to the conversion, this increase will go into transportation improvements.
Sure, there are more reasons to be optimistic — increasing the RSR to $1.4 billion during this year, fully funded retirement plans, new car sales at an all-time high … but maybe most importantly, the prospect of a short session due to the moving up of the primary date can only mean that some needless law may not get passed.
I may be reached at
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E-mail at Jack.Hill@senate.ga.gov
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