Originally created 06/30/03

Georgia is spared worst budget woes



ATLANTA - While some states are laying off government workers and letting prisoners out of jail, Georgia is falling back on its reserves and accelerating tax collections.

It's not as dramatic. It doesn't generate huge headlines. And Georgia's elected officials like it that way.

"Compared to other states, we're in pretty good shape," said Sen. George Hooks, D-Americus, the former chairman of the Senate budget-writing committee.

Georgia wasn't spared in the recession of the past couple of years, which has driven tax collections sharply downward in virtually every state. But Gov. Sonny Perdue and the General Assembly haven't had to make the severe spending cuts forced upon their colleagues elsewhere.

Instead, Georgia is relying mostly on less-painful budget adjustments other states went through a year ago.

The $16 billion 2004 budget draws down the state's reserves by $142 million, picks up $132 million by moving up the timetable for collecting income taxes businesses pay on behalf of their employees, and transfers $30 million in national tobacco-settlement funds into Medicaid.

But those accounting maneuvers weren't enough to make ends meet without additional revenue.

The Board of Regents is raising tuition at Georgia's four research universities by 15 percent, one of the largest increases in the nation.

The Legislature also approved the state's first major tax increase in a decade. The price of a pack of cigarettes in Georgia is about to go up by a quarter, part of a $180 million tobacco-tax increase.

But Mr. Perdue, a Republican, didn't ask the General Assembly to increase either sales or income taxes.

In fact, the first-year governor was able to keep intact the homestead-tax-relief program begun by his predecessor, Roy Barnes. Mr. Perdue was able to sell the tobacco tax as a way to discourage young people from smoking.

Conservative fiscal practices are largely responsible for Georgia's sound financial footing compared to that of many other states, said Thomas Lauth, the dean of the University of Georgia's School of Public and International Affairs.

For years, Georgia governors have set annual revenue estimates on the low side of what could be expected for the year, a philosophy that has helped build up healthy surpluses.

"Gov. Perdue inherited a full rainy day reserve fund," Dr. Lauth said.

Although the economy is showing some signs of a turnaround, there's no guarantee that the governor and Legislature won't be forced into tougher measures when they take up the 2005 budget next year.

To avoid more tax increases or more damaging budget cuts, Mr. Perdue is promising a long-term overhaul of state spending practices. He has created a private-sector commission to recommend ways the state government can save money by becoming more efficient.

"I'm going to get into the budget and peel it back program by program," Mr. Perdue said. "We're going to require every state agency to justify every dollar of state money they receive."

REVENUE RAISERS

Gov. Sonny Perdue and Georgia lawmakers are counting on several large chunks of money to avoid steeper state spending cuts during the new fiscal year, which starts Tuesday. The large amounts include:

$180 MILLION: Increase in tobacco taxes, raising the price of a pack of cigarettes by 25 cents

$148 MILLION: Postponement of annual school-enrollment adjustment until the midyear 2004 budget

$142 MILLION: Drawdown of the state's reserves

$132 MILLION: One-time acceleration of the timetable for income taxes businesses pay to the state on behalf of their employees

$30 MILLION: Transfer from Georgia's share of the national tobacco settlement