September Revenues Up, But Long Road to Full Recovery

State revenues in September were up 5.7 percent over revenues in September 2009, according to data released by the Georgia Department of Revenue. That is certainly good news, but Georgia has a long road to recovery in revenues.

Net revenues in the first quarter (July-September) were 7.4 percent above first quarter 2009 revenues. However, fewer income tax refunds were issued in the first quarter of 2010 compared to 2009, giving 2010 a temporary boost in July and August. Removing the anomaly of fewer refunds, gross revenues grew by 1.9 percent in the first quarter. The revenue estimate for the fiscal year is currently set at 4.2 percent.

"Consider a worker who has his pay cut by 20 percent, and then receives a 5 percent raise. The pay raise is great news, but he is still going to have trouble paying his bills, much less saving for his kid's college education," said Alan Essig, executive director of the Georgia Budget and Policy Institute. "That's what the state faces today. Revenues are growing, but we have a long way to go to regain the ground we lost. The state will continue to struggle to pay for essential services or invest in infrastructure unless leaders reform and improve our tax structure."

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Opinion: Tax Collections Sink Down Another Month: State's Ability to Fulfill Obligations Compromised

Governor Perdue released the revenue collections data for September, marking an entire quarter of dismal revenue -- an average of 14.2 percent decline from the previous year.

"Georgia's revenue has been in a consistent state of decline for the last nine months," said Alan Essig, executive director of the Georgia Budget & Policy Institute.

"This is evidence, along with Georgia's horrible unemployment rates, that the state will not reach the governor's recent goal of just a 3.5 percent decline from last year for this fiscal year."

"Georgia has already implemented over $2 billion in cuts from public services in this year's budget. The state must consider additional revenues for a more balanced approach to reducing our chronic deficit," said Essig. The vast majority of other states, including our southern neighbors, are combining raising revenues with cuts.

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Latest Numbers: State Revenues Decline Further, Governor Should Veto Tax Cuts

In light of the continued decline in state revenues, the Georgia Budget and Policy Institute calls on Governor Perdue to continue his promise of fiscal responsibility and veto bills passed by the General Assembly that siphon dollars from the fiscal year 2010 budget, placing it into a deficit.

The FY 2009 collections through March are running 1.2 percentage points behind what the budget projects - a 8.0% revenue decline from FY 2008 total collections instead of a 6.8% revenue decline. If this decline maintains through the end of the year (April through June), the FY 2009 revenue shortfall will be at least $225 million.

Georgia has approximately $550 million in the Revenue Shortfall Reserve that automatically covers the shortfall this year, however this leaves little wiggle-room for the FY 2010 budget starting in July.

"Governor Perdue has been a good and reliable steward of Georgia's budget," said Alan Essig, GBPI's executive director. "He is the last chance Georgia has to prevent worsening the impending deficit."

A deficit is acutely relevant in light of so-called stimulus legislation the governor has on his desk. According to the official fiscal notes on House Bill 261 and HB 481, if these bills are signed into law they will cost the state treasury approximately $60 million in FY 2010, as well as hundreds of millions of dollars in FY 2011 and FY 2012.

"These bills devote millions of dollars to activity that will occur regardless of government intervention. They will also keep millions of dollars from important services that won't be offered to Georgians who need them, such as meals on wheels and care for Georgians with developmental disabilities, and to services that make our state strong, like the education system," said Sarah Beth Gehl, deputy director of GBPI.

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State Fiscal Crisis: Georgia Has a Revenue Problem

The Georgia Budget and Policy Institute (GBPI) released a report today highlighting the fact that state spending is not a driving factor in the projected $2.5 billion budget deficit facing the state in the current fiscal year and possible $1 billion deficit in FY 2010. The report, State Fiscal Crisis: Georgia Has a Revenue Problem, found that the current budget shortfall is due to the combination of a historically weak economy and a declining tax base.

Even before the current economic recession, state revenue collections as a percentage of personal income have declined dramatically. In other words, as Georgians' incomes increased, the state taxes collected from Georgians did not keep pace. The weakening of the tax base has occurred over the past 10 years as Georgia has cut taxes across the board. In addition, the movement from a manufacturing to a service economy and the rise of Internet sales have further weakened the sales tax base. These tax policy decisions and a changing economy have cost the state a minimum of $1.5 billion each year.

Even during the economic recovery between FY 2003 and FY 2008 this inadequate revenue base resulted in $2.4 billion in funding formula austerity cuts and sustained budget reductions for the Board of Education and Board of Regents. In addition, due to funding limitations in Medicaid and PeachCare, the number of uninsured children in Georgia increased, and Georgia was unable to make adequate investments in such areas as a state trauma network, a community mental health system, or services for those with mental and physical disabilities. In fact, Georgia ranks 49th in state spending per capita.

"The inadequate revenue base has resulted in lagging funding for the physical and human infrastructure of the state even during times of economic growth," noted GBPI Executive Director Alan Essig. "In the midst of the current economic recession, revenues are not sufficient to pay for our basic public services, causing deep cuts that will likely worsen in the coming year."

Although revenue collections for the first five months of the fiscal year have shown only a 1.3 percent decline, due to the further weakening of the economy expected throughout calendar year 2009, the Georgia State University Economic Forecasting Center projects a 6 percent revenue decline in the current fiscal year and a 1 percent revenue decline in FY 2010. With Georgia potentially facing a $2.5 billion budget shortfall in the current fiscal year and an additional $1 billion shortfall next fiscal year, new revenues should be part of a balanced deficit reduction package to address this fiscal crisis.

Revenue raising options include:

* Increase cigarette taxes by $1 a pack to raise $450 million.
* Impose a temporary 1 percent surcharge on family income over $400,000 to raise an estimated $225 million. (Would impact less than 1 percent of taxpayers.)
* Reinstate the state estate tax to raise between $100 million and $150 million. (Would impact less than 1 percent of all estates.)
* Lower the cap on various tax credits and exemptions passed during the past two legislative sessions. For example, lower the $50 million cap on the tax credit for student scholarship organization donations to $2 million during the recession.
* Implement an income ceiling on the child care tax credit to save $20 million.
* Create a ceiling on vendor compensation for sales tax collection.

In the long term, Georgia needs to undertake fundamental tax reform and modernization that addresses the question: How do we fairly and equitably raise the funds necessary to provide the quality public services and infrastructure that Georgians demand? Such tax reform and modernization should include:

* Create a tax break budget to increase transparency and accountability for tax breaks. Like 39 other states, Georgia needs a tax break budget to detail the costs and benefits of tax breaks. A tax break budget would provide data that legislators and the public need to weigh Georgia's spending options.
* Eliminate unnecessary and ineffective tax breaks based on data gathered from a tax break budget.
* Expand the sales tax to cover some household services. The change from a manufacturing to a service economy and the rise of Internet sales have weakened the sales tax base. Broadening the sales tax to cover some services would help strengthen this declining revenue base.
* Modernize the income tax structure to the 21st century. The income tax has been relatively unchanged since the 1930's. The income tax should be modernized through increasing the standard deductions, broadening the tax brackets, establishing a new top income tax rate, and implementing a state Earned Income Tax Credit.

"Revenue increases as part of a balanced deficit reduction package would be more beneficial to the economy than budget cuts alone. In the long term, fundamental tax reform and modernization would allow Georgia to make the investments in the human and physical infrastructure of the state that is necessary for Georgia to prosper," said Essig.

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Comprehensive Analysis of Georgia Nonprofit Sector Released

Collaboration between Georgia State University and the Center on Philanthropy at Indiana University has resulted in the most comprehensive analysis ever made of Georgia’s nonprofit sector and the giving patterns of Georgians.

Funded by grants from the Wilbur and Hilda Glenn Family Foundation, and coordinated by Atlanta fund raising firm Alexander Haas, these two studies – Georgia Gives and Nonprofit Georgia – examined giving patterns throughout the state, as well as comparative analysis of giving in Atlanta and other urban, suburban and rural areas of the state.

“Georgians have always been generous, and these two studies provide evidence that the tradition continues today,” said David H. King, president of Alexander Haas. “Individuals in Georgia gave an estimated $5.58 billion in 2007 to meet vital needs and improve the quality of life in our communities and rural areas throughout the state and gave more than the national averages” he said.

Among the key findings of Georgia Gives:

Georgia’s total charitable giving by individuals, foundations and corporations in 2007 is estimated to be more than $6.7 billion. Individual donors statewide ($2,381) and in Atlanta ($2,492) gave more on average than donors nationally ($2,247) in 2007
60 percent of household donations in 2007 came from the Atlanta Metropolitan Statistical Area, which includes 54 percent of the state’s population.
86 percent of Atlantans reported making gifts to charity in 2007, compared with 70.2 percent nationally and 68 percent in the rest of the state
55.5 percent of household donations in 2007 went to religious organizations, which is slightly lower than the national level of 61 percent.

The next largest share of Georgia household contributions (14 percent) was given to public-society benefit organizations such as United Way, compared to 10 percent of contributions nationally.

In 2007, corporate giving in Georgia is was estimated at $503 million.

“This report shows that individuals, foundations and corporations all play a critical role in supporting Georgia’s thriving nonprofit sector,” said Patrick M. Rooney, interim executive director of the Center on Philanthropy at Indiana University. “Georgia’s more than 1,400 independent, operating and community foundations gave an estimated total of $615.8 million to charity in 2006,” he added.

Among the key findings of Nonprofit Georgia:

Georgia’s Public Charities
7,119 public charities in Georgia filed with the IRS in 2005. Total revenues in these charities amounted to $24.7 billion, up 36% in inflation-adjusted dollars from 2000.

Fulton and DeKalb counties had a combined 2,429 charities.

There were 12 counties with no reporting charities, and over one-third of all Georgia counties had fewer than five.

The “urban-rural” divide in nonprofit resources is different than the “haves and have not” divide primarily because the lowest poverty rates in the state are in suburban counties. The 40 counties in Georgia with the highest poverty rates had an average $460 in public support per capita, while the 40 counties with the lowest poverty rates had $127. Similarly, the 40 counties with the highest poverty rates had an average $357 in government grants per capita, while the 40 with the lowest poverty rates had $41.

On various, commonly accepted measures of financial health, public charities in rural counties appeared to be somewhat healthier than those in urban counties. This suggests that although there are fewer nonprofit organizations and revenues in rural areas, the nonprofits that are operating there are sound, and are relatively good risks for philanthropic investment.

Georgia’s Foundation Grant-Making

Georgia foundations are largely clustered around core urban areas in the state. While Fulton and DeKalb counties combined had 722, or 46%, of Georgia’s foundations in 2005, 53 of Georgia’s 159 counties—most of them rural—had no foundations.

The majority (more than 70 percent) of grant dollars from Georgia-based foundations remain in the state of Georgia.

Georgia foundations tend to give to the communities closest to their headquarters. The majority of grant dollars that go to rural counties originate in rural counties and the majority of grant dollars that go to urban counties originate in urban counties.

According to Dennis R. Young, Bernard B. and Eugenia A. Ramsey Professor of Private Enterprise, and Director of the Nonprofit Studies Program, Andrew Young School of Policy Studies, Georgia State University: “Georgia’s nonprofit sector has a powerful potential to transform the social and economic landscape of Georgia, but little is known about the capacity of the sector and the nature of its impact. Our Nonprofit Georgia study is intended to contribute to that understanding.”

Complete information on the Georgia Gives study can be accessed on the web at www.georgiagives.com and more information on The Center on Philanthropy at www.philanthropy.iupui.edu.

Nonprofit Georgia study information can be accessed on the website of the Nonprofit Studies Program of Georgia State University at www.aysps.gsu.edu/nonprofit.

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Tax Hike for Trauma Care a Hard Sell, Says Senator

A tax hike to boost trauma network funding would find little public support, a state senator said in late October during a forum on Georgia’s trauma care system.

While lawmakers last year debated a $10 increase in car tag fees to pump money into Georgia’s network of hospitals providing trauma care, that proposal failed to pass. The Legislature did, however, give the state trauma commission a one-time allotment of $58 million to distribute.

With health advocates saying a permanent funding solution is needed, a number of proposals have emerged, including hikes in taxes paid on insurance premiums and motor vehicles. But a tax increase should be the last resort, said Sen. Preston Smith (R-Rome).

“On most of the examples given to you today on the screen, there were two words beside each of the bullets and those words were ‘tax increase’ and that’s going to be a very difficult sell regardless of the merits of the argument for which you’re making the case,” Smith said during the forum at Georgia State University. “It is very difficult to turn back to the tax payers and say ‘This is an important need and we want you to bear more of the burden to provide [for] that need.’”

The forum, hosted by the Andrew Young School of Policy Studies with support from the Healthcare Georgia Foundation, was held to explore ways to fund the state’s trauma network, distribute the money fairly and make hospitals and healthcare providers accountable for the dollars spent. It was the third such forum the school has hosted this year.

Panelists included state Rep. Mickey Channell (R-Greensboro); Jim Craig, director of Health Protection for the Mississippi Department of Health; Gov. Sonny Perdue’s policy director Hanna Heck; and Georgia State associate economics professor Jim Marton and associate professor of health administration Patricia Ketsche.

Ketsche and Marton presented a report prepared by the Andrew Young School’s Fiscal Research Center which recommended a flat tag fee of $14 per vehicle, noting the fee would generate more than $100 million a year, a figure some say might be necessary. The report, prepared by economists Peter Bluestone and Robert Buschman, acknowledged however that the fee might not keep up with the rising cost of care over time.

The second-best funding mechanism would be an increase in the car tax rate. The least-preferred method, based on factors like revenue growth, how many people would be expected to pay in, impact on consumer behavior and ease of collection, would be surcharges on traffic tickets, the report said.

Smith said a number of possible funding mechanisms should be explored, including an idea to use money generated from tickets written by the Georgia State Patrol, which has always gone directly to the jurisdiction in which the violation occurred.

“There is a tremendous amount of revenue being generated for the benefit of locals, none of which goes to trauma care,” Smith said.

The trauma network in Mississippi, Craig said, is funded by a combination of fees on tickets for moving violations, DUIs and speeding, an increase in car tag taxes and other sources, including a fee on the purchase of all-terrain vehicles.

Craig said the state also requires hospitals to participate in the system to their full capability or face substantial fines.

Channell, who chairs the House Appropriations subcommittee on healthcare, said he was open to the idea of exploring mandatory participation.

“I think that we need, potentially, to look at reorganizing or organizing in a different fashion,” he said.

Heck, Perdue’s policy director, said the governor has concerns about dedicating new funding streams that bypass legislative review.

“By the very nature of going through the legislative appropriations process, we subject those funds to review, and say ‘are they being used in the right manner for Georgia? … Are they providing value?’”

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City’s July 2008 Tax Payment 14% Lower than July 2007

The City of Atlanta just received the July 2008 sales tax payment in the amount of $8,334,041.43.The sales tax payment for July 2007 was $9,682,507.41. This is a decrease of 14% from last year. Because this is such a large decrease, it will cause us to monitor our sales tax revenues closely and be even more conservative with our financial planning.

Governor Perdue, Georgia Lottery Officials Announce Milestone Achievement

Today (July 15, 2008) Governor Sonny Perdue joined Georgia Lottery Corporation President and CEO Margaret DeFrancisco at Georgia Lottery headquarters to announce that it has transferred a total of $10 billion for education to the state of Georgia since the lottery’s inception in 1993.

“Today, we mark $10 billion in total that the Georgia Lottery has contributed to education in Georgia since it was launched in 1993,” said Governor Sonny Perdue. “In those fifteen years, we’ve seen record payouts, record ticket sales and, now, this staggering contribution to the future of Georgia’s children and our state as a whole.”

The Georgia Lottery has experienced extraordinary success as one of only two traditional lotteries in the nation to experience 10 consecutive years of growth in profits.

“The Georgia Lottery Corporation has a success formula that works and delivers results for Georgia’s students and families,” DeFrancisco said. “Lottery-funded HOPE Scholarships and Pre-K Programs have made a fundamental difference in the lives of so many Georgians. The transfer of our $10 billionth dollar to education is a tremendous accomplishment that we can all celebrate.”

DeFrancisco presented Governor Perdue with an oversized check for $10 billion made payable to “Georgia Students” during today’s ceremony.

The Georgia Lottery’s fiscal year 2008 profits transferred to the State Treasury’s Lottery for Education Account amount to $858,355,000, surpassing last year’s record transfer by more than $4.8 million.

Georgia Lottery sales for fiscal year 2008, which spanned from July 1, 2007 to June, 30, 2008, totaled $3,519,341,000 – the highest in the lottery’s 15-year history and more than $97.6 million ahead of the previous sales record of $3.42 billion in fiscal year 2007.

The mission of the Georgia Lottery Corporation is to raise revenue for education in Georgia. Since its first year, the Georgia Lottery Corporation has returned over $10.1 billion to the state of Georgia for education. All Georgia Lottery profits go to pay for specific educational programs including Georgia’s HOPE Scholarship Program and Georgia’s Prekindergarten Program. More than 1 million students have received HOPE, and more than 860,000 4-year-olds have attended the statewide, voluntary prekindergarten program.

State of Georgia's Revenue Collecctions for May 2008 Cause Concerns

State of Georgia's Revenue Collections for May 2008 Cause Concerns: Governor Should Appoint Commission to Study Revenue Structure

The latest Georgia revenue figures released by the Department of Revenue show that revenues have declined by 0.1 percent through the first 11 months of the fiscal year. The Governor's FY 2008 revenue estimate is based on revenue growth of 2.7 percent. If revenue growth remains flat in June, the FY 2008 Georgia budget will be facing a $500 to $600 million shortfall.

"Because of the Governor's wise fiscal management over the past four years, the state has healthy reserve funds. These reserves put the Governor in a position to manage the economically driven revenue shortfalls without cutting vital government services," said Alan Essig, the executive director of the Georgia Budget and Policy Institute. The Revenue Shortfall Reserve (RSR) contains over $1.5 billion. If revenues remain sluggish throughout FY 2009, it is expected that almost all of the $1.5 billion of reserve funds would be needed to cover budget shortfalls.

"The continued revenue slowdown highlights the fiscal irresponsibility of those legislative leaders who proposed significant tax cuts this past legislative session. Along with this slowdown, there are continued needs, such as trauma care, full education funding, the mental health system, and health insurance for children who are eligible but not enrolled in Medicaid and PeachCare. In light of legislators wasting time with politically motivated tax cut rhetoric, the Governor should take the responsible action of establishing a blue ribbon commission to study the revenue and budget realities of Georgia," Essig concluded.