FY 2009 Budget and Revenue Outlook; State will be $1 to $2 Billion Short
Jul 30, 2008    Georgia Budget & Policy Institute   

FOR IMMEDIATE RELEASE
July 29, 2008

Contact: Alan Essig, Exec. Director, (404) 420-1324 (office) (770) 402-4630 (cell)

FY 2009 Budget and Revenue Outlook;
State will be $1 to $2 Billion Short
Continued Declining Revenues Justify Special Session

ATLANTA – The Georgia Budget and Policy Institute has released a new report examining the current fiscal year’s revenue outlook in relation to the budget passed by the General Assembly and signed by the Governor. The report indicates that while the FY 2008 shortfall was made up by dipping into the Revenue Shortfall Reserve, there likely won’t be enough in the RSR to cover the estimated $1 to $2 billion gap between state revenues and the revenue estimate for the FY 2009 budget.

FY 2008 third and fourth quarter revenues declined by 3.7 percent and 7.3 percent, respectively. To meet the FY 2009 budget, revenues would have to increase by $1.48 billion or 8.4 percent. FY 2009 revenue growth of between 0 and 3 percent would result in a budget deficit of between $1 and $1.5 billion. If revenues continued to decline throughout FY 2009, deficits could total $2 billion or more.

The Governor has asked each agency, department and authority to identify 3.5 percent of their FY 2009 state general fund appropriation for reduction as well as an additional .5 percent of their FY 2010 budget (for a total of 4.0 percent), which would result in savings of approximately $625 million in FY 2009 and an additional $90 million in 2010.

FY 2009 across the board budget reductions of 3.5 percent would result in large cuts to many state programs, such as:

• $287 million in cuts to K-12 education
• $40 million in cuts to the Department of Corrections
•  $80 million in cuts to the Board of Regents
•  $80 million in cuts to Medicaid and PeachCare.

“Depending on across the board budget cuts alone to balance the budget would have a significant negative effect on the education, healthcare, and safety of a majority of Georgians,” said Alan Essig, Executive Director of the Georgia Budget and Policy Institute. “A deficit reduction plan that includes targeted budget cuts, new revenues, and Revenue Shortfall Reserve funds would offer a more responsible and balanced approach.”

The report calls for a Special Session of the Georgia General Assembly to address the looming budget crisis if June and July revenues don’t show improvement. In addition to targeted cuts to non-vital services, the report outlines a deficit reduction plan that includes:

• Increasing the cigarette tax by $1 a pack (if effective October 1, 2008 would raise $332 million in FY 2009).
• Reducing or eliminating the Homeowners Tax Relief Grant (savings of $428 million).
• Eliminating some of the special interest tax breaks passed during the 2007 and 2008 sessions of the General Assembly (savings of $120 million).
• Reducing or eliminating Board of Regents and state employee 2.5 percent salary increases to go into effect January 1, 2009 (savings of $87 million).
• Using at least 50 percent of the Revenue Shortfall Reserve funds in FY 2009 ($450 million).

“A balanced deficit reduction plan would put Georgia in the best position to meet our education, public safety, and healthcare obligations while maintaining the short-term fiscal health of the state,” said Essig. “To assure the long-term fiscal health of the state, the Governor should appoint a blue ribbon commission to study ways to comprehensively reform Georgia’s tax system.”

A copy of the report is available on GBPI’s website, www.gbpi.org.

ABOUT GBPI
The Georgia Budget and Policy Institute (GBPI) is the state’s leading independent, nonprofit, non-partisan organization engaged in research and education on the fiscal and economic health of the state of Georgia. The Institute provides reliable and timely analyses of Georgia’s budget and tax policies and promotes greater state government fiscal accountability, improved services and an enhanced quality of life for all Georgians.

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