ATLANTA — As voters focus on the election, Georgia budget writers are concerned about what comes after and whether Congress will avoid the so-called fiscal cliff.
The U.S. Budget Control Act will trigger a package of tax increases and broad spending cuts in January if Congress doesn’t pass deficit-cutting measures on its own. States would give up billions of dollars the federal government would have spent providing social services, and places with a large military presence, including Georgia, would feel a bigger sting.
Generally, it amounts to a 5 percent cut in projected spending across the board, but there are exemptions. For instance, boating safety is exempt, but home-delivered meals are subject to the cuts. Adoption assistance is exempt, but homeless mental health isn’t.
Any congressional action is expected to occur in a lame-duck session after the election. U.S. Sen. Johnny Isakson, R-Ga., predicts that stopgap action will postpone the spending cuts and tax increases for months.
“I think probably you’re going to look at another kick of the can down the road,” he said.
The possibilities keep state officials guessing.
“We’re not sure the money will be there,” Georgia Community Health Commissioner David Cook said last week. He oversees several programs that get significant federal funding, including Medicaid, which is exempt from the automatic cuts but could be trimmed in an effort to defuse the trigger.
The state has enough problems of its own. Weak tax collections led Gov. Nathan Deal to order every state agency other than K-12 education to slice 3 percent of their budgets for the current fiscal year and the one coming.
“However, as part of the fall budget process, agencies will also be submitting contingency plans for the Budget Control Act of 2011 sequester,” said Deal’s spokeswoman Stephanie Mayfield.
Deal could ask the General Assembly in January to fill some or all of the gaps left in programs by sequestration.
Last year, he replaced part of the federal cuts to Temporary Assistance to Needy Families, notes Alan Essig, the director of the Georgia Budget & Policy Institute think tank.
“I think the hope would be that the state would try to manage the cuts with as little impact on the services to the people as possible,” he said.
Mayfield said such hopes are premature.
“We aren’t in a place to discuss what federal cuts the state could backfill,” she said.
The state’s reserves are extremely thin, and it has to absorb deficits from last year in Medicaid and other health programs.
The state could see its revenues change as a result of sequestration. For example, Georgia could resume collecting an estate tax if the federal exemption disappears in January, according to Jud Seymour, the communications director at the Georgia Department of Revenue.
Effect of cuts
Jeff Humpreys, the director of the Selig Center for Economic Growth at the University of Georgia, estimates that any recession resulting from the cuts would be mild and short overall, but slightly steeper in Georgia because it receives the third-largest portion of defense spending through military installations.
The defense cuts alone would total $2.1 billion, according to the Federal Funds Information for States, an independent foundation in Washington.
If Congress whittles unemployment payments, that will hit Georgia harder than other states, Humphreys said, because the state’s joblessness tops the national average.
An estimate of the reverberations from the automatic cuts was prepared by the U.S. Senate Appropriations Committee. For example, it predicted a $15.5 million cut to the Head Start program resulting in 518 layoffs and 2,486 fewer children in its preschool.
The Title I reading funding to local schools would drop by $38.8 million, costing 534 jobs and 76,000 students their extra tutoring.
Various cuts to programs at the Georgia Department of Labor would cost $9.8 million, affecting 110,000 people who would not get services.