Revenue up; Deal holds line on budget

As tax collections rise, state urges caution amid economic uncertainty, needs for schools, health care.

The state of Georgia is taking in record tax collections and hiring again after years of cutbacks.

But as state agencies prepare to develop their budget plans for the upcoming year, Gov. Nathan Deal is sending them a clear message: Don’t come to me with your hand out.

A memo from Teresa MacCartney, the governor’s budget director, tells agencies, “Gov. Deal will maintain a conservative fiscal management budget strategy in order to plan for any economic contingencies by asking agencies to maintain FY 2017 spending levels for agency programs.”

MacCartney’s letter notes strong economic growth in recent years.

“We expect revenues for the current and new fiscal years to be sufficient to continue meeting the needs of our growing citizenry, but we are mon-

itoring uncertainties in the global economy,” she said.

State agencies will spend the next couple of months developing spending plans for the upcoming fiscal year and then submitting them to Deal for his consideration. The governor will present his budget proposal to the General Assembly in January.

The latest instructions are similar to the ones agencies have been given ever since Deal took office in 2011.

But a lot has changed since then. Deal became governor when Georgia was still feeling the impact of the Great Recession, when teachers and state employees were still taking furloughs to help make ends meet.

The Atlanta Journal-Constitution reported earlier this month that — in part because of higher gas taxes — the state took in 9.4 percent more revenue in the recently completed fiscal 2016 than it did the previous year. And as the AJC reported Sunday, the state is also funding the hiring of thousands of new school district and state employees after years of trimming payrolls.

As in past years, Deal’s office is allowing the Department of Education and the college systems to ask for funding to pay for any increase in the number of students. Medicaid will also be able to ask for money to pay for increases in the number of Georgians qualifying for health services.

But Kelly McCutchen, the president of the conservative Georgia Public Policy Foundation, said it makes sense for the governor to draw a “no new spending” line with most agencies.

“We are due for a recession,” McCutchen said. “It’s sort of smart to keep the brakes on a little bit. What we’ve always done in the past is spend like crazy in good times and then cut back in bad times.”

But the governor is also holding back because he needs some money to pay for his administration’s priorities during his final two years in office.

“I would assume there are a couple of things on the agenda that he wants to get done,” said House Appropriations Chairman Terry England, R-Auburn.

High on the list will be changing the way the state funds k-12 education, something that could cost big money. The governor also wants to add an additional $600 million to state reserves to leave them relatively full when he retires from office in January 2019.

Deal recently said he was considering a legislative package that could include more pay for state police officers as well as a new training regimen for law enforcement authorities.

The governor will probably want to give teachers and state employees pay raises again next year, and each 1 percent increase costs the state about $140 million.

Some Republicans are warming to the idea of expanding Medicaid, the state-federal health care program for the poor and disabled. It’s unclear whether that could pass the General Assembly, or what form expansion would take, but that too is bound to cost money.

And the state’s building boom will likely continue, with Deal expected to support a $100 million-plus state courts facility down the street from the Capitol.

Despite the rising revenue and, right now, strong economic signals, McCutchen doesn’t sense much appetite from state leaders for changing tax laws or creating big tax cuts, something that is typically high on the agenda of Republican lawmakers.

Even with a record $23.7 billion budget this year, state spending is still below where it was before the Great Recession for many state agencies when population growth and inflation are considered. So Deal and lawmakers are still backfilling areas where deep cuts were made from 2009 to 2011.

McCutchen, an advocate for cutting the state income tax rate, said there is simply no strong desire to make major changes in the tax system right now among the people who can make it happen.

“I don’t fundamentally see much in the way of changes,” he said. “Some of the people in the leadership in the past who made it their No. 1 issue are gone. Until you have the leadership from the top, it is going to be difficult to get anything through.”