State House Update From Jan Jones

Friends and Neighbors-

I spend most of my time during the legislative session working on the state budget as a vice chair of the House Appropriations Committee. Reading the hyperbole about the ongoing budget dispute can cause you to wonder what's really going on. With an inside view of the budget, I'd like to give you a straightforward explanation.

As you may know, Governor Perduevetoed the Amended 2007 budget, which the House and Senate passed unanimously in both chambers in April. We expect to be called back into special session any time now. I guess you could say we have differences of opinion, but differences that will be resolved.

A budget (or any bill for that matter) must be approved by the House, Senate and Governor.
During each session (lasting from January to April), the state legislature approves two budgets. The first, which is easier and shorter to construct, is called the Amended Budget (also call revised), which I'll say more about below.

The second budget, referred to as the Big Budget, projects revenues for the next fiscal year (which runs from July to June) and allocates funds for all state agencies. The legislature approved the Big Budget just before session ended, and it awaits the Governor's signature.
When session adjourns each April, no significant changes can be made to the Big Budget until legislators return to session the following January. After the subsequent session convenes, legislators compare actual revenues and actual costs with what they projected and make adjustments accordingly in the Amended Budget. The Governor vetoed the Amended 2007 budget.

I sent the following email to House legislators to provide background and perspective regarding the 2007 Amended state budget, which concerns spending for 54 remaining days in the current fiscal cycle ending June 30. If you're interested, the information will shed more light on the issue. (See below)

I fully expect the budget differences will be sorted out shortly. Sometimes, it simply takes awhile to choose between good and "gooder." And I'm confident the Governor and the legislature will find consensus in their conviction to do what is best for Georgia.

Best-

Jan Jones / Representative - District 46
_________________________________________________________________________________House Colleagues -I'd like to share thoughts on the 2007 Amended budget.Each morning, we awaken to another news article on the Amended budget written from an outsider's perspective. Each article reflects a narrow slice of what happened, what can happen and what should happen. Let's remain focused on the latter. Our responsibility is to find the "should" that reflects the best interests of Georgia.Don't lose sight of the House's and Senate's overwhelming vote of approval for the Amended budget just weeks ago. Both houses agreed the budget was the best compromise to best meet the needs of Georgia. What could have changed in these brief weeks to change that conclusion? I don't know.The Amended budget is not perfect, but I am proud of the progress it represents for Georgia. We voted for a good Amended 2007 budget. When viewed in concert with the 2008 budget, we met the competing needs of Georgia efficiently and adequately.When I hear people say it needs to be changed this way or that, I am reminded of the old phrase "The perfect is the enemy of the good."

Surplus

Don't lose sight that the Amended 2007 budget further cuts government down to size by returning one-time dollars back to the taxpayers instead of spending them. Of course, defining what is surplus requires subjective and objective analysis. And you and I may conclude differently on any one item, but I expect we would agree on most.
It's important to recall the funds we voted to return to taxpayers aren't statutorily available to meet future operational needs for our colleges, public schools or Peachcare/Medicaid plans. These funds must be expended or rebated or saved before June 30, less than two months from now.

Without going back over who-shot-who and who-scored-first details of the budget process (because Georgians don't care about the details and neither should we), the fact is that 236 legislators voted not to spend all the money or retain all the money. We voted to send the money back to the people.

Two proposals for the $142 million surplus

Two alternative proposals were put on the table late during the fast and furious session - placing surplus funds into the Revenue Shortfall Reserve (RSR), or Rainy Day Fund, or giving tax dollars back to taxpayers. The Conference Committee and, subsequently, the House and Senate agreed to only one proposal.

Revenue Shortfall Reserve (RSR)

At $792 million, the RSR is higher than it has ever been in Georgia history. Exceeding 4 percent, the percentage of the overall budget represented by the RSR is higher than it was in the 2003 budget when the RSR stood at 2 percent ($260 million). Not many years ago, the maximum allowed reserve was 3 percent. The legislature voted in 2005 to permit the reserve to rise up to 10 percent, although 4 percent is considered "full." Only 4 percent is protected from appropriation, and can be spent only during a recession.When we voted to approve the Amended 2007 budget on April 11, actual revenues were on target to meet the 2007 budget revenue estimate.As an aside, even though the reserve exceeds 4 percent, I support increasing the reserve amount over future years.

Concerns Expressed

The Governor and some others have expressed concerns that several programs are not adequately funded in the Amended budget to meet Georgians' expectations. Our Governor has indicated we need a "do-over." With the greatest respect and admiration for our Governor, I regretfully disagree. I only speak for myself and within the context of the level of information I have as a citizen legislator that has worked on the budget since January.
Sufficient discretion exists for the Governor, within agencies, through the Fiscal Affairs Committee, and with the Emergency Fund to soften or eliminate any modest shortfalls. Whatever modifications need to be made do not appear to rise to the level to call 236 legislators back into a special session to re-work the 2007 Amended budget.

What holes?

1. In particular, it has been suggested District Attorneys won't be able to make payroll June 1 through June 30 without additional funds. The Judicial branch requested $2.36 million more for District Attorneys than was approved by the House and Senate. In the event the department needs additional funding this fiscal year (until June 30), the Governor has an Emergency Fund with a $3.46 million balance that could be partially applied to this.

2. You've heard adult literacy teachers will lose their jobs and illiterate adults will go untaught. This is not accurate. With over a $400 million budget and a history of millions in carryover (unused) federal or tuition funds (which don't lapse yearly), the Department of Technical Education (DTAE) can cover the $1.8 million needed to pay adult literacy teachers through June. In addition, extra funds were included in the 2008 budget to cover this need.

3. I read the news that "toxic waste clean-up" would be halted without a revised Amended budget. The fact is that the Hazardous Waste Trust Fund has a $10 million balance. The funding levels for each of the 2007 and 2008 budgets match the 2003 budget, which was approved prior to the recession freefall.

4. And what about screenings for newborns? The Governor thoughtfully recommended $830,000 to cover an increase in newborn screenings. The Conference Committee report did not include the funding. The Department of Human Resources, with an overall $1.5 billion budget and $114 million in federal carryover funds, can cover the sum while the Fiscal Affairs Committee (intra-agency transfers) resolves the difference or the Amended 2008 kicks in. No crisis for babies here.

5. As to preparedness for a potential pandemic flu outbreak, the Governor recommended $15 million for Tamiflu and Relenza drugs to help those most at risk during an outbreak. The House recommended $7 million because 1.3 million doses are already stockpiled through federal funding (and the drugs have a limited shelf life). The Conference Committee took care of the concern in the 2008 budget by funding at the original amount the House recommended.

What's the long-term problem given the 2008 budget takes effect on July 1 months before flu season begins?

Are there tax cut or rebate options for the Amended budget surplus?

You've heard the murmurings that we should consider a different way to return the surplus funds to taxpayers. I know of no possible tax rebate existing in current state law, except increasing the homestead exemption on property as already approved by both the House and Senate.

Keep in mind the $142 million is a "bird in hand." A future tax cut would not impact the $142 million surplus in the 2007 Amended budget.

Homestead exemption tax rebate

The state appropriates state funds to pay for an $8,000 homestead property tax exemption for property owners. The appropriation makes counties, cities and school boards whole because they would otherwise collect this amount. The state does not appropriate for nor compensate for the additional and long-time $2000 state-required homestead exemption. In the 2007 fiscal year budget, the total appropriation to compensate for the $8,000 exemption is $425 million. When you cast a vote in favor of the Amended budget, you voted to retroactively increase the state homestead exemption by another $2750. The $142 million earmarked for this purpose is slated to pay for it.

What discretion does the Governor have in revising the revenue estimate?

- At any time in the fiscal cycle, the Governor may revise the revenue estimate. State law does not specify a particular procedure or protocol for this.

- At any timeduring the last six months of the fiscal cycle, the Governor may withhold a percentage of any agency's or all agencies' allotment IF actual revenues are less than the estimate. The percentage reduction should reflect the shortfall. - As of the end of March, actual revenues were on target with the estimate. I have not yet seen the April figures.

What happens if an Amended 2007 budget is not agreed to by June 30, the end of the current fiscal year?

The entire remainder of funds left in the current 2007 Amended budget will lapse and be moved to the revenue shortfall reserve. Public education and Peachcare, in particular, will come up short. We must resolve to agree and negotiate a budget prior to that date. I have every confidence in House and Senate leadership and the Governor that we will.

If the Governor has vetoed the Amended budget, can he change his mind?

Yes, until the veto is transmitted.

In conclusion

I believe Georgians' hopes, dreams and needs are expressed and safe-guarded in the Amended 2007and 2008 state budgets. And like you, I stand ready to work with our leadership, Governor and fellow senators to swiftly resolve any differences in the budget.

I prefer to see it resolved without a special session. Should our Governor proceed with a call for a special session, I am confident the House and Senate will join with him to assure Georgia that its state leadership is focused on moving our great state forward and working with its best interests in mind. I believe it was Winston Churchill that said, "Democracy is the worst form of government, except for all others." It is messy and uncomfortable, but I am thankful that with the Governor's steadfast leadership, the House and Senate have shown - and will continue to show - democracy works.

Best -

Jan Jones
State Representative