Tuesday, November 10, 2009

Statement: Alan Essig, Executive Director, on October Revenue Decline and Worsening State Budget Deficit

The dismal October revenue numbers released today underscore the depth of Georgia's fiscal crisis. For these first four months of the new fiscal year, revenues are down by 15.1 percent.

The governor's preliminary analysis of the FY 2010 revenue projection estimates a 6.2 percent revenue decline, a decrease from the nearly 4.0 percent revenue decline the governor announced in July.

Although there has been no public announcement, this analysis is contained within the Official Statement for the State of Georgia General Obligation Bond Sale dated October 26, 2009.

The revised projection means Georgia likely is facing a $1.26 billion budget shortfall. This is an additional $320 million budget shortfall on top of the $940 million budget shortfall previously announced.

In response to the projections, the governor's budget office has a contingency plan that requires state agencies to cut their budgets again, this time by $320 million dollars (an additional three percent). This comes on top of the five percent budget cuts announced in July ($800 million dollars of cuts), and the double-digit percentage cuts ($500 million) already implemented when the FY 2010 budget was passed last April.

Also problematic are more than $2 billion in non-recurring revenues in the base of the FY 2010 budget. Unless lawmakers take a more balanced approach to solving this fiscal crisis, an approach that includes revenue options, Georgia will be facing further cuts to vital public services in FY 2011 and 2012, including those to healthcare, public safety, and education.

It is time for Governor Perdue and the General Assembly to bring a balanced approach and transparency to this fiscal crisis. The General Assembly should hold public hearings and learn about the state's revenue outlook from leading economists in the state.

The General Assembly also should hear from state agency staff and citizens about the impact of the budget cuts already in place and the potential impact of planned cuts.

In order for Georgia to prosper, lawmakers must not rely soley on cuts to public services. Georgia can not cut its way to prosperity. The governor and General Assembly must look to raise revenues, as a majority of states have done, including a majority of our conservative southern neighbors. They must take a balanced, informed, and thoughtful approach to solve the state fiscal crisis, and this must include strategic revenue options.

Alan Essig
The Georgia Budget & Policy Institute

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