(The Center Square) – State agencies in Georgia have less than three weeks to find a total of more than $3.6 billion in cuts in their 2021 fiscal budgets.
In a memo sent by state budget officials Friday, agency heads were instructed to reduce their spending plans for the fiscal year by 14 percent to brace the state coffers for COVID-19 economic downturn.
“The actions we have had to take as a state and as a nation to protect the health of our citizens is significantly impacting our economy and our state revenue,” the memo from House Appropriations Chairman Terry England, R-Auburn, Senate Appropriations Chairman Blake Tillery, R-Vidalia, and State Budget Director Kelly Farr said.
State lawmakers were working on finalizing the $28.1 billion budget for fiscal year 2021, which starts on July 1, when the legislative session was interrupted by the pandemic.
House Speaker David Ralston on Thursday said committee meetings will resume remotely starting Monday. He expects the legislative session to reconvene June 11. However, agency leaders will have until May 20 to send the proposed reductions to budget officials.
Before the pandemic, Georgia was already anticipating a revenue shortfall. State agencies were directed to reduce 2021 spending proposals by 6 percent.
The COVID-19 outbreak has unleashed a deep blow to the state’s economy, closing businesses statewide and raising unemployment to record highs.
Fiscal researchers at Georgia State University estimate the state could see revenue losses ranging from $360 million to $406 million for fiscal year 2020, which ends June 30, and $52 million to $313 million in fiscal year 2021.
Georgia Budget and Policy analyst Danny Kanso projects the state’s 2020 budget shortfall from April through June 30 could exceed $1 billion, or 3.7 percent lower than revenue forecasts. He said the state could not afford to cut 14 percent of the budget without considering an increase in revenue.
“Georgia cannot cut its way to prosperity; that much has been made clear in the aftermath of the Great Recession and in the midst of this global pandemic,” Kanso said in a statement Friday.
State revenues declined by almost $1.97 billion, or 9.9 percent between fiscal years 2008 and 2009 and $1.58 billion, or 8.9 percent, between 2009 and 2010.
Policy analysts at the Georgia Public Policy Foundation (GPPF) said past recession outcomes are not always an effective way to determine revenue losses after the crisis.
Chris Denson and Greg George of GPPF said other factors, such as the availability of federal aid, should be considered.
About $3.5 billion in direct federal aid was reserved for Georgia in the Coronavirus Aid, Relief and Economic Security (CARES) Act along with billions in grants and support for state programs.
Although budget officials, in the memo, said the pandemic “overshadows” the 2008 recession, GPPF analysts predict a better outcome for the state’s economy this time around.
“The recovery – when it comes – is expected to be swifter this time because the economy was stronger when the pandemic hit, and the shutdown appears unlikely at this point to spark a more serious banking crisis, as in 2007 to 2009.”