Weaker-than-expected recovery hampers Ga. budget

ATLANTA (AP) -- A weaker-than-expected economic recovery has proved a drag on Georgia's state finances, creating budget problems that Gov. Nathan Deal must address in his spending plans Thursday.

Legislators have approved a roughly $39.5 billion budget for the fiscal year ending in June on the expectation that state revenues would grow 5.2 percent over last year. However, a sluggish recovery has created a two-fold problem. First, the state is not collecting as much money as anticipated. Second, spending on government-run health insurance programs for the poor has increased.

Republican leaders say they are unwilling to raise taxes to offset the slump, an alternative to cutting the budget.

"That means we must make necessary cuts in other agencies and core functions of government since raising taxes is not an option that I will accept," Deal, a Republican, told business leaders in a speech Wednesday.

House Speaker David Ralston, R-Blue Ridge, and Lt. Gov. Casey Cagle on Wednesday endorsed a plan from Deal meant to keep hundreds of millions of dollars in Medicaid funding for the health care system. That funding would otherwise disappear when a so-called hospital bed tax expires in June. Georgia uses the $230 million it receives from the tax to secure an additional $400 million in federal funding for the Medicaid insurance program, which covers the poor. The money is then repaid to hospitals through a higher payment rate for treating Medicaid patients.

Some Republicans and anti-tax advocate Grover Norquist, president of Americans For Tax Reform, have said renewing the tax would violate anti-tax pledges. Deal tried sidestepping the issue this week by proposing legislation that would give the Board of Community Health the authority to levy the tax. A Senate committee gave the plan an initial vote of approval Tuesday.

"I've been informed that from 10 to 14 hospitals will be faced with possible closure if provider fees do not continue," Deal said. "These are hospitals that serve a large population of Medicaid patients."

Apart from the hospital tax issue, Georgia also must fix a roughly $750 million shortfall in its Medicaid program, according to the most recent state estimates. The bulk of those shortfalls have been driven by an increase in the number of people signing up for the program.

State spending may increase in limited areas. Deal has said he will propose a 3 percent increase in the value of lottery-funded scholarships for college students and promised to restore 10 days of instruction that were previously cut from the state's pre-kindergarten program. Deal's administration said in December regulatory filings that it expects modest growth in education spending and continued state funding to build water reservoirs and to deepen the harbor in the Port of Savannah.

The state's budget problems would be less severe if the economy grew steadily.

Money has flowed unevenly into the state's coffers. In November, revenue had grown 3.7 percent on a year-to-date basis, well below the target needed to make the current budget work. Better collections in December saw 4.9 percent growth of state revenues on the same basis, much closer to the Deal administration's target.

State tax collections, largely driven by the personal income and sales tax, are viewed as rough indicators of economic vitality. The more money that people earn and spend, the more income the state receives from tax collections.

"The good December was just in the nick of time," said state Sen. Jack Hill, the Republican chairman of the Senate Appropriations Committee. "And January a year ago was a pretty poor month. So hopefully we get a couple of really good, solid months under our belt."

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Follow Ray Henry at http://twitter.com/rhenryAP.