Revenues are up!

July state revenues were up 4.7% for the month and it is hard to portray this as anything but good news. Unless there is an unknown amount of income tax refunds laying in wait, this is a solid month of growth at $1.147 billion in revenues, or about the 2006 level.

Individual Income taxes came in at $540.6 million or up 3.6%. Sales taxes in total were up 3.0% or $818.5 million. Local Sales tax distribution was off by
-5.1% but state net sales taxes were up 2.4% or a total of $454.9 million for the month.

Motor Fuel taxes were encouraging as well. Total collections were up $16.1 million or 24.8% with fuel sales taxes increasing $12.6 million or 47.2% and excise taxes up 9.2% or $3.5 million.

Corporate income taxes had a good month, up $5.5 million or 40.2% but tobacco tax collections were off $3.2 million or -26.0%. Alcohol tax collections were down slightly at -1.0%.

So, Fiscal Year 2011 is off to a good start. It is our hope that the state has turned a corner ever so slightly as the unemployment rate also improved slightly this past month. Georgia's $17.8 billion dollar budget only needs another $16.8 billion in the next 11 months to make budget.

LOTTERY REVENUES AND THE HOPE SCHOLARSHIP

Much has been written in the press recently concerning the lottery funded HOPE Scholarship, and legislative committees are beginning to consider the fact that lottery funding is essentially flat and the costs of lottery funded programs including the HOPE scholarship is growing. While there is a robust reserve approaching $1 billion, the deficit will increase dramatically over the next few years according to the Georgia Student Finance Commission.

Over the next weeks, this column will examine these issues as well - considering the operation of the lottery and the entire range of programs funded by the lottery. It is important, though, to understand the entirety of the lottery expenditures before considering reducing HOPE or making any changes. Additionally, understanding what the standards are for each program is revealing.

Here are the major lottery funded programs and their status as to how they are earned.

Program Appropriated Percent Means Test Merit Based
HOPE - Public Colleges $474.5 million 42.1% No Yes
HOPE - Private Colleges - $ 59.3 million 5.3% No Yes
HOPE- Technical Colleges $206.3 million 18.3% No No
Grants
Pre-K Program $355.0 million 31.5% No

There are about 2.8% of other scholarships including Engineering, GMC, Accel and the College Opportunity Grant in addition to the 1% Student Finance gets for the administering of HOPE.

So the HOPE Scholarship only accounts for half of the Lottery expenditures. The legislature must evaluate all lottery funded programs the way we are evaluating the HOPE Scholarship.

Thank you for your interest. Please contact me if I may be of assistance at (404) 463-1366 or at ronnie.chance@senate.ga.gov.

Last Day for Early Voting

Today is the last chance to take advantage of Early Voting. The 2010 Republican Primary General Election has come and gone, but there are few races still yet to be decided. A few important races are in the middle of runoffs, which will be decided this Tuesday, August 10th. I encourage you to not only go to the polls and vote, but to take advantage of Early Voting and avoid the congestion of Election Day. Please see below details on Early Voting for your county.

One of the important elections involves one of my good friends and former Senate colleague Senator John Douglas who is running for Public Service Commissioner. I hope you will take the time to visit both his campaign website and his Senate website to learn more about John Douglas and his candidacy. I have served with John in the Georgia State Senate and am proud to endorse his candidacy. Senator Douglas and I served together since 2004, and I know firsthand his work ethic, integrity and his values. He will make an outstanding Public Service Commissioner.

On Aug. 10th we have important decisions to make, and we must elect proven Conservative leaders we can trust. John Douglas is that type of leader, and I hope you will consider supporting him as you cast your ballot in the Republican Primary Runoff Election.

EARLY VOTING DETAILS:

Fayette County
08/02/2010 to 08/6/2010
Days: Monday through Friday
8:00AM - 5:00 PM

Fayette County Administration Complex
140 Stonewall Avenue West, Suite 209
Fayetteville, GA

Peachtree City Library
201 Willow Bend Road
Peachtree City, GA

Tyrone Public Library
143 Commerce Drive
Tyrone, GA

Lamar County
08/02/2010 to 08/6/2010
Days: Monday through Friday
8:30AM - 12:30 PM & 1:30PM - 5:00 PM

Lamar County Board of Elections and Registration Office
408 Thomaston Street, Suite D (second floor)
Barnesville, GA

Monroe County
08/02/2010 to 08/6/2010
Days: Monday through Friday
8:30AM - 4:30 PM

Board of Registrars Office
550 North Lee Street
Forsyth, GA

Pike County
08/02/2010 to 08/6/2010
Days: Monday through Friday
8:00AM - 5:00 PM

Pike County Registrars Office
16001 Barnesville Street
Zebulon, GA

Spalding County
08/02/2010 to 08/6/2010
Days: Monday through Friday
8:00AM-5:00 PM

Memorial Drive Plaza
819 Memorial Drive
Griffin, GA

Please take the time to view John Douglas's website.

PUBLIC SERVICE COMMISSIONER
John Douglas
http://www.senatorjohndouglas.com/
http://www.votejohndouglas.com


Thank you for your continued support. Please contact me if I may be of assistance at (770) 969 - 9155 or at ronnie@chanceforsenate.com.

Notes from the Senate by Sen Ronnie Chance, 16th District

A reflection on the events at the end of the FY2010 shows effects into FY2011 and FY2012 as well. What this means is that the state's economy, while marginally improving, has not shown any signs of growth meeting the predictions as represented by the revenue estimate in FY2010 and therefore presents serious problems in the FY2011 Amended and FY2012 budgets as well. This spring state revenues were supposed to level out and equal the level of a year ago and set the stage for growth in FY2011. That has not happened.

Despite the revised revenue estimate during the Session, the state was short in cash by some $128 million at the end of the fiscal year in June. Meeting this shortfall has ramifications for FY2011. The Governor's announcement of a 4% withholding of allotments to state agencies (excluding K-12 ed.) is probably only the start of budget cuts in this fiscal year.

There are three separate but interrelated budget events:

The 2010 shortfall and how that was met
Issues with the FY2011 budget just begun in July
The writing of the FY2012 budget and the political and budgetary issues
The state has taken actions to squeak through the year's end. There appears to be a cash shortfall of $125 million or so; however, there are potential accounting actions that may help cover this deficit. Among the actions taken to meet the shortfall were: the state withheld year-end allotments and stopped non-critical purchases and moved Federal Stimulus Funds from the FY2011 budget in K-12 and Regents.

FY 2011 Issues

The $37 million in AARA funds moved from FY11 creates a hole because those funds were counted in the FY2011 budget.

The issue you have read about is the Federal Medicaid match differential, (FMAP). When the recession started, the federal government, as part of its efforts to assist states with budget problems, increased the federal match percentage for Medicaid from 60% to 75% which saved Georgia hundreds of millions of dollars. It also insured that states like Georgia would not cut Medicaid benefits to save money. That enhanced match runs out in December and if not renewed by Congress creates a $370 million hole in the budget we are in right now, FY11. This issue was mentioned in the Governor's 4% agency cut announced recently.

For the second year in a row, there is an unknown amount of state income tax refunds that have been pushed into July and August. That pay-out will affect the revenue picture in FY11. Last year the total was reported at about $160 million. If the amount still to be paid to Ga. taxpayers exceeds $160 million, then there is an additional hole created in FY11 compared to last year.

When a number of factors are considered, the amount of tax growth in state revenues built into the FY11 budget totals about 4.24% or over $600 million. Remember, the last months of FY10 were under predictions. If that continues and the very optimistic growth planned in this budget does not materialize, that shortfall could total several hundred million dollars.


While some of these numbers do depend on factors still unknown, the common belief among budget writers is that there is a potential shortfall in the FY11 budget of several hundreds of millions of dollars. Coming on the heels of reductions of 20% or more, this has the potential of seriously reducing state services.

FY2012 Issues

Tax cuts passed as part of the Hospital fee legislation start phasing in FY2012 and start reducing revenues. Removing the ¼ mill of property tax the state presently receives will begin phasing out in FY12 and will cost state coffers $16 million. Eliminating state income taxes for senior citizens also starts phasing out in FY12 and will cost the state $14 million in revenue.

The biggie is that Medicaid match or FMAP extension. If the enhanced match is not passed by Congress, the present day cost to the state is an entire year or about $787 million.

Estimating growth for the next fiscal year will be a huge issue and certainly hard to do in these uncertain times. To use a baseball term, revenue estimators for Georgia are below "the Mendoza line" in batting average for estimating state revenues.

Contributions to state retirement funds will need to increase to keep those funds up. Estimates are that the Employees Retirement System will require employer contributions to increase by $30 million. The Public School Employees Retirement System will need $8.3 million and the Group Term Life Insurance fund may require $15 million but would probably be funded internally. Even in these austere times, Behavioral Health has received over $70 million dollars of new funding during the FY10 and FY11 budgets in response to the state's court actions with the U.S. Justice Department. Recent developments in federal court may result in additional new funds that would be mandated for Georgia's mental hospitals and mental health delivery system.

The GEFA securitization and other one-time sources of funds will dry up in 2012 as well. GEFA alone was $287 million and the remainder could push this well over $300 million.

Also, don't forget that areas such as education, universities and Medicaid are still growing. This could run several hundred million depending on how forecasting proceeds over the next few months.

Post Script:

The FY12 budget is complicated by the fact that presumably there will be no new federal stimulus funds so the state is essentially on its on. Not listed as issues but almost surely to be fiscal issues are the health of the State Health Benefit Plan and Medicaid expenditures. There will be problems in those areas that will have to be solved.

Thank you for your interest. Please contact me if I may be of assistance at (404) 463-1366 or at ronnie.chance@senate.ga.gov.