Georgia: Wisdom, Justice, and Moderation

Karen Beavor, CEO, Georgia Center for Nonprofits

Perhaps Georgia doesn't garner the budget-deficit attention of states like California and New York, but the conditions in the state are perilous for nonprofits and the people they serve. In addition to further significant cuts to public services (in two 6-percent-to-10-percent, across-the-board departmental cuts), repealing the Home-stead tax credit, and drawing down almost all the state's reserve funds, Georgia still used $1.44 billion i n American Recovery and Reinvestment Act (ARRA) stimulus funds , primarily State Fiscal Stabilization Funds and the increased federal Medicaid match, to balance the 2009 budget  Without these funds, the state would have had to institute further cuts in education, health care, public safety, and so forth or, alternatively, raise taxes.

ARRA funds are temporary, and by 2012, they will have run their course. But the Medicaid rolls, by contrast, will continue to increase. Added to a continued decline in state revenue over the past six months, this dynamic has created the projected $4.6 billion shortfall in the 2010 budget.

Georgia is a balanced-budget state, so these shortfalls have prompted Governor Sonny Perdue to propose additional budget cuts this year. These reductions are carried through—to the tune of $1.8 billion, or 9.2 percent—in his proposed 2011 budget. In addition, Perdue recommended $287 million in additional onetime revenue, which is code for "Use the reserve" as well as $400 million in additional fees and taxes. These new fees include the new "superspeeder" law (which would tack on an additional $200 fee for speeds exceeding 75 miles per hour on two-lane roads and for traveling at more than 85 miles per hour anywhere in the state), a move that is slated to bring in $23 million annually.

In combination with a 3.9 percent overall economic growth projection, these cuts, proposed fees, and ARRA funds of $1.4 billion still leave Georgia with a $2.6 billion shortfall in 2012.

Here’s the rub. For the 2011 budget, the governor projects growth of $600 million, or 3.9 percent. Historically, the economy has been based on manufacturing and dependent on construction employment, both of which have declined . Georgia’s unemployment rate is now 10.3 percent. Given the current climate, these hard-hit industries are unlikely to recover quickly. So too, between 1990 and 2009, Georgia's revenue collections relative to personal-income levels have declined from 6.3 percent to 5.1 percent.

Several factors have contributed to this decrease: the emergence over the past two decades of myriad tax loopholes for business and special groups, a 50-year-old tax system, a fee system unchanged for decades, two recessions from which frankly, the state has never recovered from and a shift from a manufacturing-driven economy to a service-oriented one, a shift that affects the tax base. If the state doesn't identify other sources of revenue, further decline in revenue (and yes, if consumer spending declines further, plants continue to close, or layoffs continue, revenue could decline even further) will augment this shortfall, and additional cuts will be necessary.

Despite these strains on revenue, Georgia is one of the fastest-growing states in the nation. We have an expanding youth population and an expanding older population, each of which has unique resource demands relative to schools, health-care, recreation, and social-service needs. Total and child poverty are 2 percentage points higher than national averages, Georgia is one of five states with the highest dropout rates and has some of the highest foreclosure and unemployment rates in the country. Nonprofits are key players in identifying solutions but also in driving federal and private funds to these problems. Food banks, for example, have been essential in assisting families that are suffering. Between 1998 and 2008, Georgia’s share of households without adequate meals increased from 10.9 percent to 14.2 percent, ac-cording to the U.S. Department of Agriculture. These families will rely on already-strapped churches and nonprofits to bridge their grocery gaps, and others will simply go hungry. What these families can't do is rely on state benefit workers to steer them to food stamps and other assistance programs, because the governor proposes an-other 102 job cuts to eligibility workers through 2010 and 2011. These state employ-ees are essential for enrolling families in food programs, Medicaid, Temporary Assistance for Needy Families, and other safety-net programs.

While trying to keep their organizations above water despite mounting need; continued cuts from the state; reduced foundation, corporate and individual giving; and as Georgia wrangles with billion-dollar deficits through 2012, the state’s nonprofits will also struggle to provide services to vulnerable populations and those most affected by the recession. Given the level of strain on these organizations, we argue that fining superspeeders won't get us out of this deficit situation. To deal with looming deficits that threaten already-weak education, social, and health systems, lawmakers in Georgia must act with superspeed to rethink state revenue production that, unfortunately, must also include further cuts.

Along with a consortia of leading nonprofits throughout the state, the Georgia Center for Nonprofits has created a public-education and advocacy campaign to provide insight on the state's revenue issues and to dispel the myth that there is hidden "fat" that we can simply cut to eliminate our billions in deficits. We support measures such as a $1 tobacco tax, urging tax and fee reform, and advocating a balanced approach to cuts. But we have also paired these supports with a collaborative plan to deliver a firm message to the public and a lobbying effort to spur rational action on the state's revenue needs.

Karen Beavor is the CEO of the Georgia Center for Nonprofits.