It is no secret that the major issue this legislative session will be the budget and dealing with the revenue shortfall. As legislators and the governor grapple with cutting agency budgets, it is important to remember that, unlike the federal government, Georgia must produce a balanced budget. This means that the state can only spend as much as it actually receives. Therefore, there is a finite pool of money that will be divided between all of the state’s agencies.
There are a number of major issues that will be debated as the governor and legislature work their way through the 2009 amended and 2010 general budgets. Here is a brief explanation of some of the bigger issues:
Homeowners Tax Relief Grant
The Homeowners Tax Relief Grant (HTRG) is a grant provided by the state to counties in order to offset a portion of homeowners’ property taxes. HTRG is implemented by exempting the first $8,000 of a home’s assessed value from property taxes and shows up on the front of the tax bill as a reduction. In FY09, the legislature appropriated $428 million for HTRG.
The governor, under his authority, acted to suspend the distribution of these funds in July. If HTRG is granted, then budget writers will have to find that $428 million from cuts or reserves.
If HTRG is not granted to homeowners, either counties or homeowners will foot the bill.
Managed care provider fees
The state has three care management organizations (CMOs) that service the state’s Medicaid population. Georgia charges CMOs a 5.5 percent fee on the revenues they earn and uses revenues from these fees as matching funds for federal funds for Medicaid and Peachcare.
In October, federal law will change and require that the state either charge the same fees to commercial CMOs (insurance companies) or to none of the CMOs. If the state is not going to charge this fee at all, it will be a loss of at least $90 million to the budget. The governor has proposed a plan that would impose a 1.6 percent fee on CMOs and commercial insurance providers.
In addition, the governor’s plan would charge the same 1.6 percent fee on hospitals’ net revenues. The governor’s proposal would cover some of the deficits facing Medicaid programs as well as cover a way for the state to pay more to providers and even provide a source for funding trauma care.
This proposal, of course, is controversial and opposed by insurance companies and hospitals.
Whose budget to cut?
This summer, the governor announced a reduction in the revenue estimate for the 2009 budget and with the concurrence of Legislative leaders, pooled together one time funds and a 6 percent budget cut across the state budget (2 percent in education, 5 percent in Medicaid funds) to meet an anticipated $1.6 billion shortfall.
With December’s revenue report, the shortfall is expected to reach $2.1 billion or so for the present budget year. So the most immediate problem will be how to fill that additional hole. That is of course where the HTRG issue comes into play. The additional funds needed are in addition to the $428 million in suspended HTRG funds that legislators want to fund as well.
The announcement of the use of $525 million in reserve funds from the State Employees Health Insurance fund will make up part of the shortfall. Of course this means the Legislature cannot now use these funds to pay out the HTRG.
For the 2010 general budget, if the revenue estimate reflects the new lower figure we are expecting, additional, higher cuts are likely. Remember when you remove education and the Medicaid/Peachcare part of the overall budget amount to be cut, that is over one half of what will be a $17 billion budget.
Education will have a 3 percent cut, probably and Medicaid is again a 5 percent cut at this point. An 8-10 percent cut in the balance of the budget is not out of the realm or possibility.
This is almost certain to be a session to either long remember or soon forget…
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