Taking Budget Woes Head On...

At the end of last week, Governor Sonny Perdue released his budget documents, the full versions of which can be found here . The 2010 Amended Budget (which will complete the period running from July 1, 2009 to June 30, 2010), is proposed to be funded at a total level of $17.4 billion, with proposed cuts in the amount of $1.1 billion. This is a reduction from the previous level of $18.5 billion. The cuts are coming from agency reductions of approximately 8% or $500 million; Department of Education reductions of 3% or $299 million; a total of six teacher furlough days (three of which have already been taken) in the amount of $187.8 million; and savings from debt service refunding in the amount of $87 million.

Governor Perdue's proposed budget for Fiscal Year 2011 is at a proposed level of $18.1 billion with $901 million in new debt. This new debt will require annual debt payments in the amount of $101 million. The growth rate in this budget is approximately 4.2%. The new debt includes the following:

Capital outlay for school construction and buses: $168 million

Capital outlay for university system: $121,020,000 $121 million

Technical colleges/purchase of Kia training facility: $44 million

Deepening of Savannah Harbor: $68,435,000 $68 million

Transportation funding: $300 million

College Football Hall of Fame: $10 million

On Wednesday morning, Georgia Department of Transportation (GDOT) Commissioner Vance Smith presented the Department's budget requests to the joint appropriations committees. Georgia is currently the 4th fastest growing state in the nation, but is the 2nd lowest in per capita spending on transportation. This problem is in an ongoing state of exacerbation due to falling motor fuel revenues (these revenues have been steadily declining in Georgia over the last several years). The rate of decline is similar to the recent decline in vehicle miles traveled (VMT), which has dropped significantly over the past 4 years due to higher gas prices, more availability of buses and higher use of carpools and transit.

Commissioner Smith described the ways that GDOT has addressed the revenue crunch, beginning with outlining the four furlow days that GDOT employees have taken as of January 2010. Department travel has been cut by 32%, and GDOT's roadside mowing activities have been reduced by 66%. GDOT has also outsourced their accident reporting unit as a cost savings measure. Finally, GDOT has completely eliminated purchases of vehicles or equipment except in emergency situations. As of December 2009, GDOT has 5,126 employees, and has eliminated 573 jobs through attrition. Thirteen (13) GDOT state facilities have been vacated, and 84 GDOT employees from those facilities have been transferred to other locations.

Commisioner Smith thanked Governor Sonny Perdue for his leadership in proposing $300 million in additional transportation revenue through bonds. Smith noted that some of the biggest challenges facing GDOT in the future include infrasctructure maintenance, economic development and the stability of future projects. This bond package will greatly assist in facing those challenges.

During the question and answer portion of the presentation, Commissioner Smith and Deputy Commissioner Gerald Ross spoke about a pilot program that GDOT has undertaken in four urban counties and three rural counties in which GDOT is seeking to sell off any unneeded right-of-way to free up the money for other uses. Commissioner Smith also addressed a question regarding increasing the speed limit on rail lines to 45 mph and other rail line upgrades funded through the governor's proposed bond package. Smith commented that it would be the ideal situation, but that GDOT would have to make sure it was the wisest use of the money first. Finally, Smith spent some time explaining how GDOT planned to use the $300 million in bond money, and outlined his vision for funding some of the larger projects around the state such as freight corridors, and finishing work on U.S. Hwy. 27 South.

State School Superintendent Kathy Cox presented the Department of Education’s budget to a joint meeting of the House and Senate Appropriations Committees on Wednesday, January 20. Major highlights of the FY 2010 Amended Budget and FY 2011 budget are:

QBE will face a $479 million cut in the FY 2010 Amended Budget, and an additional $433 million in the FY 2011 budget.

School systems have had $710 million in general QBE funds cut in FY 2010.

Teachers are slated to receive an additional 3 furlough days in the FY 2010 Amended Budget, thus meaning school systems will have to furlough teachers 3 additional days before schools finish in May (unless systems are able to find another way to cut their budgets). The total cost associated with the 6 furlough days budgeted for this fiscal year is $187.8 million.

Equalization funding will receive a 4% ($17 million) reduction in the supplemental budget, but is not slated for any further reduction in 2011.

Funding for transportation will decreased by 26% in the supplemental budget (equaling $27 million), and an additional 14.7% cut in 2011 (equaling another $25 million cut).

RESAs face a 9.6% reduction in the supplemental budget, and all funding ($12 million) is eliminated in the FY 2011 budget.

ETCs face an 8.7% cut in the supplemental budget, and all funding ($3 million) is eliminated for 2011.

Salary supplements for teachers receiving National Board Certification are reduced by 4% ($288,000) in the supplemental budget, and then completely eliminated in the FY 2011 budget ($7.2 million).

Funding for school nurses is budgeted for a 4% ($1.2 million) reduction in funding for the rest of this fiscal year, and then a 5.5% ($1.6 million) cut in FY 2011.

Commissioner Rhonda Medows delivered the Department of Community Health’s budget to a joint meeting of the House and Senate Appropriations Committees on Thursday, January 21.

The main focus of Commissioner Medows’ presentation was the large deficit facing Medicaid (this program makes up nearly 10% of the entire state budget). Medicaid is facing a $507 million shortfall in state funds (this does not include nearly $102 million that will be needed for expected growth in the program). Factoring in the associated federal matching funds, the total amount is nearly $2 billion.

If cuts in Medicaid reimbursement rates to providers were enacted to make up for the $507 million shortfall, providers would face a 16.5% rate cut across the board. Commissioner Medows said that such a drastic cut would jeopardize the existence of those that provide care to Medicaid patients, and thus jeopardize the Medicaid program itself.

The governor’s budget addresses this shortfall by instituting a 1.6% tax on hospitals’ net revenue, a 1.6% tax on managed care providers (insurers) premium revenues, and removing the exemption of Medicaid Care Managed Organizations (CMOs) from the state’s 2.25% insurance premium tax.

This tax on hospitals would be used to bring federal matching dollars to Medicaid, and then used to cover the reimbursement rates for hospitals serving Medicaid patients. As of now, hospitals are not facing a decrease in their reimbursement rates if this tax is enacted into law. Some hospitals will have a net benefit from the proposal, while other hospitals will face a net loss (since they do not service Medicaid patients, they will not receive reimbursements, but will still be taxed). Legislation will be required to enact the tax on hospitals. Governor Perdue introduced this legislation last year (HB 307 ), but it never made it out of committee.

All other providers face a 1.98% decrease in Medicaid reimbursement rates for FY 2011.

Also of interest in DCH’s budget is that the Georgia Trauma Care Network Commission’s funding of $23 million has been renewed for the FY 2011 budget. These funds are allocated as a result of the governor’s super speeder legislation that passed last year.

Report from January Georgia Transportation Board Meeting

On Thursday, the Georgia Transportation Board held its monthly Board meeting at GDOT's headquarters in Atlanta. For the total fiscal year to date, GDOT has let a total of 182 projects. 61 of those projects have been new road construction, 41 projects have been safety improvement projects, and the remaining projects have been a mix of safety improvements, bridge rehabilitation and traffic management improvements. These projects total $519.3 million in value. Regular program dollars awarded fiscal year to date total $86.6 million. To date, Georgia has obtained approximately $845 million in stimulus funds. Of that, awarded approximately $713 million has been awarded.

The February project letting includes 29 total projects, 15 of which are funded through the American Reinvestment and Recovery Act (stimulus), and 14 of which are funded through GDOT's regular program. 12 projects are restoration and resurfacing, 9 are other road enhancements, 5 are safety improvements, 2 are traffic management, and 1 is a major widening project. The stimulus projects total $58.4 million, and the regular program projects total $38.7 million for a total letting value of $97.2 million. 20 of the projects are let through GDOT, and the remaining 9 are locally let projects. 5 of the stimulus projects are in economically distressed areas, and 9 are not. Congressional District (CD) 1 received one 1 project; CD 2 received 5 projects; CD 3 received 8 projects; CD 6 received 2 projects; CD 7 received 2 projects; CD 8 received 1 project; CD 10 received 1 project; and CD 13 received 1 project.

Planning Director Todd Long offered no revisions to the February work program, after which Earl Mahfuz gave a report on the status of the P3 project. Mahfuz explained that the House and Senate Transportation committees had agreed to the proposed rules for P3, with three exceptions: that any changes to P3 guidelines be approved by the entire GDOT Board; that the House and Senate Transportation Committees be required to approve all rules changes; and that when a P3 project is undertaken, public hearings be held in multiple counties within the project area rather than simply in one central location. The Board approved a resolution stating their agreement to these changes, and the official rulemaking process will be re-opened at the GDOT Board meeting taking place on February 18 to officially incorporate these changes. Should there be no logistical difficulties, the revised rules would be presented to the House and Senate Transportation Committees on March 23. This would allow the GDOT Board to vote on final approval of the rules at the April 15 Board meeting.

Commissioner Vance Smith wrapped up the meeting with a report on current motor fuel tax collections, which currently amount to $405 million, a reduction of 17.2% over this time last year and 2.18% below budget. For the first half of 2010, staff attrition has resulted in a savings of approximately $9.6 million due to the loss of salaries. To date, 165 of Georgia's ARRA projects have been given a notice to proceed. The Governor, to date, has certified 451 projects.

Smith also commended 860 GDOT employees who put in extra time and effort during the recent winter weather storms. These employees distributed roughly $1 million worth of salt and other treatments onto Georgia's icy roads.

The meeting concluded as Board Member David Doss (CD 11) made a motion that the Board adopt a policy of accrual accounting in the Department. Chairman Bill Kuhlke and Chief Counsel Debra Burgess voiced some concerns because of the lack of constitutional clarity from the Attorney General's Office. However, board members Brandon Beach, David Doss, and Bobby Parham argued strongly for the move, noting that such a move would allow GDOT to let far more projects and put a great many Georgians back to work. The motion passed with only one dissenting vote from GDOT's newest board member, Steve Gooch.

The Ox: "It's Not Like That!"

Earlier this week, State Insurance Commissioner John Oxendine was apparently on a quail hunting trip with his family in northwest Georgia. What happened next is truly outside the realm of something anyone could make up. The Atlanta Journal-Constitution reported that a man (later identified as Russell Robinson of Chickamauga) was shot in the leg with bird shot. The Oxendine campaign immediately confirmed that Oxendine was neither the shooter nor the one shot. Rather, Oxendine's 13 year old son had accidentally shot the man when several hunters were after one bird. Oxendine's campaign vehemently denied that the incident bore any resemblance whatsoever to the hunting accident experienced several years ago by then-Vice President Dick Cheney . Ironically, Oxendine was hunting on land owned by Delos "Dee" Yancey, a friend and long time donor to Oxendine. The State Ethics Commission is currently investigating $120,000 worth of contributions that Yancey may have illegally funnelled to the Oxendine campaign. The campaign later returned the donation to Yancey.

Secretary of State's Race Heats Up

This week, Doug McGinnittie, a businessman city council member from Sandy Springs seeking the post of Georgia's Secretary of State, took a shot at Secretary of State Brian Kemp, stating that "last Sunday, on the eve of the legislative session, Kemp was entertained by lobbyists and special interests at an establishment frequented by Capitol regulars with the goal of collecting last-minute campaign cash. State law does not allow constitutional officers to raise funds during the legislative session.” The event actually took place within the limits of Georgia law, and was attended by not just advocates and lobbyists, but also by business and community leaders from around the state, Governor Sonny Perdue, Lt. Governor Casey Cagle, and Speaker David Ralston . The Kemp campaign responded with a short statement decrying McGinnittie's press release as a "babble of irrational attacks."

Today In History

January 22, 1521: Charles V, Holy Roman Emperor, opens the Diet of Worms.

January 22, 1889: The Columbia Phonograph is formed in Washington D.C.

January 22, 1917: During World War I, President Woodrow Wilson called for "peace without victory" in Europe.

January 22, 1927: Inaugural live radio commentary of a football (soccer) match between Arsenal F.C. and Sheffield United.

January 22, 1946: Creation of the Central Intelligence Group, the forerunner to the Central Intelligence Agency (CIA).

January 22, 1968: Apollo 5 is the first unmanned flight of the Apollo Lunar Module into space.

January 22, 1973: The Supreme Court of the United States hands down its historic decision in Roe v. Wade.

January 22, 2002: Kmart becomes the largest retailer in the United States to file for Chapter 11 bankruptcy protection.

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