Another View Piece Published by Atlanta Journal-Constitution
(This article was published in the Sunday April 15 Atlanta Journal-Constitution)
Mike Klein
This year, Georgia legislators took down some barriers in tax, pension and criminal justice reform but they whiffed on creating a state-assisted venture capital investments model. Next January, they need to take another step forward in tax reform, monitor the start of criminal justice reforms, enact juvenile code reforms and create a real strategy around venture capital investments.
Tax reform this year included sales tax changes to benefit industry, the beginning of the end for the hated annual tax paid on personal vehicles, sales tax added to some online purchases and a gimmicky sales tax holiday. That is not enough. Comprehensive tax reform must include a decision — or at least a full blown discussion — about whether to revise the state’s 6 percent maximum income tax rate, which is widely considered to be non-competitive against states like Florida and Tennessee with no state income tax. Proponents of, say, a 3 percent to 4 percent maximum rate argue it will benefit Georgia’s emerging high-tech and bioscience industries.
One way to offset the change in income tax revenue would be to revise the state sales tax. That would require lots of buy-in over the next year. Income taxes fund about half the state budget. Local governments will be concerned about the impact of changes.
Two bills attempted to stimulate Georgia’s nascent venture capital investments industry. Both were controversial, highly political and neither passed the Legislature. Georgia continues to incubate businesses that move to other states when they need more venture capital. The Legislature must deal with this issue before more businesses and jobs lost.
Pension reform is another barrier that began to come down this year. The state Employees Retirement System is now authorized to invest up to 5 percent (about $750 million) of its available total assets (about $14.9 billion) in venture capital pools and other private placements specifically named in legislation. Georgia public sector pensions are well-funded in comparison to many states. However, public sector pensions nationally are under pressure as boomers begin to retire and state revenue is slow to recover from the recession. Eventually, the teachers’ retirement system should be included. Currently it is not, which is their choice.
Everyone agreed it is time to move forward with criminal justice reforms that will emphasize treatment over incarceration for some low-level property offenders and drug users. This is recognition that current strategies created swollen prison populations and caused havoc with budgets. Adult system reforms will take years to implement and it will be impossible to evaluate their success soon.
Georgia’s juvenile code, unchanged for decades, came up short this year. Gov. Nathan Deal’s office put on the brakes until there is a better understanding of the financial impact. There is universal support for changing this code that regulates foster care, permanent placement hearings, adoption codes, family mitigation hearings, status offenders and parental rights. This bill should become law next year if the financial analysis makes sense.
(Mike Klein is editor at the Georgia Public Policy Foundation.)
A Little White House Vision for America’s Wounded Warriors
Mike Klein
The Little White House in Warm Springs is a place where time stands still.
This was the Georgia home visited by Franklin Delano Roosevelt before and during his Presidency. It was far away from the stress and pain of world issues, somewhere that Roosevelt could find solace, therapy for polio that stole his strong legs and the companionship of friends. A stroke claimed the life of the longest-serving President in American history when Roosevelt died in his tiny four-poster bed on April 12, 1945 in Warm Springs.
On the world stage Roosevelt led his country out of depression and he led the free world against totalitarianism on two continents. But it was in Warm Springs that FDR and others founded the National Foundation for Infantile Paralysis. You likely know it as the March of Dimes. And it was here that FDR created a healing center for crippled children and adults. Today that center continues to operate as the Roosevelt Warm Springs Institute for Rehabilitation.
President Franklin Delano Roosevelt
Each year the Little White House pauses to remember FDR on the anniversary of his death. Thursday morning’s ceremony marked the public launch of the Georgia Warrior Alliance initiative that could transform Warm Springs with a bold strategy to combine public and private resources to serve soldiers and their families. Camp Dream at Warm Springs hosted six groups of military families last year; some ninety families are here this weekend.
The physical results of war are painful and easy to see. It is more difficult to measure the depth of damage to a soldier’s soul and to his or her family. About 6,000 military veterans commit suicide each year. Divorce rates are 68% for soldiers who serve one overseas tour, 81% after two tours and 93% after three tours. There is a need to help. And there is a place in Warm Springs.
The Georgia Warrior Alliance project began about three years ago after a series of conversations that were started by Ross Mason and organized by the Georgia Public Policy Foundation and Senator Johnny Isakson. Mason, who founded HINRI – the Healthcare Institute for Neuro-Recovery and Innovation. was paralyzed in August, 2007 after a bicycle riding accident. Mason took his Warm Springs idea to dozens of Georgia military, business and philanthropic leaders. The conversation soon attracted others like Scott Rigsby and General Larry Ellis.
Scott Rigsby
Rigsby is a Camilla. Georgia native whose story of courage is almost impossible to comprehend and he is perhaps the most remarkable athlete at any level that Georgia has ever known, bar none in any sport. “My name is Scott Rigsby and I’m an Ironman,” Rigsby said Thursday at the Little White House where he spoke on behalf of the Georgia Warrior Alliance.
Rigsby lost one leg after a motor vehicle accident when he was 18 years old. His other leg was removed several years later. Five years ago Rigsby became the first double amputee using prosthetic legs to complete the Ironman World Championship in Hawaii – 2.4 miles swimming, 112 miles cycling and 26.2 miles running. Warm Springs is where Rigsby learned to run after his second amputation.
Rigsby’s autobiography “UnThinkable” tells the story of his journey through tragedy, depression and recovery. “Helen Keller said it best; ‘It is a terrible thing to see and have no vision.’ I didn’t have any vision for my life. I wanted to die,” Rigsby said. “At Christmas 2005 I threw a Hail Mary prayer up to God and said, hey, Man, if you open a door for me then I’ll run through it. Be careful what you pray for. I’ve been doing a lot of running.”
Today Rigsby spends a lot of time with veterans and their families. He spoke about meeting the wife of a soldier who was sent to Walter Reed Army Hospital after his leg was blown off by a roadside bomb. “I looked at his wife; she had tears streaming down her face. She said to me, ‘Is my husband going to be alright?’ I am proud to say that I could look back at her and say, ‘Am I alright!’ With confidence I could share that feeling that they could still live an active lifestyle (and) that their sacrifice was not in vain.”
General Larry Ellis
General Ellis spent 35 years in the military and he retired as Commander of the U.S. Army Forces Command. Today he serves on many boards including the University System of Georgia Board of Regents. Eight months ago Ellis began to feel numbness in his legs. The diagnosis was spinal injuries perhaps caused by dozens of military career parachute jumps. Ellis underwent two spinal cord surgeries but shortly thereafter a rare complication paralyzed him from the waist down.
“Following my second surgery, not knowing if I would ever walk again at the tender age of 65, I began to reflect on the negative consequences of being wheelchair-bound for the rest of my life,” Ellis said at the Little White House. “To say the least, it was one of the most depressing periods of my life. Given my experience I cannot imagine how devastated and confounded the young FDR was when he learned that he would never walk again.”
Ellis is walking again, sometimes aided by a cane, after care at St. Joseph’s Hospital in Atlanta. When he spoke at the Little White House the retired four-star general paused to mention five veterans seated upfront in their wheelchairs. Ellis said a Georgia Warrior Alliance survey of 4,000 Georgia military families concluded their number one need “was for a safe environment to decompress from the stresses of combat and re-engage with their families.” That, in a nutshell, is what the Warm Springs project is all about.
The Georgia Warrior Alliance goal would keep the civilian component but add a new military aspect. Callaway Gardens in nearby Pine Mountain has agreed to host families who have wounded warriors in treatment. The Alliance envisions coordination with the U.S. military burn center in Augusta. The project could boost state telemedicine initiatives. Georgia’s extensive university health care research capacity could become part of the Warm Springs initiative.
Ross Mason
Mason has said there is already support for the Georgia Warrior Alliance idea among the U.S. Joint Chiefs of Staff. The project could draw down tens of millions of federal dollars to Georgia that are available for treatment of veterans. Georgia Tech is already working on an internet strategy. The Alliance wants to network some 360 Georgia agencies that offer support services to veterans and it would like to build a non-profits training hub for them at Warm Springs.
None of this is guaranteed to happen. What the Georgia Warrior Alliance seeks to achieve will require combining lots of sectors that sometimes have problems figuring out how to work together. It should help that Mason chairs the Department of Community Health board of directors.
There were a few hundred folks including an Iwo Jima veteran and lots of children sitting outside the Little White House on Thursday morning when Rigsby made his strongest case for the Georgia Warrior Alliance: “Georgia has the best facilities. We have the best corporations. We have the best health care. We have the best research institutions. We have the best people to set the standard for the nation. Let us be the generation that cares,” Rigsby said.
“Let us erase the bad memories of the wounded who were left behind in previous wars. One weekend with our wounded warriors and their families right here at Camp Dream is all you need to get you hooked. We can change the world right here today in this magical place of Warm Springs. We can do the unthinkable.”
Monday morning Scott Rigsby will do the “UnThinkable” again.
He will run the Boston Marathon.
(Mike Klein is Editor at the Georgia Public Policy Foundation)
The Serious Challenge to Georgia’s Low-Tax Economic Strategy
Mike Klein
Georgia built its economic strategy over the past couple decades around being a good place to raise a family with low taxes and a business friendly environment. But others are getting pretty good at using similar strategies and Georgia should feel none too comfortable with its tenth place national ranking in an economic strategies and performance report this week from the American Legislative Exchange Council.
“Georgia is still among the better states. Certainly you are not in the crisis category,” ALEC economist Jonathan Williams said during a telephone interview. “However, it does have some issues in terms of mediocrity.” Georgia’s 6% state personal income tax rate is about in the middle of all states, but it is positioned alongside Tennessee and Florida that do not collect income tax. “That does not help your marketing,” Williams said.
The fifth edition of “Rich States, Poor States” is a robust work co-authored by three conservative economists — Arthur Laffer who is often described as the father of supply side economics, Wall Street Journal editorial board economist Stephen Moore and Williams who directs the ALEC state fiscal reform and tax policy initiatives. The annual report compares state strategies in 15 tax, regulatory and labor law categories.
Southern states earned half of the top 16 spots with Virginia highest at third. There is a cluster of southern power at ten through 16 with Georgia, Arkansas, Tennessee, Florida, Oklahoma, Mississippi and Texas consecutively. Georgia ranked well in several soft categories but ALEC said the state is very much middle-of-pack in several high profile tax categories and Georgia has a ten-year trend in three important categories that you would not want to emphasize in a marketing plan.
The ALEC study released Wednesday placed Georgia first nationally (often tied with others) in categories like not imposing estate and inheritance taxes, requiring that employers pay only the lowest federal minimum wage of $7.25 per hour, being a right-to-work state and the amount of personal tax burden for each $1,000 of personal income.
Georgia ranked lower in total sales tax burden (36th), average workers’ compensation costs (27th), top personal income tax rate (25th), personal income tax progressivity (24th), total property tax burden (23rd), public employees per 10,000 population (21st), and top corporate income tax rate (15th). Tax law reforms passed by this year’s legislature that include the elimination of sales taxes paid on energy used in manufacturing and extending sales tax to more online purchases would not be considered until next year’s sixth edition of “Rich States, Poor States.“
Arthur Laffer
“There are lots of things that affect states besides their own economic policies,” Laffer said during ALEC’s national conference call. “What happens to neighboring states, what happens to the U.S., oil prices and all sorts of other stuff happens. What we’re trying to look at here is how these state and local governments are doing and how they influence growth.”
The ALEC study includes a ten-year backward-looking measurement of domestic migration, non-farm payroll and personal income per capita. Isolating those three categories, ALEC ranked Georgia 33rd nationally during the decade that ended in 2010. Georgia ranked fifth nationally with strong population growth of 552,000 that earned the state one new congressional seat. But growth spiked in 2006 at some 120,000 new Georgians, then it quickly declined during the recession and there was almost no net growth during 2010.
The ten-year trend showed a 2.3% reduction in Georgia non-farm payroll employment; that placed the state 34th nationally. Texas non-farm payroll grew 11.5% during ten years, best in the south. Virginia grew 4.5%, Oklahoma 3.5%, Florida 2.9% and Arkansas 1.1%. North Carolina dropped nine-tenths of 1 percent followed by declines in Louisiana 1.3%, South Carolina 2.6%, Alabama 3.2%, Tennessee 3.8%, and Mississippi 5.4%.
Georgia personal income per capita grew 23% during the past decade and that was 48thnationally. Other southern states grew more; Louisiana by 58%, Arkansas 45.3%, Mississippi 45.1%, Oklahoma 44.4%, Virginia 39.4%, Alabama 39%, Texas 34%, Tennessee 32.2%, Florida 31.6%, South Carolina 30%, and North Carolina 25.7%.
Georgia non-farm payroll employment and personal income per capita numbers are frustrating because the state markets itself as a good place to grow intellectual equity companies in the high-tech, health and science sectors and to establish new manufacturing such as KIA in West Point and Caterpillar coming to the Athens area.
ALEC likes to highlight “Cheerful News from the States.” During Wednesday’s national conference call Laffer said bipartisan political leaders in his new home state of Tennessee have agreed to abolish estate and gift taxes. Nine states including Tennessee charge no state income tax. ALEC named Oklahoma, Kansas and Missouri among states that are studying how to abolish their personal income taxes. A 2010 state special council on tax reform recommended reducing the Georgia state income tax but the idea has not been able to move forward.
“Rich States, Poor States” also has its own Facebook page.
(Mike Klein is Editor at the Georgia Public Policy Foundation)
Georgia Will Report 5-Year H.S. Graduation Rate for 2012 Class
Mike Klein
Georgia’s high school graduation rate could improve next year because the state will report the number of students who complete graduation requirements within five years instead of four years. Yes, you read that right, a five-year graduation rate.
“We know that not all students are the same and not all will graduate from high school in four years, so we asked for the U.S. Department of Education’s permission to use a five-year cohort graduation rate for federal accountability purposes,” state schools Superintendent John Barge said Tuesday. “Ultimately, our goal is to ensure each child will graduate from high school ready to succeed in college and a career, regardless of how long it takes.”
Barge is correct. Graduation is more important than how long it takes to get there. The state will also continue to track and be able to report a four-year graduation rate.
The five-year graduation rate announcement was sort of secondary Tuesday when state education officials revised the 2011 class graduation rate down to 67.4 percent from the previously announced 80 percent. The rate changed because the federal government standardized how all states must calculate graduation rates.
Four districts posted better than 90 percent graduation rates – Chickamauga City, Bremen City, Oconee County and Rabun County. Ten county or city public school systems were at 55 percent or less. That includes Atlanta Public Schools which graduated just 51.96 percent of its students on time, meaning within four years, which was the eighth worst school system performance statewide.
Georgia School Superintendent John Barge
The new method will put all states on more even footing when analysts try to determine where learning is most and least successful. The previous model did not fully account for dropouts and school districts also had trouble tracking transfer students. That created the possibility that graduation results could be inflated.
The new model is considered more accurate, but education officials have warned for a couple years that it would produce a lower graduation rate. In effect, they worked in advance to reduce the shock and awe factor.
Georgia restated graduation rates for 2009, 2010 and 2011. That is smart strategy. It takes the emphasis off the 12.6 percent decline for the 2011 class and it enabled the state to demonstrate there is a trend line going up.
Using the old method, Georgia reported graduation rates of 78.9 percent, 80.8 percent and 80.9 percent in 2009 – 2011. Using the new method, the 2009 recalculation is a stark 58.6 percent but the rate improved to 64 percent in 2010 and 67.4 percent last year.
The report is packed with data; here is some that jumps out and begs to be noticed:
Districts Above 90 Percent: Chickamauga City 97.44, Bremen City 93.18, Oconee County 91.57, Rabun County 90.4.
Districts 80-to-90 Percent: Union County 88.69, Decatur City 88.40, Towns County 88.37, Wheeler County 87.5, White County 86.45, Forsyth County 86.27, Morgan County 86.09, Clinch County 85.53, Pike County 84.65, Pierce County 84.23, Commerce City 83.96, Hancock County 83.51, Miller County 83.33, Gilmer County 82.39, Fannin County 82.18, Stephens County 81.99, Screven County 81.94, Gordon County 81.76, Pickens County 80.74, Dalton City 80.57, Glascock County 80.0.
Atlanta Metro System Percentages: Forsyth County 86.27, Fayette County 78.23, Paulding County 76.0, Coweta County 74.85, Cherokee County 74.82, Cobb County 73.35, Henry County 72.35, Douglas County 70.98, Fulton County 70.05, Gwinnett County 67.56, Bartow County 66.22, Rockdale County 66.20, DeKalb County 58.65, Atlanta City 51.96, Clayton County 51.48.
Districts Less Than 55 Percent: Dublin City 53.38, Greene County 53.19, Atlanta City 51.96, Clayton County 51.48, Taylor County 51.39, Bibb County 51.34, Talbot County 44.78, Crawford County 42.25, Baker County 41.38, Taliaferro County 40.0.
(Mike Klein is Editor at the Georgia Public Policy Foundation)
Tax Freedom Day — The Feeling of Not So Much Freedom
Mike Klein
There is this idea out there that the country has a tax code. Actually, it has a tax obstacle course. It is almost impossible to decipher the obstacle course with its many minefields and politicians constantly argue about how to “simplify” it. That is why the annual dust-up between the Tax Foundation and the Center on Budget and Policy Priorities is a fascinating spat.
Each year the Foundation announces Tax Freedom Day – the date on which it says we have worked long enough to pay federal, state and local taxes. This year the Foundation says freedom will arrive next Monday in Georgia and one week later nationally, on Monday, April 17. Are you feeling better?
The theory is that we will work for ourselves the remainder of the year because collectively we will have earned enough to pay our fair share — $2.62 trillion for federal taxes and $1.42 trillion for state and local taxes. Every year the Center on Budget and Policy Priorities debunks the report because it does not like the analysis method. This has become an annual ritual and both organizations talk about each other on their websites.
Monday, April 17 is also when 2011 federal and state returns must be filed unless you receive an extension. First quarter payments for next year federal and state taxes are due the same day so perhaps a lot of folks won’t be feeling like they have Tax Freedom!
Freedom this year is calculated on an “average” American paying 29.2 percent in federal, local and state taxes. Here’s where the Tax Foundation and the Center disagree about what the numbers mean. The Center says the Foundation overstates middle class tax levels and it says states with the highest wage earners are penalized in the formula. The Foundation’s position is that the highly progressive federal tax code creates the result because high wage earners are paying more real tax dollars than low wage earners.
Georgia has a low percentage of the nation’s highest wage earners. The Tax Foundation ranked the state 35th nationally. Last year tax freedom arrived in Georgia on April 3, so we slipped by a week in new rankings, and our overall position changed by two spots from 37th last year. When it recently wrote about Georgia’s 2012 tax reform legislation, the Tax Foundation favored changes that will impact business-to-business transactions, but it said the plan to collect online sales tax is unconstitutional and the Foundation described the reinstated sales tax holidays as a gimmick.
Southern states with their lower comparative personal incomes generally rank low. North Carolina (31) placed slightly ahead of Georgia but Alabama (43), South Carolina (47) and Tennessee (50) trailed. Connecticut is ranked first (tax freedom on May 5) followed by New York and New Jersey tied for second (tax freedom on May 1). Those three states have higher percentages of the most affluent wage earners so their residents are paying lots of taxes.
The Tax Foundation and the Center on Budget and Policy Priorities are caught in a data argument that they seem likely to continue in a sporting fashion. The deep level economic arguments on both sides are fairly fascinating stuff that you can examine in depth on their websites … click here for the Tax Foundation and click here for the Center on Budget and Policy.
Methods aside, the most profound message is the undeniable impact of government expansion and taxation on individuals. The Tax Foundation says Americans will spend more dollars on federal, state and local taxes this year than on food, clothing and housing combined. When you consider that about half of all Americans pay no federal income taxes, those who do pay taxes are paying a lot, their fair share and someone else’s fair share, too.
The Tax Foundation anticipates that state income taxes will eat up 40 working days for the average American, the equivalent of eight working weeks. That figure is slightly skewed because millions of Americans who live in seven states including Florida and Tennessee pay no state income taxes. Georgia has a 6 percent maximum income tax rate that funds about half of the state budget.
The report estimates you will work eleven days to pay your share of corporate income taxes because business taxes flow downhill to consumers. It will take 24 working days – almost five weeks – to pay for Social Security, Medicare and other social programs, 15 days for sales and excise taxes, 12 days for property taxes and seven days for various miscellaneous taxes.
Tax Freedom Day was first calculated in 1948 by a Florida businessman who later deeded his formula to the Tax Foundation when he retired in 1971. Data has been analyzed going backward to 1900 when tax freedom was on January 22. Tax freedom moved in sync with dramatic events such as both World Wars, the expansion of federal government social programs in the 1960’s and the Vietnam War in the 1970’s. The latest date was May 1, 2000, during the final year of President Bill Clinton’s eight-year administration.
Federal stimulus spending, tax cuts, large numbers of laid off workers, and workers earning low wages were factors in the early tax freedom date on April 1, 2009. But the growing canyon between federal revenue and spending has changed the game again. This will be the fourth consecutive year in which Washington will borrow at least $1 trillion. The Tax Foundation said tax freedom this year would not be reached until May 14 if federal deficit borrowing was included in the calculation.
(Mike Klein is Editor at the Georgia Public Policy Foundation)
The Final Breath From This Year’s Georgia General Assembly
Mike Klein
The final breath has been drawn by this year’s Georgia General Assembly. Here is what lawmakers did on seven issues that are closely tracked by the Georgia Public Policy Foundation. This article discusses state charter schools, digital learning, criminal and juvenile justice reform, pension and tax reform, and health care. All of these will require more work going forward and in some cases, much more work starting soon.
State Charter Schools
This November voters will decide who got it right: Lawmakers four years ago when they created a state charter schools commission or the state Supreme Court last spring when it ruled that the commission was unconstitutional. The very fact that voters – not the state Supreme Court and not legislators – will settle this question was by no means assured during the session.
House Resolution 1162 faced a significant hurdle to achieve a two-thirds House super majority and it almost collapsed in the Senate. Opposition came from some of the state’s largest school systems and organizations that represent school boards, superintendents and teachers. Those groups were focused on how to stop voters from having a chance to decide the question.
They might have prevailed until the Senate’s two longest serving members – Democrats George Hooks and Steve Thompson – delivered powerful chamber speeches to explain why they would vote yes. Hooks, Thompson and two other Democrats joined all 36 Republicans to vote for the constitutional amendment resolution. Another “yes” vote in November would start development of a new commission whose bones are contained in House Bill 797.
The commission could approve virtual or brick-and-mortar schools. Students could live within defined local boundaries for traditional schools or statewide for virtual schools. The commission would consider applications only from groups that were already rejected by local school boards. Those same local boards would be permitted to explain why they rejected the application.
New and existing state commission charter schools would receive only state dollars. Traditional schools would be paid operating expenses figured on the state’s school funding formula for the lowest five school systems based on assessed valuation, plus a or capital expenditures amount. Virtual schools would receive two-thirds of the amount given to traditional schools for operating expenses. Schools that offer blended learning – online with a teacher – could receive some capital funding at the discretion of the commission.
“No” from voters in November would render House Bill 797 unnecessary.
Resources: House Resolution 1162. House Bill 797
Digital Learning
State-based digital learning is about to explode in Georgia. Two bills are responsible.
House Bill 175 actually was introduced and passed the House last year. This year it passed the Senate. The bill establishes a clearinghouse of online learning courses that would be managed by Georgia Virtual School (GAVS) at the Department of Education. Courses could originate with public school systems – such as Cobb, Forsyth and Gwinnett school systems that have robust online curriculum – or from other sources that could include online learning companies.
This clearinghouse method has the potential to create vast amounts of content that could be available to any student who has online access anywhere in the state. GAVS serves about 10,000 students with courses that supplement their traditional bricks-and-mortar classroom work. The expectation is that GAVS could serve 100,000 students within just a few years.
Senate Bill 289 takes digital learning another step forward; it directs the state board of education to ramp high school digital learning resources for today’s current sixth graders before they are freshmen in fall 2014. The original Senate bill said those students who are scheduled to graduate in spring 2018 would be required to take at least one online learning course before high school graduation but that language was changed to “maximize the number.”
The clearinghouse would also be managed through the Georgia Virtual School.
Resources: Senate Bill 289. House Bill 175.
Criminal Justice Reform
When the final ink was dry, everyone agreed it is time to move forward with widespread reform. The House voted 162-0 and the Senate 51-0 on final legislation that will emphasize treatment programs over hard-time incarceration for some property crime offenders and low-level drug users. From the beginning supporters said these are not going-soft-on-crime strategies.
New ideas adopted this year recognize the state cannot continue to absorb more than the $1.5 billion per year that it spends on prisons, parole and probation. State prisons hold 56,000 inmates and each day local jails contain hundreds to thousands of inmates who are waiting for an empty state bed. Georgia also has 22,000 adult parolees and 156,000 on felony probation.
New ideas will take years to fully incorporate. They include new and expanded accountability courts, especially drug and mental health courts that will reroute eligible offenders into treatment programs with severe oversight. New definitions and penalty levels were established for several property crimes including theft, burglary, shoplifting and forgery.
The state will move toward prosecution of drug offenses based on the type and weight of drugs to clarify the distinction between casual users, sellers and traffickers. Child abuse laws were tightened as were requirements for reporting suspected sexual abuse and suspicion of human trafficking.
Criminal justice reform is not a single year issue. It will take money and time to develop public and private resources. Sheriffs and the county district attorneys are concerned about the impact of reform on their budgets, facilities and staffs. Everyone already knows this will take a steep learning curve and come corrections are likely. Governor Nathan Deal kept the Special Council on Criminal Justice Reform intact and it is expected to have new assignments this year.
Resources: House Bill 1176. Policy Foundation Issue Analysis.
Juvenile Justice Reform
The outlook was bright when the House voted 172 – 0 to pass ambitious legislation that would rewrite nearly every section of the state’s juvenile code. But the outlook proved to be too bright when the Governor’s Office said it wanted more financial analysis and the current bill died.
Much like adult criminal justice reforms, the bill emphasized treatment over incarceration when appropriate for juveniles. It also made changes to policies that regulate foster care, permanent placement hearings, adoption codes, family mitigation hearings, children who are status offenders and the rights of parents. None of the changes would be enacted until July 1, 2013.
Advocates – and there are many inside and outside government — believed they could work out funding details before July 2013 and during the next General Assembly. That strategy came up short at the Governor’s Office and the bill never reached the Senate. It has been at least five years since hard work was begun to rewrite the code and it will be at least one more.
Resources: House Bill 641. Policy Foundation Issue Analysis.
Pension Investment Reform
Pension investment management is an ongoing hedge that contributions and investment returns will continue to generate the cash flow required to pay benefits. Public sector pensions nationally have started to come under pressure as baby boomers began to claim retirements while equity investments were losing billions of dollars and other state revenues were shrinking. Georgia has taken a small step forward to help stabilize its pension system investment returns.
Senate Bill 402 would permit the Employees Retirement System to allocate up to but not more than 5 percent of its available assets into alternative investments that include venture capital pools and other private placements specifically named in the legislation. ERS had $14.9 billion invested on June 30 of last year, about two-thirds in equities and the remainder primarily in U.S. Treasury notes or bonds. Currently, the 5 percent threshold would be about $750 million. The Teachers Retirement System is exempt and it is not allowed to make similar investments.
Many independent analyses have concluded Georgia public sector pensions are better funded at a higher percentage than most other states but Georgia does have a liability position and it needs to close the gap between funds available and owed over time. Georgia is not breaking new ground; it is adopting an investment strategy already authorized in every other state.
Additional resources: Senate Bill 402. ERS 2011 Audit.
Tax Reform
The results here were mixed and tax reform requires more work.
Pro-business and economic development changes adopted this year include the elimination of sales tax charged on energy used in manufacturing, agricultural tax relief, reduction of the sales tax paid on jet fuel purchases (to help all commercial airlines) and some other modernization of the tax code. Pro-family changes that will prove to be politically popular include reduction of the marriage penalty on state income taxes and a guarantee that the first $65,000 of income earned by retirees (plus Social Security) will be continue to be exempt from state income taxes.
The motor vehicle revenue structure will change. The state will charge a title fee rather than state and local sales tax on new car purchases after March 1, 2013; essentially, that is a wash. But the state will no longer impose the much hated annual ad valorem value tax on vehicles purchased starting in March next year. The state will continue to impose ad valorem tax on millions of existing vehicles so in practicality, it will take years to fully convert this system.
For the second straight year the Legislature took no action to reduce state personal income tax rates that peak at 6 percent, which are among the highest rates in the southeast. Tax reform also did not address possible state sales tax rate or corporate income tax rate questions. House Speaker David Ralston has said personal income tax rate reform should be a priority.
Additional Resources: House Bill 386.
Health Care Reform
Not much happened in the General Assembly because Georgia is waiting for an early summer U.S. Supreme Court decision in the Patient Protection and Affordable Care Act case.
Georgia is among 26 plaintiff states that are asking the Supreme Court to throw out the law. Nine justices have the option to keep the law as is, throw it out entirely or select bits and pieces to uphold or reject, including the contentious individual mandate. Health care dominoes will begin to fall into a more predictable pattern after the opinion which is expected in late June.
This issue affects every Georgian, whether you work for or own a business, purchase your own health insurance, use public sector programs or have decided you do not want insurance. You could be forced to obtain insurance whether you want it or not, and larger numbers of your tax dollars could be required to support public sector insurance programs.
For example, existing health care law would expand the number of Medicaid eligible Georgians by 650,000 to 750,000 within two years. The anticipated cost to the state in new dollars would be $2.5 billion over ten years, paid for somehow by someone, most likely taxpayers. If upheld, the law would also force Georgia to create a health insurance exchange that it currently does not have, or to accept one that is created and overseen by the federal government.
Several pieces of Georgia legislation were introduced this year that could become the basis for a state-based health care solution if the federal law or portions of it are ruled unconstitutional. None of this year’s Georgia bills passed the General Assembly but they could be resurrected as a package or individually next year. How all this plays out depends on how the Supreme Court feels about the greatest expansion of the federal government into health care since Medicare.
Additional Resources: GPPF analysis of U.S. health care spending. GPPF commentary on state health exchanges.
Save the Date: Monday January 14, 2013 for the next Georgia General Assembly!
(Mike Klein is Editor at the Georgia Public Policy Foundation)
Senate Passes Criminal Justice Reform 51-0 with Amendments
Mike Klein
Georgia criminal justice reform has passed both chambers but the House would need to agree to substitute legislation because the Senate added seven amendments when it passed the bill 51-0 on Tuesday afternoon. Two other floor amendments failed and two were withdrawn.
None of the amendments dramatically change Georgia’s most sweeping criminal justice reform since a generation of do the crime, do the time laws were passed some twenty years ago.
Governor Nathan Deal made criminal justice reform a major priority during his first State of the State address in January 2011. The work of the Special Council on Criminal Justice Reform last year and the legislature this year are an important first step forward with others to follow.
The satisfaction that was evident because of these reforms is somewhat tempered because the fate of a juvenile justice code rewrite is less certain. Some sources who are familiar with the HB 641 juvenile code rewrite said Tuesday that the bill is dead this year because it still requires more financial analysis of the impact that would be made by proposed changes.
So for the moment the spotlight shines on adult criminal justice system reforms.
Monday afternoon Sen. Bill Hamrick outlined changes to burglary, forgery and other sections when he presented House Bill 1176 to the Senate. Hamrick is co-chair of the Special Joint Committee on Criminal Justice Reform. One amendment would reduce the number of felony burglary levels from three in the House version to two in the Senate version.
Senator Bill Hamrick
“After discussion with prosecutors we believe it was a little too complicated and so we’ve narrowed it to two,” Hamrick said about the burglary section. Residential burglary would become a first degree felony and all other burglaries would become second degree felonies. The House and the Special Council on Criminal Justice Reform both said that burglary of an occupied home should be treated different from burglary of unoccupied sheds or buildings.
The Senate version would also change the forgery statute. “Checks are the most common type of forgery,” Hamrick said. Felony check forgery would be established at $1,500 and above, or possession of ten or more blank checks that were intended to be passed as forged checks. Forgery of checks valued at less than $1,500 would be prosecuted as misdemeanor offenses.
Other changes would assist counties with drug court funding, assist state courts if their case loads grow due to other criminal justice reforms, make sure misdemeanor crimes are counted when a person’s recidivism record is being reviewed and strengthen the state’s prosecution language for persons who are charged with trafficking a person for sexual purposes.
There was bipartisan enthusiasm for reform on the Senate floor. “It is my hope that not only can we pass this unanimously but also look toward some of the remaining issues that in the future may need to be addressed,” said Democratic Sen. Emanuel Jones. Gov. Deal has kept the Special Council on Criminal Justice Reform intact and its work is expected to continue this year.
The intent of this two-year reform initiative is to slow down the anticipated growth inside Georgia prisons by emphasizing alternatives to incarceration for non-violent property crime offenders and personal drug abusers who would benefit more from intense treatment programs.
Twenty years ago Georgia had a $500 million state prisons budget and about 30,000 inmates. A generation of popular do the crime, do the time laws exploded the prison population. Today the state has 56,000 inmates and a $1.1 billion prison budget plus several hundred million dollars more for parole and probation. Georgia faced having 60,000 inmates plus $264 million in additional new cost within four years if the state did nothing about criminal justice reform.
Another section in the new law would change public access to records kept on persons who are charged but never prosecuted or charged but never convicted. The charge — regardless of the outcome — often makes it difficult and sometimes impossible to find employment, which is one of the two key factors in rehabilitation. The other is available secure housing.
Hamrick noted people who have an arrest but no conviction “deal with that on their record for the rest of their life, basically. We have some provisions in the bill that would allow for those records to be restricted when a person is applying for a job but not restricted to the extent that law enforcement or judicial officials would not get that information.”
The House and Senate are not in session Wednesday. House consideration of the Senate amendments will become an agenda for the 40th and final day on Thursday.
Georgia Legislature Passes FY 2013 Budget by Wide Margins
Mike Klein
Georgia legislators overwhelmingly approved next year’s budget early Tuesday afternoon, just one day after they voted to pass significant pension investment reform.
Next year’s $19.342 billion budget that passed both chambers Tuesday is 5 percent higher than $18.2 billion current fiscal year funding. Governor Nathan Deal’s office recently increased the revenue estimate by $177 million. “While this is positive affirmation that we are recovering slowly, it should be understood that this growth does not begin to regain all the lost ground from our high water mark in Fiscal 2008,” said House appropriations chair Terry England.
“At that point (during fiscal year 2008) our budget was some $2 billion larger than it is today with a half million less people. In fact, the fiscal year 2013 base budget proposes state operations at 20 percent lower per capita than one decade ago,” England said.
The fiscal year begins July 1. The new budget has a strong economic development focus with $44 million in new One Georgia Authority funds and $67 million for REBA – Regional Economic Business Assistance – primarily from Georgia’s receipts from the national mortgage settlement.
Senate appropriations chair Jack Hill told the chamber those funds will “front-load our economic development efforts. If we have the opportunity to bring in new industry nothing will stop us from the standpoint of a new rail spur or a new road, whatever is needed for that community and the state to bring new jobs to Georgia.”
The House voted 143 – 24 and the Senate voted 45 – 0. The bill contains no across-the-board state employee salary increases, except for some increases for Georgia Bureau of Investigation agents and Department of Natural Resources rangers. The bill fully funds pre-K salaries and operating expenses for 170 days; there was concern earlier in the session that pre-K teacher salaries were addressed but operating expenses were overlooked.
Significant public sector pension reform was approved on Monday when the House passed SB 402 by a 104 – 53 margin. The bill allows for the allocation of up to 5 percent of Employee Retirement System assets into alternative investments such as venture capital funds. The state Teachers Retirement System is exempt. The bill does not require any specific alternative investment; it merely establishes the framework and defines the investments.
The budget that will be sent by Governor Deal would restore funding to the Morehouse and Mercer University Schools of Medicine. It would also expand new physician residency slots statewide, restore $4.3 million for substance abuse programs, add $1.2 million for GBI scientists who conduct drug tests and fund new judges in the Bell-Forsyth and Piedmont judicial circuits. Ten million dollars is provided to fund accountability courts as part of criminal justice reform.
Other highlights include funds to open a new trade office in China; $108 million in bonds for the Technical College System, $75 million for reservoir development, and $29.8 million to comply with the federal court agreement on behavioral health programs. Autism treatment funds would be allocated for the Marcus Center, Emory University and a facility in Savannah.
The Plains and Sylvania welcome centers would remain open. The budget also restores funds that were in jeopardy for cooperative extension county offices and 4-H programs.
Click here to read the budget legislation tracking sheet.
Click here to read the final budget legislation.
Click here to read the pension reform bill.
(Mike Klein is Editor at the Georgia Public Policy Foundation)
Georgia House Passes Digital Learning Bill, 125 – 38
Mike Klein
Georgia’s current sixth graders will start high school with more digital learning options. Monday the House passed Senate legislation to expand those resources and prohibit local systems from blocking students who want to take online courses. The bill passed 125 – 38. Georgia Virtual School would manage the expansion and emerge with a more ambitious footprint. Having already passed the Senate, the legislation is ready for Governor Nathan Deal’s consideration.
Senate Bill 289 stipulates that expanded digital learning options in high schools would start to become available in the fall 2014 school year. Rep. Mike Dudgeon presented the legislation on the floor, saying, “When this bill is fully implemented in 2018 I think we will look back and say this bill is really not that big of a deal because we will have moved so far in technology.”
This session lawmakers also passed House Bill 175 to establish a clearinghouse of online courses that would be available to students statewide. Georgia Virtual School would select the courses from public school systems, or from charter schools that nominate their courses.
Senate Bill 289 directs the state Board of Education to “maximize the number of students” who could participate in digital learning. The initial Senate version by Majority Leader Chip Rogers sought to mandate that each high school student take at least one online course before graduation. “Mandate” was replaced with “maximize” before Senate passage.
Rep. Mike Dudgeon
“We are setting policy about how we want education to move in the big picture,” Dudgeon told the House. “This is not a mandate. This is telling the state board to set policies to maximize these opportunities across the state.” Rogers and Dudgeon have both said Georgia Virtual School could serve 100,000 students per year. Currently, GAVS has 10,000 students taking regular online curriculum. It also offers credit recovery courses.
Highlights from Senate Bill 289: Make digital learning available to more high school students statewide through GAVS; prohibit local school systems from blocking participation by students who want to select digital learning courses; and, change the funding formula so GAVS and the local school share the $650 total reimbursement when students choose a GAVS course.
The reimbursement question is an important point. Currently, local schools lose all $650 when a student chooses a GAVS course over one offered inside the traditional classroom. This has been a strong incentive for local schools to deny students when they request permission to take a Georgia Virtual course. Under the new formula GAVS would receive up to $250 to cover its costs while the local school would receive up to $400 maximum.
The legislation further stipulates that the state shall make end-of-course tests available online by the 2015 – 2016 school year. This is a forceful response to test cheating scandals in Atlanta Public Schools and other school systems. “It certainly prevents the adults from cheating,” Dudgeon said, because scores would be recorded in state computers and local school personnel would not evaluate or have the ability to change end-of-course test answers.
Dudgeon also noted, “We know there are financial issues. Some districts may not have the money or the technology. One goal of the (schools funding) finance commission next year is going to be to allow more money to be pointed toward technology.” Click here to read an earlier article about this legislation.
(Mike Klein is Editor at the Georgia Public Policy Foundation)
History Up Close at U.S. Supreme Court Health Care Arguments
Mike Klein
Monday morning millions will pay attention via media reports but only a few dozen will be inside when the U.S. Supreme Court begins three days of hearings that will decide the constitutionality of President Barack Obama’s federal health care reform law. Georgia Attorney General Sam Olens will be among those few who have a seat in the Court where history will begin to unfold.
“We won’t know the opinion until the end of June,” Attorney General Olens said this week when he discussed the case before Georgia Public Policy Foundation members and guests. The lawsuit that reached the U.S. Supreme Court is just one of several filed nationally that all had the same goal: Throw out the Patient Protection and Affordable Care Act and start over.
Georgia is among 26 plaintiff states that are challenging the law before the Supreme Court. U.S. District Court Judge Roger Vinson ruled the individual mandate unconstitutional in his January 2011 decision. Vinson further ruled that the mandate is the essential component of the entire law and, therefore, he declared the entire law unconstitutional.
The federal government appealed to the 11th Circuit Court of Appeals in Atlanta. Last August the appellate court upheld Judge Vinson’s individual mandate decision by a 2-1 margin but the three-judge panel also ruled that the mandate could be severed from the entire Act, so the remainder of the law could stand. “We didn’t like that part of the ruling,” Olens said.
That is a very condensed version of how this case got to the Supreme Court. As the Attorney General outlined, six hours of arguments over three days will be conducted as follows: Monday the Court will consider whether legal challenges are premature or whether challenges must wait until after the law takes full effect in January 2014. Individual mandates will be argued Tuesday and Medicaid expansion Wednesday.
Georgia Attorney General Sam Olens
Olens explained the question-at-hand for Monday. “The issue is simply that you cannot file a lawsuit on the imposition of a tax before the tax is collected,” the Attorney General said. “Since the tax, or penalty, is not collected, until January 2014 the theory goes this case has been prematurely brought and you would have to re-file it after January 2014.”
The individual mandate section to be argued Tuesday has generated the most headlines since the Obama administration began to pursue health care reform legislation. It would require that every adult American – “with minimal exceptions,” Olens said — must obtain health insurance or pay a penalty to the federal government starting in 2014.
This raises the question: can the federal government force citizens to purchase any product, and if they choose to not purchase the product, can the government then impose a fine? The U.S. District Court in Florida and the Appellate Court in Atlanta both said no. Other courts have issued different rulings, causing confusion and requiring a Supreme Court final decision.
Medicaid expansion under this law – without federal funds to support the expansion – is the Wednesday discussion. Olens said Georgia’s Medicaid-eligible population could swell by 650,000 to 750,000. The reason is the bill establishes Medicaid eligibility at 133 percent of the federal poverty level starting in 2014. Medicaid is a shared federal – state partnership but states increasingly are being forced to absorb expanded costs even before this new law takes effect.
“We already know that (fewer) doctors will accept Medicaid,” Olens said. “What happens when we have a 35 percent increase in the number of Georgians that are then on Medicaid? It is an additional $2.5 billion cost (to Georgia) over the decade.”
Attorney General Olens also said the federal health care law will require large employers that include state governments to offer a minimum level of benefits, as decided by the federal government. “They are telling us what coverage we need to provide to state employees,” Olens said. “That ought to be your decision, not the federal government’s decision.”
(Mike Klein is Editor at the Georgia Public Policy Foundation)
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