Mike Klein Online

Georgia Asks Supreme Court to Reconsider Charter Schools Decision

Mike Klein

Georgia Attorney General Sam Olens has asked the state Supreme Court to reconsider its recent decision that declared the state charter schools commission is unconstitutional.

“Today we filed a motion for reconsideration in an effort to protect the rights of Georgia students to have a say in their education and be placed in a school that meets their needs,” Olens said. “I hope the Court will accept the arguments presented in our brief and reconsider their decision.”  The two-part filing included a motion asking the Court to stay its decision announced May 16.

The Court’s 4-3 opinion immediately impacts 16 brick-and-mortar and online learning charter schools that expected to enroll at least 15,000 students when classes resume in August.  State legislators have begun work on options to provide a short-term fix this fall.  A Senate education sub-committee will be in session on this question next week.

All Georgia charter schools are public schools, and most of the state’s 60,000 charter students attend schools that received charters from local school districts.  However, 16 other schools received state Charter Schools Commission authorization to open after they were turned down by local districts.  This was made possible by a 2008 law that created the commission.

Seven school districts filed suit in 2009. They argued the state charter schools commission was unconstitutional because it bypassed local control of education. The plaintiffs also argued state charter commission schools did not fit the definition of “special schools” that the state is permitted to establish for deaf and blind students, and for other purposes like adult education.

The plaintiff districts did not argue money before the trial court, where they lost, or before the Supreme Court, where they prevailed one week ago.  Tens of millions of federal, state and local dollars are directed to state charter commission schools.   Consequently, local school districts lose those dollars when students exercise school choice rights and choose charter schools.

Georgia Attorney General Sam Olens

Four Supreme Court justices in the majority ruled state charter commission schools are not special schools, according to the definition of special schools in the 1983 amended constitution. The Court also affirmed the local control position advocated by the plaintiff school districts.

The Attorney General’s office motion articulated this distinction:  “Special now evidently means a ‘special student,’ while our Constitution refers to ‘special schools.’  ‘Special’ apparently no longer means a school that offers an experimental and different approach to education than that found in a local school system.”

The motion to reconsider filed by Attorney General Olens also argued Georgia public education has never been exclusively about local control; rather, it is a shared responsibility.  The Georgia state public education budget is some $7 billion per year, about 40% of the entire state budget.

Charter schools enroll about 4% of the state’s 1.65 million public school students; the number who would attend state commission schools next year is 1% of the entire student population.

State lawmakers are considering several ideas that would enable Georgia to regain the position it had begun to earn as a national leader in the school choice and charter schools movements.

Short-term options include placing the 16 affected schools directly under the state Board of Education as “special schools” that receive state funds but no local dollars.  Another potential idea would enable them to open this fall as private schools.  Funding models would change.

Long-term, the Legislature is expected to approve a proposed constitutional amendment that would ask voters to give the state the authority to establish public schools.  The amendment would appear on the November 2012 general election ballot.  But that election is 18 months away, so other protections are needed for the 2011 and 2012 calendar school years.

(Mike Klein is Editor at the Georgia Public Policy Foundation)


May 27, 2011 Posted by | Uncategorized | , , , , , | Leave a comment

Making the Moral Case … Not the Money Case … For Economic Policy

Mike Klein

Has national economic policy become a moral issue?  When he addressed the University of Colorado at Denver business school last Thursday evening, JPMorgan Chase CEO Jaime Dimon said a United States default on its debts and payment obligations would be a “moral disaster.” The big bank was among many who received government funds known as TARP.

Dimon may well have been channeling the innermost thoughts of American Enterprise Institute president Arthur Brooks who spoke about making the moral case for economic change when he addressed Georgia Public Policy Foundation members this month in Atlanta.

Brooks noted off the top, “If you love free enterprise, you need to start talking about morality.”   His view about current national economic policy: “This train is going toward a cliff.”

The following excerpts are from Brooks’ prepared remarks.  You can watch his presentation below or click here now.

“My parents were a little bit mixed up politically but they were very good parents.  My Dad said one time, you know, son, I want to die peacefully in my sleep like my grandfather, not screaming in terror like his passengers.  That could be a joke about our policy makers in Washington, DC right now.  These are perilous times.  We are running more than a new trillion dollars in deficit in 2012. There is no balance under the President’s budget ever.

“Government as a percentage of GDP will never fall under 23% if President (Barack) Obama has his way, and this means trillions of dollars in future taxes and debt and or default, something that would be unprecedented for the United States.  It seems sometimes like our policy makers are peacefully sleeping while we are screaming in terror.

Arthur Brooks, President, American Enterprise Institute

“Successful policy revolutions all look like this: They all started with a moral case for change, not with a money case for change, not with a pragmatic case, with the moral case for change.  Second, they demolish the things that were in their way.  They talk about why the status quo is incorrect, it’s morally degenerate and it has to go.

“Third, they proposed real solutions that real Americans could understand, could grasp, not just esoteric, not just stuff down in the weeds but real solutions.  And finally, there was leadership which induced people to make the sacrifices that they needed to make to have these things come about.  When you look at the things that happened under Franklin Delano Roosevelt, like him or hate him, he was an effective leader who went through those four steps.

“The great Ronald Reagan went through those four steps and we’re going to have to through those four steps again if we’re going to solve the current crisis.  The hardest point is making the moral case. Conservatives never want to talk about the moral case when it comes to economics and right now, conservatives are very uncomfortable about the whole idea of morality.

“The reason is because it makes people think about Jerry Falwell.  It makes people think about God and guns and gays and abortions.  But that’s not what we’re talking about when we’re discussing the free enterprise system.  We are talking about something else and if you say morality, people tend to think the wrong thing, you fear, so the result is we don’t talk about the moral case for free enterprise.

“We talk about the money case for free enterprise.  I’m telling you, I’m looking at the data all day long.  It’s losing.  It is a losing argument to say that the problem with Obamacare is to say that could permanently cut a quarter of a percentage point off the long-term economic growth rate.

“Americans don’t find that compelling.  What they’re getting is two choices.  They’re getting a choice between a left-wing moral case for a false kind of fairness and they’re getting right-wing materialism that says it’s all about economic growth.

“If you think either one of those things is going to get Grandma to let go part of her Medicare, you’ve got another thing coming, because she’s not going to.  What do we need?  We need to have the real moral case.  We need to have the rejoinder to the left that speaks to the heart and if we don’t, we’re going to fail.”

Link to complete presentation on the Georgia Public Policy Foundation YouTube site.

About Arthur Brooks

Arthur Brooks is a Seattle native and classically trained musician who performed with the City Orchestra of Barcelona for twelve years while he studied to obtain bachelors and masters degrees in economics.  Brooks received his doctoral degree in economics policy analysis from the Rand Corporation.  He was an assistant professor of public administration and economics at Georgia State University from 1998-to-2001.  He was a consultant to the Rand Corporation for ten years and he joined the Syracuse University faculty for two years.  Brooks became an AEI visiting scholar in 2007 was named AEI president in 2009.  Link

About the American Enterprise Institute

AEI is a private, nonpartisan, not-for-profit institution dedicated to research and education on issues of government, politics, economics, and social welfare. Founded in 1943, AEI is home to some of America’s most accomplished public policy experts — from economics, law, political science, defense and foreign policy studies, ethics, theology, health care, and other fields.  Link

(Mike Klein is Editor at the Georgia Public Policy Foundation)

May 23, 2011 Posted by | Uncategorized | , , , , , | Leave a comment

One Unusual Week: “Everything Happened in Such a Hectic Fashion”

Mike Klein

Nina Gilbert was waiting to board a plane Friday when she paused to discuss the unusual week in Georgia charter schools history.  “Everything happened in such a hectic fashion,” said Gilbert, who is head of school at Ivy Prep Academy in Norcross.  “I feel most pressured to be able to inform my parents that school will start without a hitch.  This is incredibly urgent.”

Ivy Prep Academy in Norcross and Cherokee Charter Academy in Canton lost their operating charters on Monday when the Supreme Court struck down the Charter Schools Commission.  Some 16,500 students must consider new options and 16 schools face unknown futures.

Thursday evening Ivy Prep and Cherokee Charter schools asked local boards of education for new charters.  Both schools will have to wait a bit longer as neither board voted on Thursday.

Ivy Prep applied to the Gwinnett public schools board which turned down Ivy Prep’s request three years ago.  Gwinnett was also the lead plaintiff in the Supreme Court case.  “We need believers,” Ivy Prep’s Gilbert said.  “We need people who believe in what we do so the academic routines of our girls are not interrupted while the adults figure out what to do.”

Gwinnett turned down a school in theory three years ago but now its five board members must decide whether to grant a local charter or close an existing school and endure the reaction to that decision.  Ivy Prep enrolled 450 middle school girls this year.  About 60% live in Gwinnett; the next largest student group is from DeKalb County.  Ivy plans to start ninth grade this fall.

“We requested an extension to collaborate with Gwinnett County to ensure any questions can be answered to their satisfaction,” Gilbert said.  The next Gwinnett board meeting is June 16.  “We will meet any timeline to make sure (our families) can enroll this fall,” Gilbert said. “That is really the most important one to me, our families.”

Whereas Ivy Prep is working to save its fourth school year, Cherokee Charter Academy is trying to save its first.  The Canton-based brick-and-mortar charter school acquired a building large enough for 1,150 students and this fall it would open with about 950 students in grades K-8.

Cherokee Charter Academy applied to the Cherokee public schools board.  “It’s a very different (school) board from the one that turned us down and we are very grateful for that,” said parent advocate Lyn Michaels-Carden.  “They are very receptive.”  Three new school board members were elected last November. The board could vote on Cherokee Charter at its June 16 meeting.

Michaels-Carden is former radio personality turned marketing executive who is also Cherokee Charter Academy’s designated liaison between state and local education boards.  She fully expected to send her daughter to first grade this fall at Cherokee Charter.

“Cherokee is one of the top-performing counties in the state for education. Having said that, Georgia is 47th in the country and I have a very bright child,” Michaels-Carden said. “I want to see her challenged. I want to see her get the best education that she can and I think this school will offer that to her.  She is in a great school now but I think I owe her the best.”

Michaels-Carden said Cherokee supporters are optimistic.  “This has been quite an experience.”

(Mike Klein is Editor at the Georgia Public Policy Foundation)

May 23, 2011 Posted by | Uncategorized | , , , , | Leave a comment

Is Charter Schools Commission Case Headed Back to Supreme Court?

Mike Klein

We should know very soon whether the Georgia Supreme Court will be asked to reconsider its historic charter schools commission decision, even though one source said the likelihood that the Court would reverse itself is “an astronomical possibility,” as in, place really low bets.

Thursday could be a pivotal date. Representatives from commission charter schools affected by Monday’s Supreme Court decision have been asked to attend a meeting with Attorney General’s Office and State Board of Education staff.  Then in the evening one of the charter commission schools will go before the Gwinnett County Board of Education to request a local charter.

The Supreme Court ruled on Monday that the 2008 General Assembly overstepped its bounds with a law that gave a new state commission the power to authorize charter schools, in many instances, after those same schools were denied charters by local boards of education.  The Court majority said in 4-3 split decision that it would not allow the state to create K-12 “special schools” that compete with local board of education schools for students and funds.

Several sources who are familiar with options being discussed since Monday said a decision to request Supreme Court reconsideration is near the top of the list because the motion must be filed no later than Tuesday, May 31. There would be no new oral arguments and the Supreme Court could issue a confirmation or reversal of its first decision at any time.

Speaking on background, sources said strategies are being broken down into short-term and long-term priorities.  Short term priorities include making certain that commission school professional staffs are paid through the end of this school year and then examining options that would enable schools to operate next year.

There is growing support for a short-term option that would transfer existing and newly authorized charter commission schools to direct supervision by the State Board of Education. This would change their funding models – always a dicey and critical component of any change — but it could prove to become the best option to prevent shutdowns. The downside is another possible legal challenge.

Three persons who are familiar with ongoing conversations said federal Race to the Top dollars might be an option to replace local funds that would be lost if the state board assumes control.   Estimates vary, but that shift could require $30 million to $50 million. Race to the Top dollars have already been designated for STEM education programs, per Governor Nathan Deal.

Another short-term option could create one of the most interesting public relations scenarios.  At least two charter commission schools will request charters from local boards of education that originally rejected them. Ivy Prep Academy will ask the Gwinnett Board of Education for a charter on Thursday evening.   Ivy received a state commission charter after it was  rejected by Gwinnett.  Cherokee Charter Academy will do the same in Cherokee County, where it was also initially turned down.

Georgia charter schools draw students from an extremely wide geographic footprint.  That creates unique funding challenges.  For example, Ivy Prep Academy could receive a Gwinnett local charter but local funding associated with that charter would only follow students who are county residents.  The Gwinnett board cannot take any action that would ensure Ivy Prep is paid to educate students who live in other counties. That would require some sort of additional financial fix.

The problem becomes potentially more extreme when you consider charter commission online learning schools. Georgia Cyber Academy expects to enroll at least 8,500 online students this fall. GCA pupils come from nearly every county in Georgia. The Academy needs a financial model that ensures consistent funding.  It cannot piecemeal money county-by-county.  Georgia Cyber was originally under state board supervision and that might become its best current option again.

Looking toward long-term solutions, sources agreed their best option rests with a constitutional amendment that voters would be asked to approve in November 2012.  Amendment language could take many forms but, essentially, it would ask Georgia voters to approve creation of a commission that could authorize state charter schools and designate funding.  Perhaps that would end discussions about what is a special school, and what is a special student.

(Mike Klein is Editor at the Georgia Public Policy Foundation)

May 18, 2011 Posted by | Uncategorized | , , , , , , , , | Leave a comment

Georgia School Choice Advocates Are Not Going Down Without a Fight

Mike Klein

Georgia school choice advocates are not going down without a fight.  Some are going back to the legislative table and some are taking to the streets.  On the other side of the coin, there are those who believe the Georgia Supreme Court got it right in Monday’s split decision opinion that sidelined the state charter schools commission.

Late Monday afternoon we learned a Senate sub-committee will be named to study the Supreme Court decision and propose fixes, perhaps this summer.  “The thing we are counting on is the special session,” said Tony Roberts, executive director of the Georgia Charter Schools Association.  “That comes up in August.”

The year’s second General Assembly session could become hyper-hectic when lawmakers return to Atlanta to redraw legislative district lines, possibly try tax reform again, and now, just perhaps, an attempt to address charter schools questions created by the Supreme Court ruling.

And there are several questions, including how to keep funds flowing to existing schools and the impact on new schools that were scheduled to open this fall.  The state commission planned to have 17 schools operating with as many as 16,500 students starting in August.  Notably, the majority opinion written by Chief Justice Carol W. Hunstein contains no effective date.

Supporters predict thousands will descend on the Washington Street side of the State Capitol on Tuesday morning to protest Monday’s 4-3 decision.  Governor Nathan Deal is in Europe on a trade mission and the General Assembly is out of town but protestors, no doubt, will be easily heard at the Supreme Court which is just across the street from the Capitol.

Earlier, Roberts at GCSA described the decision as “bad news for thousands of children and parents in Georgia who hoped for a brighter future with their children in a Commission charter school.  This is a case where the majority is NOT right.  The minority opinion of the Supreme Court contained in the 75 pages of dissenting opinion is the one that is right.”

Schools are asking, what to do next?  “That’s the $64,000 question,” said Matt Arkin, head of school at Georgia Cyber Academy which has 6,500 online learning students.  GCA was approved to become a state commission charter school this fall.  “Until we hear otherwise we’re going to continue with our plans. The ruling today certainly has not changed that commitment.”

Monday’s opinion – filed seven months after oral arguments – said the General Assembly overstepped its bounds when it passed a 2008 state charter schools commission bill that was signed into law by Governor Sonny Perdue.  The Supreme Court decision means state charters would not receive funding this fall, and perhaps sooner.

Mark Peevy, executive director of the Georgia Charter Schools Commission said his office is coordinating with the offices of Governor Deal and Attorney General Sam Olens, along with the State Board of Education, to understand the ruling and mitigate negative impacts.

“We will be working on a solution to help our current schools bridge the gap until we have that fix in place.”  Peevy estimated that could cost $30 million-to-$40 million.  Peevy admitted he does not have a great answer for parents who wonder what’s next.  “The parent has to take a look at what they want to see happen with their child and move forward with those options.”

While crestfallen school choice and charter school supporters re-group, others view the majority opinion written by Chief Justice Carol Hunstein as confirmation that House Bill 881 got it wrong three years ago.

“One thing that does seem clear is the Supreme Court has held the General Assembly may not create its own charter schools for the general K-12 population,” said attorney Tom Cox, who represented DeKalb County and the Atlanta Public Schools before the state Supreme Court.

“This has never been about the wisdom and viability of charter schools, at least speaking for my clients, Atlanta and DeKalb.  They have approved and authorized and are currently operating within their districts more charter schools than any other district in Georgia,” Cox said.  “This has always been about who makes the decision about which new charter schools will be approved.”

Georgia joins a short list of states whose highest courts rejected the creation of a state charter schools commission.  The list consists of just Georgia and Florida.   A challenge to the Florida Schools of Excellence closed the state charter commission closed before any schools opened.

Arkin at Georgia Cyber Academy remains optimistic.  “Every state that ever had the appetite to do this has eventually done it. This is probably a hiccup toward the eventual solution. Now we just need to wait for some direction from the state Board of Education and from the governor to help us all make sure our students don’t get penalized.”

(Mike Klein is Editor at the Georgia Public Policy Foundation)

May 16, 2011 Posted by | Uncategorized | , , , , , , , , , , , | Leave a comment

Georgia Supreme Court Throws Thousands of Charter Students into Limbo

Mike Klein

The Georgia Supreme Court decision that struck down the state’s charter school commission is a long-awaited opinion that seems likely to throw thousands of students into education limbo and dismantle a growing network of existing and approved charter schools.

The Supreme Court ruled 4-3 in favor of the challenge by seven public school systems to a 2008 state law that created the Georgia Charter Schools Commission. The law gave the GCSC the authority to authorize and fund charter schools with state and local dollars.  Some schools that received state commission charters were initially turned down by local boards of education.

It is now apparent the Supreme Court has been deeply divided since oral arguments last October. Predictions of a quick ruling before year-end vanished. The Court took the highly unusual step in March to announce it would delay its ruling with no date specified. The review lasted seven months.

The majority opinion focused on a strict interpretation of “special schools” which the 1983 state Constitution defined as schools established to help students with special needs, for example, blind, deaf and vocational or adult students. The 2008 law sought to expand “special schools” to include charter schools which did not exist when the Constitution was amended 28 years ago.

Chief Justice Carol W. Hunstein

Chief Justice Carol W. Hunstein wrote the 24-page majority opinion:

“Labeling a commission charter school as ‘special’ does not make it so when the students who attend locally-controlled schools are no less special than those enrolled in commission charter schools and the subjects taught at commission charter schools are no more special than the subjects that may be available at locally-controlled schools.”

The majority opinion underscored a strict, traditional view of local control over school systems:

“Because our constitution embodies the fundamental principle of exclusive local control of general primary and secondary (“K-12″) public education and the Act clearly and palpably violates (the State Constitution) by authorizing a State commission to establish competing State-created general K-12 schools under the guise of being “special schools,” we reverse.”

The Commission would have enrolled up to 16,500 students in 17 schools this fall. After the ruling, state Schools Superintendent John Barge said his office will begin to examine “what flexibility can be offered for these schools.”

Justice David E. Nahmias

Justice David E. Nahmias wrote the 74-page primary dissent:

“Today four judges have wiped away a small but important effort to improve public education in Georgia – an effort that reflects not only the education policy of this State’s elected representatives but also the national education policy of the Obama administration. That result is unnecessary, and it is unfortunate for Georgia’s children, particularly those already enrolled and thriving in state charter schools.”

The dissent also took strong exception to the majority opinion view of local control:

“Moreover, local boards of education – entities that are not even mentioned in the Constitution until 1945 – have never had and do not today have ‘exclusive control over general K-12 public education,’ because that control has always been shared with and regulated by the General Assembly and, since 1870, by the State Board of Education and State Superintendent as well.”

The dissent continued, “Thus, understood in the true historical context, commission charter schools are simply the latest iteration of ‘special schools’ that have long been created by the General Assembly outside the ‘common’ local school systems in Georgia. The majority may be able to change our law, but it cannot change our history.”

Hunstein was joined in the majority by Justices Robert Benham, P. Harris Hines and Hugh Thompson. Nahmias was joined in the minority by Justices George Carley and Harold D. Melton.

Justice Harold D.Melton

Melton quoted directly from the Charter Schools Commission Act in a second dissent that noted the 2008 General Assembly sought to create “access to a wide variety of high-quality educational options for all students regardless of disability, race or socioeconomic status, including those students who have struggled in a traditional public school setting.”

Melton wrote the law specifically referred to “providing the highest level of public education to all students, including, but not limited to, low-income, low-performing, gifted and underserved student populations and to students with special needs.”

All Georgia charters are public schools. The first Georgia charter schools law passed in 1993 and was modified five years later.  Under the 1998 law, state or local boards could authorize charter schools. Most charters are brick-and-mortar schools; some are online learning models.  Georgia has more than 60,000 students in charter schools.

The 2008 law was the first update in ten years and it caused a ruckus.  The new legislation enabled petitioners who were turned down by local school boards to appeal to a new state commission. Local school districts lose funds that follow students to state charter schools.  This change coincided with the rapid expansion of online learning companies whose products compete with local school districts.

The majority opinion said very little about redirection of state and local education dollars, even though that has been hotly debated and was widely considered to be the real reason for the lawsuit filed by Gwinnett, Atlanta, DeKalb and four other school districts.  The majority’s 24-page ruling focused almost entirely on historical and current definitions of special schools.

Writing the dissent, Nahmias said, “Because the majority evidently can find no traction in the local systems’ attack on the funding scheme … as the ground for striking down the statute, the majority must rely on the ‘special schools’ argument, which has the consequence of nullifying any state charter schools established under the 1998 Act.”

Ironically, Georgia public education innovation in the charter schools sector was one reason the state received a $400 million Race to the Top grant from President Barack Obama’s administration.  Now the state Supreme Court decision means charter commission schools will lose tens of millions of dollars.  They will be forced to find a new lifeline or perhaps cease to exist.

(Mike Klein is Editor at the Georgia Public Policy Foundation)

May 16, 2011 Posted by | Uncategorized | , , , , , , | Leave a comment

Atlanta Fed Bank Boss: Gas Prices Like “Seeing Your Money Click Away”

Mike Klein

When he delivered a national and regional economic report card this week, Federal Reserve Bank of Atlanta President Dennis Lockhart came armed with data to support his conclusion the economic recovery is “demonstrating clear evidence of improving quality” despite residential and commercial real estate that continue to lag gains evident in other sectors.

Then after his presentation Lockhart spoke during an interview about an indicator that is harder to measure: the emotional well-being of consumers who feel battered by inflation on everyday family staples, especially prices at the pump and groceries.

“Gasoline prices influence consumer attitude and sentiment because of the direct, highly visible nature of filling up your tank and seeing your money click away, and then being startled by the cost of the full tank,” the Federal Reserve Bank president said.  “It has a big effect on people and we have to watch expectations closely to make sure they don’t get away from us.”

On Friday, the U.S. Labor Department said the Consumer Price Index rose 0.4 percent in April, and year-on-year inflation rose to 3.2 percent, the highest level since October 2008. Gasoline was up 3.3 percent nationally in April and 33 percent in the past twelve months. One gallon of regular unleaded routinely sells for $4 and sometimes more in the Atlanta metropolitan region.

Atlanta Federal Reserve Bank President Dennis Lockhart

During his economic report card Lockhart predicted “relatively modest” 3-to-4 percent annual gross domestic product growth in 2011 and going forward, adding, “Economic history shows that recoveries after a financial crisis tend to be quite slow.”

Strong growth during the second half of 2009 was softer through much of 2010 until a fourth quarter bounce back. “Ups and downs in quarterly growth are in fact normal,” Lockhart told the Council for Quality Growth, which promotes economic development in Atlanta and collar counties.

Long term economic growth and stability will no doubt be impacted by how Washington resolves fiscal issues. On Thursday, Republican leaders in Washington told President Barack Obama that there will be no increase in the national debt limit ceiling without linking it to entitlement reform.

“The important thing is to get a meaningful long-term plan in place that first, attacks the deficit which is a pre-requisite to being able to repay debt, and then works that debt down,” Lockhart said on Wednesday. “I have emphasized in previous remarks, and I know most of the people in political circles understand this, you cannot count on growth to take us out of this debt.”

Lockhart said he could not discuss whether the debt limit ceiling should be tied to other issues such as entitlement reform, as national Republicans insist.   “It’s too close to being active legislation, active deliberations on (Capitol) Hill, for someone like me to weigh in from the outside. It’s important that we come to grips with this and produce a credible plan.”

The U.S. domestic economy has battled uphill to recover from other impacts that include last year’s European sovereign debt crisis and earlier shocks created by hurricane Katrina, the Gulf of Mexico Oil spill and this spring, the Japanese tsunami, U.S. tornadoes and Mississippi River flooding.

Yet, it is resilient. Lockhart said first quarter business and software investment grew 12 percent  compared to last year’s fourth quarter, and personal consumption expenditures were up 2.7 percent.  He said anecdotal evidence suggests the Southeast outperformed the national economy.

Residential and commercial real estate nationally and also in Georgia continue to lag during the 22-month recovery. Citing several economic reports, Lockhart said home sales prices are down 30% from their peak five years ago and 23% of residential mortgages are underwater, meaning the property is worth less than the outstanding mortgage balance.

Lockhart said 3.7 percent of mortgages were in foreclosure and 7 percent of homeowners were delinquent on payments in March. Existing home sales are down 50 percent and near 1998 levels. New home sales are down 80 percent and now are at levels not seen since the early 1960s.

“Defaults and foreclosures are likely to remain elevated for some time,” Lockhart said. “My forecast for residential construction puts me among the less optimistic.” The national inventory of new homes is near historical lows, he added and, “This is clearly evident in Atlanta.”

Prices for commercial real estate – defined as the office, retail, hotel, warehouse and multi-family residential sectors – peaked in 2008 before a 45 percent decline that continues today.  Atlanta office vacancy rates remained above 20 percent in the first quarter this year, fueled by weak job creation.

The U.S. Department of Labor’s jobs creation and unemployment report issued one week ago said non-public sector employers added more than a quarter-million jobs in April.   “Employment growth of the magnitude we have seen so far this year is encouraging but will still only slowly bring down unemployment in the near term,” Lockhart said.

Georgia unemployment is 10%, well above the 8.8% national rate. The Federal Reserve Bank president predicted a “continuing decline of unemployment to a base level that is higher than pre-recession levels. At the gradual pace I am expecting, it could take up to three years to get employment back to pre-recession levels.”

Lockhart predicted overall inflation of 2% or less over the next two years, but he said further spikes in oil prices, intensified fiscal pressures here and in Europe, and continued deterioration of the U.S. residential and commercial real estate sectors could negatively impact inflation.

In summary, the Federal Reserve Bank president said, “Overall, I think the case can be made that the recovery underway is meeting some of the tests of quality.  I understand, however, that it doesn’t feel that way to all of us.  The recovery is clearly a work in process.”

(Mike Klein is Editor at the Georgia Public Policy Foundation)

May 15, 2011 Posted by | Uncategorized | , , , , , , , , , | Leave a comment

Georgia Will Seek Federal Funds for New National Transportation Institute

Mike Klein

Georgia intends to pursue federal funds to create a National Transportation Institute at Georgia Tech. Governor Nathan Deal made the announcement Tuesday morning in Atlanta, probably to the chagrin of the state’s northern neighbor because Tennessee has an institute in Knoxville.  And, here’s the rub, the federal government would not have funds available for both centers.

Governor Deal’s announcement was made during his morning speech to some 1,200 attendees at the 2011 Georgia Logistics Summit. The Atlanta-based Robert W. Woodruff Foundation has provided a six-figure seed grant that will enable the state to prepare its federal funding proposal.  At least six Georgia universities — their researchers and students — would become project partners.

“We plan to partner with other southeastern universities giving this plan a regional context as well,” Governor Deal said. “I plan to reach out to the governors of the other southeastern states to propose a comprehensive logistics study that will help all of us coordinate our planning and our investments as we move forward.”

State executives who briefed reporters later said Georgia will apply for a National Transportation Institute designation from the U. S. Department of Transportation.  Designation would bring $2.25 million in annual federal dollars that would be supplemented with public and private funds.

Georgia is a natural location for a regional transportation institute. The Georgia Ports Authority in Savannah and Brunswick handles 12% of the nation’s total export traffic to all U.S. major trading partners. The state has the world’s busiest passenger airport, several thousand miles of freight rail lines, three north-to-south interstates and one east-to-west interstate.  Logistically, it makes sense.

The University of Georgia, Georgia State University, Georgia Southern University, Spelman College and Southern Polytechnic State University would become partners. The institute would help to coordinate real-world transportation planning within southeastern states and it would become an academic center for logistics industry students.

Georgia’s announcement sets up some fairly interesting dialogue possibilities with Tennessee, which proudly boasts about the Center for Transportation Research at the University of Tennessee in Knoxville. Georgia officials said the region would not need two such centers.

The Center for Transportation Research website notes that a National Transportation Research Center was recently established with Tennessee’s Oak Ridge National Laboratory. CTR’s site says the 41-year-old University of Tennessee center has $10 million in ongoing projects and that it “strives to address these needs for the nation, our region and our community.”

Governor Deal’s announcement was the biggest early headline from a daylong summit that brought together experts on how logistics impacts agribusiness, air freight, life sciences, energy, manufacturing and ocean freight.  The consistent summit theme was how to improve Georgia-centric logistics and then make that model interact properly with regional and national models.

Jack Wells, chief economist for the U.S. Department of Transportation, described many federal government priorities and initiatives during his logistics summit morning keynote address.

But Wells did not tip his hand on the biggest elephant in Georgia logistics; federal funds that Georgia needs for the $580 million Savannah River and harbor deepening project.

Wells said the U.S. DOT is conducting a project study; the U.S. Army Corps of Engineers has studied the Savannah project for several years and Congress first discussed funding some 12 years ago. It could be another year before the federal funding question is resolved.

“The Savannah harbor expansion project is one that the Corps of Engineers and hopefully the White House will recognize as great significance for the future of our country,” Governor Deal said Tuesday morning. “It makes sense for Georgia. It also makes sense for the southeastern region and it certainly makes sense for the country as a whole.”

Wells said four southern ports – Savannah, Charleston, New Orleans and Norfolk – handle about 39% of the nation’s product exports and one-fourth of all exports and imports. Southeastern states grew their exports by 80% in the last decade while the nation grew by 71%.

“I do want to emphasize, the federal government will not select a single port on the East Coast and support just that one port,” Wells said. “What we want to do is look at each individual port, what its needs are, what its contributions are to the national economy and then make appropriate investment in that port. We won’t be picking only one port.”

State officials gave Wells’ prepared remarks a favorable review.

“When you look at it from an economic point of view, from a facts and figures point of view, we’re going to be coming out on top of that argument because we have such an impact on the national economy,” said Page Siplon, executive director of the Georgia Center of Innovation for Logistics. “All those things are music to our ears.”

(Mike Klein is Editor at the Georgia Public Policy Foundation)

May 10, 2011 Posted by | Uncategorized | , , , , , , , , , , , , | Leave a comment

NATO Top Diplomat in Atlanta: Washington and Pakistan Need Each Other

Mike Klein

Pakistan’s prime minister uttered menacing words toward Washington on Monday as diplomatic nerves continue to fray after American troops took out Osama bin Laden.  But thousands of miles away in Atlanta, the NATO Secretary General was equally forceful in saying that success in that part of the world means Washington and Pakistan need each other.

“Osama bin Laden apparently has been hiding in Pakistan for quite some years.  That fact raises a lot of questions,” NATO’s Anders Fogh Rasmussen said.  “My bottom line is that we need strong cooperation from Pakistan.  If we are to ensure long-term peace and stability in Afghanistan and beyond, then we need the positive engagement of Pakistan.”

Rasmussen noted that he spoke with President Barack Obama after the military strike that took out the al Qaeda terrorist.  “Osama bin Laden stood against all the values that America and Europe have shared and upheld for many decades, freedom, tolerance and humanity.”

NATO’s Secretary General also brought this observation to Atlanta:  “Over the past few months brave people throughout the Arab world have cried out for freedom, freedom that we have enjoyed for many decades, not least thanks to NATO.  Change is taking hold in the Middle East and North Africa but Libya is an exception. Colonel (Moammar) Gadhafi and his regime are repressing their people who have expressed the desire for freedom.”

Rasmussen made Atlanta the second of four cities on a whirlwind getting-to-know-you better tour that began in Washington, D.C. this past weekend, continues in Austin, Texas on Tuesday, and then moves to Chicago before the Secretary General returns to Washington later this week.

NATO Secretary General Anders Fogh Rasmussen (NATO Photo)

“My bottom line is, there is no alternative to a positive engagement with Pakistan,” the former two-term Prime Minister of Denmark told 200 World Affairs Council of Atlanta guests at The Commerce Club.   “We should support those forces in Pakistan that realize the real threats against the Pakistani society come from terrorists and extremists.”

Pakistan is feeling emotionally tattooed after Americans parachuted under the cover of night into Abbottabad, landed in bin Laden’s compound, easily killed him and then flew away with his shot-up body and an enormous cache of intelligence that U.S. officials believe will be invaluable in the effort to find and kill or capture more terrorists.

Pakistan reacted with bewilderment, dismay and embarrassment last week. Then on Monday, a defiant Prime Minister Yousuf Raza Gilani told his Parliament that bin Laden’s death was “justice done” but he also warned Washington, “Unilateralism runs the inherent risk of serious consequences.”

U.S. officials now believe intelligence taken from bin Laden’s compound proves the terrorist was still engaged at high levels within al Qaeda, which has long been tied to Afghanistan’s Taliban.

Rasmussen said Taliban insurgents are at a crossroads. “Continued fighting will lead to Taliban defeat.  So, time has come for the Taliban to cut links with al Qaeda.  Extremism has no future.  Cut links with al Qaeda, renounce violence, engage in the political process, help rebuilding the Afghan society.”

Rasmussen seemed publicly less concerned about growing political pressure that bin Laden’s death means the United States should downsize its costly military commitment in Afghanistan.

“International terrorism still poses a direct threat to our security and stability across the world.”  Afghanistan, Rasmussen said, “has been ravaged by over 30 years of conflict.  We have the right strategy, the right resources and the resolve to see this through.  We will continue our mission to ensure that Afghanistan does not return to being a sanctuary for extremists and terrorists.”

Rasmussen has several times publicly stated that Libyan dictator Colonel Moammar Gadhafi must go.  “There is no military solution solely to the problems in Libya.  And, it’s hard to imagine that attacks against the civilian population would stop as long as Gadhafi remains in power.”

NATO assumed command of multi-national forces aligned against Libya five weeks ago.  “Consider this: What if we had stood by and watched as Gadhafi’s regime killed innocent civilians in Benghazi?  What would that have said about our values?” Rasmussen asked.

NATO has flown 5,500 sorties against Libyan government forces.  “We have significantly downgraded Gadhafi’s war machine. The clear message is, Gadhafi, it’s time to leave.  Your time is out.  There is no future for you and your regime.”

Rasmussen arrived in the United States on Saturday.  He visited wounded service personnel at the U.S. military hospital in Bethesda, Maryland.  The NATO Secretary General is also making time to meet with Georgia and Texas National Guard troops. “I am grateful for their service and for their sacrifice.”

(Mike Klein is Editor at the Georgia Public Policy Foundation)

May 9, 2011 Posted by | Uncategorized | , , , , , , , | Leave a comment

U.S. Justice Will Decide Whether to Challenge Georgia Immigration Law

Mike Klein

U.S. Homeland Security Secretary Janet Napolitano side-stepped whether the White House will challenge Georgia’s new immigration law in federal court when she spoke to an Atlanta Press Club luncheon on Saturday, but the secretary left no doubt President Barack Obama has no interest in state-by-state immigration reform.

“Those legal determinations will be made in consultation with the Department of Justice, but I think these efforts at the state-by-state level, first of all, they are predicated on a falsity,” Napolitano said at The Commerce Club.  “The falsity is that there has been nothing done and the border somehow is out of control.  That is incorrect,” she said in response to a question.

Napolitano listed several homeland security improvements during prepared remarks, among them, doubling the number of border patrol agents to 21,000, an increase in analysts who focus on Mexican cartel violence, a fivefold increase in the agents who work directly with Mexican enforcement, and screening all southbound trains for guns and cash.

Napolitano is a former U.S. prosecutor in Arizona where she also served the state as attorney general and for six years as governor before she took the Homeland Security job.  Arizona enacted Senate Bill 1070 immigration reform legislation last year and it was challenged by the U.S. Justice Department.  A federal Court of Appeals upheld part of the government challenge..

Georgia Governor Nathan Deal’s office says he will sign House Bill 87 which is similar but not identical to the Arizona legislation.  Georgia legislation was passed by the General Assembly this year as a statement that state legislators are tired of waiting for federal immigration reform.  The Department of Homeland Security says Georgia has 480,000 illegal immigrant residents.

Homeland Security Secretary Janet Napolitano

Napolitano told the Atlanta Press Club, “This is what the President has said and what I’ve been saying.  State by state won’t cut it.  It’s got to be a federal reform of immigration laws if we are really going to deal with this issue.  Look at the way our system is set up.  Read the case law.  Read the Constitution and you will realize immigration is fundamentally a federal issue.”

The secretary said reform should update enforcement– particularly where fines and penalties are not substantial; update visa laws for temporary workers – she named the agriculture and high tech industries; pass the Dream Act that would create a path to citizenship for illegals who were brought here as children; and decide how to proceed with millions more who are in the country illegally “so they can come out of the shadows.”

The Homeland Security secretary’s Atlanta public appearance came six days after President Obama announced a successful hit on Osama bin Laden.  “There really is no doubt that al Qaeda or an al Qaeda affiliate or those inspired by its ideology continue to focus their attacks on the West and their thoughts and attacks on the United States,” Napolitano said.

“What does that mean?  That does not mean that we live in fear or we walk around in a constant state of alarm.  What it means is that we just have to remain ever vigilant against these threats and others from those who would see to attack us and our way of life.”

Napolitano predicted airport screening changes over the next several months or couple years should make getting to the gate less intrusive for low-and-no risk passengers.  She said security officials would like to “reduce the number of things you have to take off,” and Napolitano said, “No one wants to see a 6-year-old being patted down.”

The secretary spent Sunday morning in tornado-stricken Ringgold, Georgia near the Tennessee border. FEMA – the Federal Emergency Management Agency – has nine Georgia disaster relief centers open 12 hours per day, seven days per week.  Napolitano said the agency has paid $23 million to some 50,000 southern states tornado victims.   FEMA‘s current focus includes Mississippi River floods that are devastating several states.

Napolitano will deliver the Emory University commencement address on Monday.

(Mike Klein is Editor at the Georgia Public Policy Foundation)

May 8, 2011 Posted by | Uncategorized | , , , , , , , , , , , | Leave a comment