ANALYSIS: Georgia looks ahead at dangerous economic future

ATLANTA -- Jack Hill pictures himself staring down the barrel of Clint Eastwood's gun in a "Dirty Harry" movie.


"'Do you feel lucky, punk?'" Hill quotes from the movie. "Well, I guess I'm the punk, and I don't feel too lucky."

Hill, the well-respected chairman of the Senate Appropriations Committee on the floor of the Senate was recounting the scene for his colleagues last week.

Why would he feel like an unlucky punk?

The Reidsville Republican is worried about the Georgia's budget and what he sees as massive deficits ahead. This week, the Senate will vote on his version of next year's spending plan, and then he will enter marathon negotiating sessions with his counterpart from the House, Rep. Ben Harbin, R-Evans.

Though the two men are friends who value each other, they are starting from different assumptions about the economy.

"I just don't see anything that shows we've reached the bottom," Hill said.

Harbin, though notes that Federal Reserve Chairman Ben Bernanke is forecasting recovery could begin by year end.

"It's all a guess," Harbin said.

Guessing wrong -- beyond merely the half-full/half-empty look at the proverbial water glass -- can have significant consequences for state workers, teachers, hospitals and people who depend on government benefits.

Back in November when Gov. Sonny Perdue prepared his budget recommendations, he included for the first time, in the back of the 427-page book, a page called State Expenditure Projections. Before the state's unemployment rate hit record levels and tax collections plunged 35 percent in a single month, he was projecting budget deficits starting in 2011, averaging about $500 million for each of the next three years.

"I don't think anyone has picked up on this," said Perdue spokesman Bert Brantley.

Since then, the federal government rescued states with its stimulus package spread over this year and the next two. When that money ends, the state could face devastating deficits if the economy doesn't grow.

On top of that, Brantley warns about the revenue given up as a result of the various tax breaks coming out of the General Assembly this year.

"When you start to roll in some of those tax breaks, the numbers look even worse," he said, offering a hint that Perdue might veto tax initiatives Republican lawmakers have trumpeted so loudly.

Members of the House suspect the governor is blowing smoke to get his way on the budget.

Lt. Gov. Casey Cagle had his staff updated projections with flat revenue growth. They show a $715 million deficit in fiscal year 2011 and $1.7 billion in 2012 -- and those are based on conservative assumptions about enrollment in Medicaid and PeachCare for Kids.

"I think it's just a philosophical issue of when the recovery begins and if we would use all of the one-time stimulus money," he told reporters the day the House passed its budget. "You have to project over the next year to two years what you think the hole that that one-time money is going to create."

Harbin, though, isn't rattled.

"To project out that there is going to be this huge deficit when we really don't know is just a scare tactic," he said.

Where the House and Senate do agree is in rejecting Perdue's approach to Medicaid reimbursement rates to doctors and hospitals. The governor wanted to cut the rates 10 percent, but the House and Senate responded to medical providers who warned hospitals would close and lives would be lost as a result.

Cagle's plan is to cut other parts of the budget to preserve Medicaid spending and set the stage for dealing with the future deficits.

But cut where?

Teacher furloughs, raising state worker's share of their employee health premiums and another 1-percent, across-the-board cut for non-education parts of the budget.

The so-called "out years" are the challenge. Perdue has already tapped nearly all of the state's reserves -- and the reserves of every independent agency, from the Georgia Ports Authority to the State Employee Health Fund and probably Mary Perdue's butter-and-egg account.

Without reserves or stimulus money in 2012 -- or a willingness to raise taxes, budget writers have only one option: Cutting.

Tax collections took three years to recover after the last recession. Cagle's staff estimates it would take a 5 percent rise, not counting inflation, to balance the budget in 2012 if current expenses only increase 2 percent.

The House Appropriations members aren't so worried. They note that last seven projections on Medicaid costs from the governor's office have been off by an average of $350 million, which is about 5 percent.

That's why the state has a mid-year budget adjustment, to correct faulty projections, according to Rep. Mickey Channell, R-Greensboro, vice chairman of the House Appropriations Health Subcommittee.

"What's going to happen 16 months from now? I don't know," he said. "I don't know that anybody knows. The economy could get worse. The economy could get better quicker than some people think it could. I plain don't know."

Walter Jones is the bureau chief for the Morris News Service and has been covering state politics since 1998. He can be reached at or (404) 589-8424.



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