Weekly Report to the People
Representative Mike Cheokas, District 138
Jan. 25, 2013
Tuesday, Jan. 22, State Representative Terry England (District 116), chairman of the House Appropriations Committee, called to order the 2013 Budget Briefings for the House and Senate Appropriations Committees in Room 341 of the Capitol. Each year the General Assembly Appropriations Committees meet on the Tuesday after Martin Luther King Jr. Day to look at the amended budget of the previous fiscal year and begin discussions on the current fiscal year’s state budget.
The amended fiscal year budget is known as the “Little Budget.” This budget was created during the last regular legislative session of 2012, for the fiscal year that started July 1, 2012, and will end June 30, 2013, and is based on revenue estimates at that time. During the Budget Briefings, the “Little Budget” is amended to reflect actual revenue increases/decreases.
The second budget, known as the “Big Budget,” is for the current fiscal year that starts July 1st, 2013 and ends June 30th, 2014. Both budget proposals are reviewed during the Appropriations Briefings. Each agency and department is invited to present their recommendations during this process. Traditionally, the Governor starts with a presentation of his proposed budget recommendations.
This year Governor Nathan Deal began with a review of his spending priorities for the $19,874,261,481 State Budget. Many of these were outlined in his State of the State Address to the General Assembly last Thursday. He said that Per Capita Spending has been reduced by 17 percent over the last 10 years and that we have 9,000 less State employees than five years ago. Governor Deal then highlighted his recommendation for the FY 2014 State Budget by saying that this budget reflected a 3 percent reduction in overall spending by each department and agency. The only exception was in the Department of Education. He said that he is adding $12.9 million to the Pre-K Program to add 10 days to the school year. This will bring Pre-K back to 180 days. He is adding $147 million for enrollment growth, bringing the total number of Full-Time Equivalent (FTE) students funded to over 1.6 million student s and over 118,000 teachers.
He said he wanted to add 3 percent to the HOPE Scholarship Program, bringing it to about $600 million for FY 2014. He said that last year there were 318,027 students in the University System of Georgia. He has increased the University System budget by $85 million to cover enrollment growth. His budget included over $2 million in additional funds to increase the number of health professionals practicing in the state. These funds will be used to develop new graduate medical education programs to train and retain medical residents. This is intended to add 400 new doctor residency slots.
Five million dollars were added for cancer related research and $45 million in bonds for a new cancer research facility at Georgia Regents University (GRU). You may recall that Georgia Regents University was created by the merger of the Georgia Health Science University (formerly the Medical College of Georgia) and Augusta State University. This funding will hire research faculty and staff and provide for research equipment at the GRU Cancer Center. The governor’s goal is to make Georgia a leading player in cancer research and treatment development by expanding clinical trials throughout the state.
The governor continued by saying he proposed to add $6.5 million to expand the HOPE Grant Program for students in the Technical College System. These funds are to be used to cover 90 percent of the tuition costs in high demand fields such commercial truck driving, nursing and early childhood education.
There is just under $70 million to fully fund the Annual Required State contribution for the Teachers Retirement System (TRS). This will continue to maintain its fiscal soundness and sustainability.
In the area of public safety, the governor proposed adding $4.8 million to open the new Rockdale Regional Youth Detention Center as well as a new 30-bed Youth Development Campus. He oncluded his remarks by saying that because of Georgia’s sound fiscal policy, balanced budget constitutional amendment and multiple revenue streams, we have retained our AAA Bond Rating with all three major credit rating agencies. This in turn saves millions of dollars each year for Georgia taxpayers and provides capital for major investments in infrastructure. This attracts industry, creates and retains jobs and provides a better quality of life for all Georgians.
Next on the agenda was Ken Heaghney, Ph.D., the State economist from Georgia State University.
Overall, Heaghney was optimistic about Georgia’s economic outlook for this year, but cautious due to the federal budget uncertainty. He began by saying that Georgia has added funds to the Revenue Shortfall Reserve (RSR), also known as The Rainy Day Fund. This fund now stands at $377,971,440, up from a low of $103,693,796 in 2009, the first full year of the Great Recession.
He then talked about FY 2013 YTD tax revenue performance. Since July 2012, tax growth has averaged 4.9 percent. This figure is made up of Individual income tax, which grew at 5.4 percent; state sales tax, which grew at 2.7 percent and corporate revenue, which grew at 35.4 percent.
His view of the economic trends and outlook are:
• The economy will continue to grow at a modest pace.
• Employment growth is also modest with Georgia outperforming the U.S.
• Consumer spending growth remains positive, but subdued compared to prior recovery periods.
• Business investment growth has slowed.
• Housing appears to have turned the corner.
Heaghney pointed out three key areas of concern:
• Higher federal taxes will weigh on consumer spending and investment.
• Slow global growth, especially in Europe, will weigh on exports and manufacturing.
• Federal fiscal policy uncertainty is still high. This makes it hard for businesses to move forward with investment and hiring.
He stated that real disposable Income growth is trending upward, but now faces pressure from higher federal tax rates. He continued by saying that housing prices have begun to move up and that housing permits issued in Georgia are trending up as well.
His economic forecast predicts:
• Slow growth due to higher taxes and policy uncertainty at the federal level for the first half of 2013. Should these issues be resolved, growth will pick up the second half of 2013, and we will see more rapid growth in 2014.
• The labor market growth is expected to slow the first half of 2013, but then pick up the second half of 2013.
• Consumer spending growth will remain subdued.
• Inflation is to remain low through the calendar year.
Before he offered his revenue projects, Heaghney pointed out three revenue risks:
• A slowing in economic growth
• Year-end revenue volatility
• The effect of Georgian’s Tax Code changes
The Amended FY 2014 revenue estimate is $19.9B.
Susan Ridley, director of the Georgia State Finance and Investment Commission (GSFIC) was next.
Her presentation was focused on the management of Georgia’s General Obligation Bonds. The GSFIC is responsible for:
• All services relating to state debt
• Invest, account for and manage all proceeds derived from general obligation debt
• Provide financial advisory to all state authorities and agencies
• Acquire and construct projects for all state agencies requiring debt
GSFIC acts as the investment and disbursement agent for the Transportation and Investment Act, which passed in three regions last year. They are the Central Savannah River Area, Heart of Georgia Altamaha and River Valley Regions. GSFIC receives the proceeds from the Department of Revenue and then distributes 25 percent to local governments for local projects and 75 percent to the Georgia Department of Transportation for regional projects. GSFIC handles all of Georgia’s multi-year contracts and rental agreements.
Once the General Assembly authorizes bonds in the Appropriation Acts, the GSFIC identifies specific projects in a tracking document. State agencies then request bonds to be sold for projects ready to proceed. The GSFIC then prepares an offering statement, obtains a credit rating and approves the sale of bonds in the market. Once the bonds are sold, the GSFIC establishes budget and review requests for payments in accordance with the tracking document for the procurement, design and construction of each project.
There are nine states including Georgia with a “triple-A” bond rating. They are Georgia, Alaska, Delaware, Iowa, Maryland, Missouri, North Carolina, Utah and Virginia. Ridley outlined some of Georgia’s strengths in maintaining a “triple-A” bond rating:
• Conservative financial management
• History of rebuilding reserves
• Relatively well-funded pensions
• History of making difficult decisions by maintaining a balanced budget
• Well diversified economy
• Moderate overall debt at $1,099 per capita; we rank 24th in the nation
• Strong constitutional provisions regarding debt
• The General Assembly is charged with the responsibility to increase revenues and does not require a voter initiative
Ridney said that another key factor to maintain the “triple A” bond rate was the fact that Georgia has historically maintained debt service at about 6.4 percent of state revenue. This equates to about $800 million in general obligation bonds annually.
After lunch, Chancellor Hank Huckaby made his presentation on the University System of Georgia (USG). He started by saying that “creating a more educated Georgia” is the mission of the University System. He said that he has focused on three areas to accomplish this:
• Value of education
He said that during his first 18 months as Chancellor, the University System was focused on:
• Maintaining student affordability
• Cnsolidating eight institutions into four
• Developing a Space Utilization and Facility Needs Program
• Worked to increase graduation rates through “Complete College Georgia”
• Opened lines of communication and cooperation with other education agencies
• Focused on economic development, especially in rural Georgia
• Addressed challenges in enrollment
• Employed a demographer to study enrollment
• Worked on strategic planning in light of the “New Normal”
He said 2012 fall enrollment statewide was down 1.2 percent to 314,365 students. He added that tuition only covers approximately 25 percent of a student’s education and that the other 75 percent is in state funding.
He said that in the amended FY 2013 budget, the USG will see a 5 percent reduction of $83.7 million. He continued with the FY 2014 budget, saying that the USG will see a 3 percent reduction totaling $54 million. He said that the overall budget from FY 2014 stood at $1.879 billion, up $50 million from FY 2013.
In meeting these reductions, he directed the institutions to:
• Minimize impact on students
• Protect the priorities
• Look for permanent reductions
• Avoid one-time reductions
Huckaby added that he was requesting $50 million in bonds for major repair and renovation of its facilities. He concluded his remarks by saying that the USG will remain committed to continue its focus on the “Complete College Georgia Initiative.” We will look for and develop alternative delivery modes such as on-ine learning. The USG will create more graduates and jobs through economic development partnerships, and that “The Alliance of Education Agency Heads” monthly meetings have been very productive in addressing the statewide and lifelong education needs of Georgia’s citizens.
Next came Commissioner Ron Jackson of the Technical College System of Georgia (TCSG). He began by listing a few of the many accomplishments the TCSG made during 2012:
• Implemented the semester system of better align with other educational institutions
• Managed HOPE program changes with students
• Expanded the articulation agreements with the USG from 10 courses to 27 courses
• Expanded SACS/COC accreditation to 22 colleges
• Opened the TCSG office of Global Initiatives
• Reorganized the TCSG Resource Development Office
He added that the Quick Start Program helped create 8,662 new jobs and saved 4,697 existing jobs in 2012. He said that enrollment was 170,860 students in 2012, and that that number was down from 2011. Jackson said that the changes in the HOPE Grant Program were a major factor in the loss of enrollment.
He continued by saying that dual enrollment of high school/technical college students was at an all-time high of 4,870 students, and that these students don’t drop out; they complete their high school requirements and get a high schoold iploma. He said that GCSG graduate placement in their field of study or related field of study stood at 82 percent.
Jackson said that for 2012 Quick Start had:
• 161 projects
• 70 percent outside metro-Atlanta
• 27 percent international
• 89 percent advanced manufacturing
• 57,993 trainees
• 8,662 jobs created
• 4,697 jobs saved
He said Quick Start was the best, No.1, economic development tool in the country and that it is a model for other states, adding that 43 of the Quick Start projects were with international companies from 13 different countries.
The governor’s budget recommendation for FY 2014 stood at $305,917,034. Jackson echoed Huckaby’s remarks about the importance of “The Alliance of Education Agency Heads.” He said that we are the only state in America to do this and that already initiatives to improve outcomes have been proposed.
He continued by saying that to meet the “Complete College Georgia” challenge, the TCSG will focus on:
• Learning support through redesigned courses and new methods of delivery
• Prior learning assessment to identify knowledge acquired through other sources that could apply for credit hours (i.e. military training)
• Pro-active career counseling to create a clear path and time line from study to job
• Articulation agreements that improve student advancement
He concluded that the TCSG provides the best education at the lowest cost for its students.
On Jan. 23, the Budget Briefings continued with all of the department heads making presentations. These presentations continued on Thursday. The following are just a few of the many presenters we heard from.
• Brian Owens, commissioner, Department of Corrections
• Avery Niles, commissioner, Department of Juvenile Justice
• Col. Mark McDonough, commissioner, Department of Public Safety
• Chief Justice Carol Hunstein, Supreme Courts
• Maj. Gen. James Butterworth, adjutant general, Department of Defense
• Keith Golden, commissioner, Department of Transportation
• Mark Williams, commissioner, Department of Natural Resources
• Gary Black, commissioner, Department of Agriculture
• Mark Butler, commissioner, Department of Labor
• Chris Cummiskey, commissioner, Department of Economic Development
• David Cook, commissioner, Department of Community Health
Each one of these presentations painted a brighter future for the state of Georgia. Although we have challenges, we also have the talent and resources we need to overcome them and excel in making Georgia the best state to live, work, study and simply enjoy life.
Jan. 24 was Georgia Nursing Association 2013 Legislative Day at the Capitol. The halls were full of nurses and nursing students. Many of these students were studying at Georgia Southwestern State University.
Thank you for choosing me to represent you in Atlanta at the State Capitol.
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