Mike Klein Online

What Happened to Georgia Prosperity?

Gosh, it seems like only yesterday that Atlanta re-branded itself with the catchy phrase “Every Day is an Opening Day” which came complete with a rap song that energized some folks and offended others.  Mostly, those were the good old days of November 2005 before financial challenges smash-mouthed Georgia and Atlanta like a monster truck rolling over a Ford Pinto.

Georgia and Atlanta today are poster children for residential foreclosures, glistening office towers without tenants, bank foreclosures, transportation woes, water woes, education woes, revenue woes, pension fund woes and stunning numbers of personal bankruptcies.   But we’re not alone; all major cities and state governments are experiencing financial meltdowns.

Some economists suggest the recession has ended. Others like one million Georgians who applied for unemployment compensation since December 2007 are quite a bit wiser.  With at least half a million still not working … many others quit looking for jobs … Georgians know the recession cannot be declared over until just about anyone who wants a job can find one.

Will State Agencies Be Closed?

This year’s General Assembly session will be like none other in recent times.  Folks at the State Capitol are acutely aware that forthcoming revenue vs. expense projections could force layoffs for state employees who already are accustomed to furloughs.   That would translate into reduced state services and closed or combined state agencies.

The numbers are beyond stunning: a $1.5 billion shortfall in the budget year that ends June 30 plus another $2 billion shortfall in the 2011 budget.  All that on top of $3 billion in cuts already made. A lot of folks who plan to campaign this fall will need a strategy to explain why their friends lost jobs and a lot of popular services are just gone.

Nobody around these parts is used to thinking like that.  The drought may be over but the trough is dry.  All this is happening even as the weight of evidence grows that Georgia is losing ground and no longer doing enough of the right things to remain competitive regionally and nationally.

The overall woeful performance of our students on standardized national tests, the failure of all elected officials to solve Atlanta region transportation problems and the weak position Georgia holds in the Tri-State Water Wars are well documented.  But there is more reason for concern.

Losing Ground in Telecom

A Discovery Institute telecom white paper released this month challenged Georgia to keep up with Alabama and other southern neighbors.  Discovery described Georgia telecom policy as being downtrodden by “state cobwebs of regulation.” The institute said State Capitol policy makers could trigger billions of dollars in new investment and create tens of thousands of jobs “by simple reform of outmoded laws.”

The Atlanta-based Southern Education Foundation recently said despite decades of attention and concern, the number of low income children attending Georgia schools increased by nearly 20% between the years 2000 and 2007.  It’s not just Georgia; it’s a Southern thing.

Southern states consistently record the highest number of low income students.  Georgia’s percentage increased from 43% to 52% during seven years between 2000 and 2007, the latest years analyzed.   Latino immigration and low income household birth rates were significant factors.  This means one in every two Georgia public school students is at or below the government’s low income line.

No Easy Answer to Unemployment

Georgia long described itself as an economic engine.  And it was, for many years.  But the engine has stalled.

Most alarming, there is little reason to believe out-of-work Georgians will have jobs soon.  The Georgia Department of Labor has identified unemployed white males as its largest out-of-work population. That dispels a myth that the typical jobless person is a black female.  Men are 75% of all unemployed Georgians and white males are 58%.

This was caused by the twin real estate and banking recessions plus the collapse of Georgia manufacturing of all kinds from blue jeans to carpets to cars.  KIA in West Point is a rare point of light. Volkswagen’s new Chattanooga plant will help some jobless in north Georgia but overall the state does not have enough jobs of any kind available for its unemployed.  You would need to open 200 KIA plants to put half a million Georgians back to work.

No End to Constant Revenue Erosion

Rapidly eroding state government revenue will impact its own programs along with aid to local government programs that receive state support.  Local revenues will be further impacted by devalued real estate that generates less tax revenue.  Next year and beyond there will not be enough federal stimulus dollars to cover the shortfalls.

All this plus Washington’s desire to create federal rules that govern just about everything means trimming a bit here and furloughing a bit there will no longer balance Georgia state budgets.  Medicaid by itself would be enough to sink future state government budgets even in fiscally healthy years.  Nobody knows for certain the financial impact of new federal health care that remains a contentious work in Washington.

The Road Ahead: An Unpaved Highway

No easy answers exist, but a CATO Institute report issued this month suggests several approaches.  It recommends that state governments focus on compensation.  That would be good for Georgia in any budget year.  CATO also brings pressure to bear on early retirements; Georgia is flush with state employees who retired while in their middle 50’s.  We need to study whether retirement ages and eligible service years should be increased.

Some of those folks are back on public payrolls, almost from the moment they retire.  Double dipping costs taxpayers and it deprives other people from having those jobs.  State employees who choose retirement should be banned from accepting any state government consulting or other employment for at least five years from their date of retirement.

Georgia legislators need to write a balanced budget before the General Assembly adjourns.  Generally that work would finish in late March or April but considering the task at hand, almost anything seems possible this year.  Perhaps even a new definition of necessary government.  It’s time.  And it’s overdue.

Additional Resources

CATO Institute,  www.cato.org

Discovery Institute, www.discovery.org

Southern Education Foundation, www.sefatl.org

January 10, 2010 - Posted by mikekleinonline | Uncategorized