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Folks Could Get Run Over When Debt Limit Rubber Meets the Road

Mike Klein

Chances are extremely high that you know someone who receives Social Security or Medicaid or unemployment compensation or another federal benefit payment.  If so, they may be scared.

More than 1.6 million Georgians receive Social Security or Supplemental Security Income monthly benefits.  Some receive both.  Nobody knows what they will receive starting next week when direct deposits and paper checks are due on August 3 and 10.  That’s just one way that you can look at the real world impact of adults behaving angrily in Washington political circles.

The federal debt limit ceiling fiasco that has Washington in volcanic gridlock has become some kind of weird super energy cell that drives politically bitter conversations and it holds a lightning bolt over real Georgians whose lives might depend to a great degree on federal assistance.

About 15 percent of all Georgians – about 1.5 million — receive Medicaid benefits.  Twelve percent – about 1.2 million — receive Medicare benefits.  The state has more than 200,000 enrolled in the children’s health insurance program.  What happens to them next week?  Medicaid and the PeachCare children’s program cost Georgia about $694.4 million per month.

About 181,000 Georgians receive weekly unemployment compensation benefits.  Will those checks still be written next Friday if the federal government suddenly goes into fiscal default?

These are real world, feet-on-the-hot-pavement questions.  No doubt, the next several days in Washington will be historic, regardless of how it plays out, but away from Washington real world folks are trying to understand the impact created by something way beyond their control.

Unemployment checks appear safe.  “The long and short of it is the unemployment insurance payments will go out like they are supposed to,” said state labor commissioner Mark Butler.  Checks are written on Friday.  This week Georgia paid $47 million to 181,665 recipients.

In an average month, Georgia writes almost $200 million in unemployment benefit checks.  Funds to cover those checks are derived from taxes paid by employers into the unemployment insurance trust fund.  The state account is flush and Georgia has not needed to borrow money from Washington since April.

Social Security and Supplemental Security Income benefits would be less certain during a Washington financial default.  The federal government owes benefits payments to 28 million Americans next Wednesday and 27 million more payments are scheduled one week later

President Barack Obama famously said he could not guarantee benefits will be paid unless Congress agrees how to raise the debt limit ceiling and sends legislation he is willing to sign.  Others contend payments, or at least partial payments, could continue by selling Social Security trust fund bonds in a scenario that raises cash, but also requires issuing other bonds.

All that matters to folks are their checks and direct deposits.  The Social Security Administration website has nothing that would help citizens through this minefield.  When I looked today the top news announcement on the SSA website was an entry about reduced hours in field offices starting next month.  There was nothing about possible delayed benefits or even how one should follow that information trail.  Equally unhelpful: the White House website.

Each month in Georgia more than 1.4 million people receive more than $1.5 billion in Social Security benefits, according to data provided by the SSA’s Atlanta public affairs office.  Another 228,500 receive almost $118 million per month in Supplemental Security Income benefits.

Or to describe that in a different context, 17 percent of Georgia residents depend on SSI or Social Security checks, based on newest SSA available data from December of last year.

Moody’s Corporation, the big international debt ratings service, recently named Georgia among a small number of states that would be least affected by a federal government default.  Still, the percentage of federal dollars inside the state budget is great.

The current fiscal year budget includes $18.1 billion in state funds, $10.8 billion in federal funds and about $8.6 billion from other sources, including the lottery, tobacco settlement funds, motor fuel taxes and other receipts.  So to have some percentage of that in doubt for any length of time is a big deal for everyday folks from all walks of life, particularly those using health care.

Brian Robinson, deputy chief of staff for Governor Nathan Deal, said this in an email:  “Because of the uncertainty surrounding what Congress and the president will do, federal agencies have not contacted their state counterparts to discuss potential funding disruptions.”  Governor Deal’s office asked agencies to report how they would be affected if the federal payments faucet slows down and how they would prioritize their spending.

At some point, rubber always meets the road.  This time, a lot of folks could also get run over.

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

July 29, 2011 Posted by | Uncategorized | , , , , , , , , | Leave a comment

Long-Term Unemployed Are Now Majority of Jobless Georgians

Mike Klein

Georgia’s new unemployment data proves the state’s weak economic recovery has missed nearly half a million people who worked and claim they want to work again.  The Atlanta metro area’s 10.2% jobless rate announced Wednesday is identical to the state percentage, and both are nearly one full percentage point higher than the 9.4% national percentage.

The most significant trend in Georgia Department of Labor data is continuous growth in the percentage of long-term unemployed, defined as persons without work more than 26 weeks.  They now represent 54% of the state’s jobless population, up from less than 35% one year ago.

Georgia reported 76,635 initial claims for unemployment insurance in December and 478,833 total unemployed.  The number of long-term unemployed rose dramatically from 168,200 in December 2009 to more than 259,000 twelve months later.

The national recession that began about three years ago also caused Georgia to burn through its entire $1.2 billion unemployment insurance trust fund.  Thirty one states including Georgia now borrow federal dollars to write their weekly unemployment checks.

A report posted online this week by the National Conference of State Legislatures said 31 states have borrowed $42.2 billion since September 2006.   NCSL said Georgia has borrowed $588.5 million since December 2009.  Principal and interest will be owed back to Washington.

Mike Klein is Editor at the Georgia Public Policy Foundation.

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

Governor Deal Pledges to Save HOPE, Reform Corrections, Limit Spending

Mike Klein

Moments after Nathan Deal became the 82nd Governor of Georgia on Monday afternoon he predicted a more limited government that perhaps chooses different missions by vowing, “We must justify every cent that government extracts from our society.”

Deal’s inaugural address was predictably short on program specifics.  Those begin to come this week when the governor delivers his State of the State address and releases his first proposed budget, both on Wednesday.  His address focused on statewide unemployment, corrections system reform, education, the HOPE scholarship, transportation, water and health care.

“The lingering pain of this great recession in which we are still engulfed has underscored the urgency of re-examining the role of government in our lives,” said Deal, who served nine terms in Congress.  “The evolution of society has infringed on much of the elbow room that our ancestors enjoyed, and government has been asked to regulate our actions as we bump into each other in our frantic search for success.

“In times of economic prosperity we often ignore the costs and inconvenience of governmental paternalism.  But in times such as these with more than one of every ten of our employable citizens out of work we must justify every cent that government extracts from our economy.”

Deal said one-in-13 Georgians is under correctional control, meaning in custody, on probation or on parole, and he said it costs $3 million per day to operate the Department of Corrections.  “Yet every day criminals continue to inflict violence on our citizens and an alarming number of the perpetrators are juveniles,” the governor said.

“College students should be concerned about their grades, not whether they are going to be mugged on their way home from class.  Visitors to our cities should be treated as welcome guests, and protected.  Families should not live in fear of gang violence or drive-by shootings. But most of all, our dedicated law enforcement officers must not be target for criminals.  Anyone who harms one of them harms us all.”

Georgia Governor Nathan Deal

The former state legislator from Gainesville promised violent and repeat offenders that, “We will make you pay for your crimes.  For other offenders who want to change their lives, we will provide the opportunity to do so with day reporting centers, drug, DUI and mental health courts, and expanded probation and treatment options.

“As a state we cannot afford to have so many of our citizens waste their lives because of addictions,” Deal said.  “It is draining our state treasury and it is depleting our work force.”

Deal praised his predecessors and “dedicated teachers and educators” but he noted Georgia K-12 public education “has failed to make the progress that we need.  This failure is a stain on our efforts to recruit businesses to our state and is a contributing factor to the frightening crime statistics that I previously mentioned.  High dropout rates and low graduation percentages are incompatible with my vision for the future of the state of Georgia.”

Deal sought to assure families who wonder about the long-term future of the financially challenged HOPE scholarship program.  “”I was not elected to make easy decisions but difficult ones,” Deal said.  “In this legislative session we will save HOPE for future generations.”

Deal emphasized the Savannah and Brunswick ports are Georgia’s link to an ever expanding international trade community.  “We will do our part to deepen the Savannah port in order to accommodate the larger vessels that will soon pass through the Panama Canal, but we must do more.  Our rail capacity and cargo routes must be improved and expanded.  We must not miss this opportunity to provide jobs for Georgians.”

The governor described Atlanta metro highway congestion as “a deterrent to job growth in the region.  If we do not solve this problem soon we will lose the businesses who want to expand or locate in our state.”

Deal also inherits the Tri-State Water War.  A federal court judge ruled Alabama, Florida and Georgia must reach agreement before July 2012 or Congress will impose a solution.  All three states have new Republican governors, but that does not ensure agreement.  All three states had Republican governors during Sonny Perdue’s eight years as Georgia governor.

Deal vowed the state will continue to negotiate but will also develop regional reservoirs.  “We are blessed with abundant water resources and we must use them wisely.”

The new governor was blunt in his assessment of federal health care policy, widely known as Obamacare.   “As governor I will resist the efforts of the federal government to mandate its solutions on our people, our businesses and our state government.”

The new governor assumed office three days after a special council issued the state’s most dramatic tax reform proposals in eighty years.  Legislative approval would reduce personal and corporate income tax rates, and make significant changes to sales taxes on products and services, including collection of sales tax on groceries.  He did not mention the tax proposals.

State of Georgia Seal

Fiscal issues will dominate every General Assembly conversation this session and dictate which priorities prevail.  The next state budget faces an estimated $2 billion shortfall.  Georgia will lose $1.2 billion in federal stimulus funds.  It must also repay $425 million to the federal government because the state has been borrowing federal dollars to write unemployment checks.

Deal inherits an economy that is taking tentative steps to rebound from recession.   Georgia’s 10.1% unemployment rate is still several percentage points higher than the national average.  State government revenue that plunged over two fiscal years has begun to recover with seven consecutive monthly year-to-year increases, but improvement will not balance the budget.

Deal returned to his leaner, more focused model of government in concluding remarks.  “State government should not be expected to provide for us what we can provide for ourselves,” he said. “Let us refocus state government on its core responsibilities and relieve our taxpayers of unnecessary programs.  Let us be frugal and wise.  Let us restore the confidence of our citizens in a government that is limited and efficient.”

The inaugural ceremony was held at the House chamber at the State Capitol.  Overnight snow and ice that paralyzed Georgia caused cancellation of the planned outside ceremony, a morning church service and the Philips Arena evening gala in downtown Atlanta.

Deal was joined by his wife Sandra.  Their daughter Katie sang “Georgia On My Mind.”  Their son, Hall County Superior Court Judge Jason Deal, administered the 47-word oath of office.  Dignitaries in the state House chamber included U.S. Senator Johnny Isakson, Congressman Phil Gingrey and Atlanta Mayor Kasim Reed.

Mike Klein is Editor at the Georgia Public Policy Foundation.

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