More cuts might be needed

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ATLANTA --- Cuts to state government might go even deeper, and a sluggish housing market might limit local school districts' ability to pick up the slack, an economist with the University of Georgia said Thursday.

Barring withdrawals from the state's reserve fund or some sort of tax increase, "I'm absolutely convinced that the cuts that have been implemented thus far are not going to be enough to balance the budget," said Jeff Humphreys, the director of UGA's Selig Center for Economic Growth.

Gov. Sonny Perdue has frozen 6 percent of state funding for most agencies, 2 percent of state aid to local schools and 5 percent of Medicaid spending. He has also asked agencies to submit ideas for reducing their budgets up to 10 percent as he looks to revise the budget for the current fiscal year, which begins June 30, and craft a spending measure for the following spending year.

Housing values might not fall during a recession, Mr. Humphreys said, but they would likely remain flat. And publicity about falling property values in other states might prompt more taxpayers to challenge their tax assessments, delaying payments.

The economy should begin turning around next year, Mr. Humphreys said, though housing values might take longer to recover. A $7,500 tax credit for first-time homeowners, set to expire July 1, could help the market, though Mr. Humphreys said potential buyers might wait until closer to the deadline to see whether prices will go down.

"They don't have to sell a house to buy, so that's high-octane fuel for the housing market," he said.

Mr. Humphreys made his comments at the inaugural "State of the State" report for education in Georgia, sponsored by the UGA College of Education and Education Policy and Evaluation Center.

College dean Andy Horne said the goal of the conference was to help education leaders deal with some of the challenges education currently faces.

"The economy is certainly impacting education," he said, "and the business as usual mode isn't going to work."

Reach Brandon Larrabee at (678) 977-3709 or brandon.larrabee@morris.com.


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