Even with the $853 million in unexpected revenue, the state’s proposed FY2012 budget anticipates between $300 and $500 million in additional cuts as federal dollars coming to the state are likely to be slashed drastically.
The Georgia Budget and Policy Institute said that overage in revenue is misleading in that the state is not distributing as many funds in anticipation of a possible shortfall as stimulus programs end and more falls back on the state. The actual increase in revenue is closer to 4 percent, with FY11 ending with about $400 million in new funds, the institute projects.
Increased revenue is good, but it still may not be enough, experts say.
Dr. Joey Smith of the University of West Georgia Department of Economics said part of the need for additional savings is a result of not receiving federal stimulus this year.
“No one is expecting a new stimulus package from the federal government this year,” he said. “Even though we’re seeing revenue rise right now, it’s still not fast enough that we can offset a brand-new stimulus package.”
In the past few years, Georgia has managed to avoid making some cuts to the budget because of stimulus dollars. Some jobs were not cut and work on many projects could continue because of the funds.
Since revenue is increasing this year, and expected to continue increasing next year, the cuts made in the coming year are not going to be as drastic as would have been needed last year, Smith said.
“We can’t have a deficit from one year to another. We have to cut whatever we can’t raise,” he said. “We’re balancing the budget by reducing spending.”
Georgia continues to make cuts as revenue increases, meeting in the middle.
“Things are improving, not fast ... but the rate of improvement is increasing,” Smith said. “There will be at least one more year of pain when it comes to the state budgets.”
Some states, like California, are facing large deficits that may take years to balance. Smith said the state figures released in March indicate an increase in individual income taxes, an indication that people paid their taxes earlier this year or had more income to be taxed. It could mean that more are working as well.
The use of motor fuel has increased slightly while the increase in tax revenue from motor fuel has increased about 30 percent, a result of higher gasoline prices.
State sales tax has increased about 4 percent, but local sales tax is slightly lower than that. The only explanation Smith can suggest is that people are grocery shopping differently – it is the only commodity taxed locally but not at the state level.
Property tax is down, as was expected as the cost of property decreases and stabilizes. Smith said this will impact local school districts and local governments but not the state.
Tobacco taxes are down, a bad thing if you depend on the taxes, but a potential indication that future health problems — and health insurance bills – will be lower many years into the future.
“Overall, it’s looking subs tantially better than it did last year,” Smith said. “That’s a cautionary positive.”