Friday, January 23, 2009

This year's session to be a classic clash of political philosophies
by Eric Tanenblatt
Georgia Online News Service

Over runny eggs and undercooked sausages, Gov. Sonny Perdue found himself before 2,500 people at the Georgia Chamber of Commerce's annual legislative session Feb. 13 starting the "Eggs & Issues" breakfast discussing a budget crisis much like he did when he took office just prior to the 2003 legislative session.

Having been Perdue's chief of staff at the time, I can tell you that I do not envy the position the governor and the legislators find themselves in today. They must devise ways to close a $2 billion revenue shortfall within the remaining 2009 budget and to compensate for projected declines in tax collections over the coming year.

Generally, legislators optimistically begin the session with different policy ideas and initiatives intended to reform education, improve transportation, alter the tax code and protect the state's fragile health care delivery system. Committees will meet for hours to debate the finer points of legislation, and floor time will be spent deliberating these issues. This process comprises the bulk of the legislative session, but ultimately the overriding concern and responsibility of the legislative and executive branches of government is to balance the budget.

Flavoring this session will be a heightened political sensitivity that may expose the ugly side of the process. Time is winding down on Sonny Perdue's second term. As soon as the gavel closes the 2009 legislative session, attention shifts to the race to succeed him. While the governor has already streamlined much of state government in an effort to be the "Best Managed State," he apparently still has more to do. He wants to bring efficiency and transparency to the state Department of Transportation and reconstitute the Department of Human Resources and Department of Community Health into what would become more mission-focused agencies. Given the skepticism by some legislative leaders, this realignment of essential services likely will command a significant part of his energies and force him to barter political capital.

Lt. Gov. Casey Cagle, who has already announced that he is running to succeed Perdue, will use the legislative session as a springboard to his gubernatorial campaign, which begins in earnest the first day after the gavel closes this session. Cagle's effort to manage the day-to-day operations will be colored by the jockeying of his colleagues, previous Senate Pro Tem Eric Johnson and David Shafer, chairman of the Senate Regulated Industries Committee, to replace him as Lt. Governor.

In the midst of this, Speaker Glenn Richardson, who is not running for higher office, must ensure that a constitutionally mandated balanced budget will pass the House. Unlike the federal government, the state can only spend as much revenue as it receives. It would be foolhardy to underestimate the gravity of this task. A review of the numbers is sobering.

State tax revenue collections are way off. According to a Revenue Department analysis, they are down nearly three percent for the first six months of the budget year and worsening, with nearly a nine percent decrease in December collections alone.

To put this in perspective, the administration is operating under the premise that the 2009 budget will be trimmed from $21 billion to roughly $19.2 billion as a result of dwindling revenue collections and future projections. In order to make up the shortfall, the governor says the state's Rainy Day Fund will have to be tapped. Reserves will be depleted by $50 million for 2009, $408 million will be drawn down for the 2010 budget and an additional $187 million will be contributed to the mid-year education adjustment.

Some think tanks such as the Georgia Budget and Policy Institute are calling for increased taxes, citing the need for more government services during these tough economic times. Conservative leaders view the budget crisis as an opportunity to pare government back to its core functions. This is a classic clash of political philosophies, and in the end each might get a bit of what they prescribe in the final budget.

Several tax issues are expected to be on the legislative table, one of which is the Homeowners Tax Relief Grant (HTRG), the state funded program that offsets the first $8,000 of homeowner property taxes levied by the counties. Foreseeing the economic conundrum, earlier this year the governor warned that the state may not be able to afford the HTRG grant and suspended disbursements to counties. Given the worsening revenue conditions, the governor has ordered the $428 million HTRG be redirected towards the $2 billion deficit. Local governments are scrambling to replace the anticipated revenue loss this year and are forced to consider raising property taxes and reduce spending.

A controversial tax increase will come through the governor's proposal to levy a new 1.6 percent fee on hospital and commercial health insurers. This proposed tax will cover existing Medicaid deficits, will increase reimbursements to state providers and, in conjunction with a new $200 "Super Speeder" fine for those caught grossly exceeding the speed limit, will also fund the state trauma network. Many hospital administrators claim this is nothing more than an arbitrary redistribution of wealth. The governor, in his State of the State address, couched the effort as "spreading the burden."

In addition to the above, the governor directed state agencies over the summer to reduce existing budgets, an endeavor that identified an additional $200 million in state spending savings to apply towards the current year budget deficit -- but unfortunately those pieces and parts do not cover the entire $2 billion shortfall.

The remainder will have to come from deep cuts within state agency budgets, starting with state employee pay raises, including those for teachers. Given that about half of the state budget goes to K-12 education and to fund the state's portion of Medicaid, non-related state agency budgets may face cuts up to 10 percent.

There will be other issues considered this legislative session. Expect to see legislation originating in the House to cap property tax increases at 3 percent or the price of inflation each year. Since Speaker Richardson is a large proponent of property tax reform, it is expected to pass the House. However, county governments will fight this measure tooth and nail before it crosses to the Senate chamber.

There will continue to be wrangling over transportation funding, with Richardson favoring a statewide solution; Cagle supporting a regional referendum to opt-in for a special purpose transportation tax; and Perdue preferring neither until he first finishes infusing greater efficiency into the Georgia Department of Transportation. This remains among the leading priorities for the business community, particularly the Georgia and Metro Atlanta Chambers of Commerce. These business groups have banded together with dozens of other organizations to form the "Get Georgia Moving" coalition. This lobbying effort is intended to persuade legislators to immediately address worsening transportation conditions.

With regard to education, having stood powerless during the Clayton County school crisis last year, the governor is proposing legislation for more direct oversight of local school boards should accreditation become threatened. An issue that is likely to spark debate among educators is the governor's proposal to implement a merit pay system for rank-and-file teachers, a policy some unions have long opposed.

Moving on a parallel track with the president's stimulus efforts, Perdue has proposed a $1.2 billion bond stimulus package, taking advantage of both the state's AAA bond rating, which allows for lower interest rates, and low construction costs. The administration is projecting the stimulus will generate some 20,000 jobs through capital construction projects such school buildings and libraries and facilitating state property maintenance projects.

In addition, there are 180 individual state House representatives and 56 state senators, each with his or her own legislative agenda and individual constituency. In a typical year, the noise level among these competing interests can be deafening. However, against the backdrop of the nation's economic crisis, partisan bickering and local self-interest may be more transparent and, therefore, appear more trivial. Most lawmakers seem to be expressing similar sentiment today, and the hope is that the state will emerge in April leaner and better positioned for a prosperous future.

Eric Tanenblatt heads the government affairs practice at McKenna Long & Aldridge. He previously served as Gov. Sonny Perdue's chief of staff and as a senior adviser to the late U.S. Sen. Paul Coverdell.

Eric Tanenblatt heads the government affairs practice at McKenna Long & Aldridge. He previously served as Gov. Sonny Perdue's chief of staff and as a senior adviser to the late U.S. Sen. Paul Coverdell.   [full bio]


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Today's GONSO

Georgia's budget crisis could sour Perdue's legacy

by Tom Baxter
As he awaits the day, not too far in the future, when his portrait is hung on the walls of the state Capitol, Gov. Sonny Perdue presents a painterly problem for the person assigned to capture his legacy on canvas.

Full Story

This year's session to be a classic clash of political philosophies

by Eric Tanenblatt
Over runny eggs and undercooked sausages, Gov. Sonny Perdue found himself before 2,500 people at the Georgia Chamber of Commerce's annual legislative session Feb. 13 starting the "Eggs & Issues" breakfast discussing a budget crisis much like he did when he took office just prior to the 2003 legislative session. Full Story

Behold the Gold Dome, behold the media – and weep

by John Sugg
Georgia, we have a problem. It's called leadership – or more precisely, a lack thereof.
Full Story

Senate Agrees to New Transport Agency, Barely

by Maggie Lee
In a nearly a party-line vote of 30-25, the Georgia Senate has approved a bill that would create a new state transportation agency, and in the view of its sponsor, give more power to rural districts.
Full Story

Senate Agrees to New Transport Agency, Barely

by Maggie Lee
In a nearly a party-line vote of 30-25, the Georgia Senate has approved a bill that would create a new state transportation agency, and in the view of its sponsor, give more power to rural districts.
Full Story

Tomorrow's Budget
What comes first at General Assembly: political posturing or good policy?
by Tom Opdyke
Problems abound with single party control
by J. Randolph Evans
Funding for Georgia health programs, trauma centers may be a smoking issue
by Bill Hendrick

 
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