ATC Georgia Capitol Update – Week 1, January 16, 2012

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By: Michael Sullivan,  head of ATC’s Zoning, Land Use & Governmental Relations group. 

On Monday, January 9, 2012, the Georgia General Assembly convened for the first full week of its 2012 session. Things got off to a much faster start than normal, with the Senate actually passing two substantive bills (See SB 184 & SB 38 below) on the first day. This was a big break from a tradition where the first day of every session has been treated as largely ceremonial, with little more than a few opening day speeches and a short homily from the pastor of the day before adjourning. However, since 2012 is the second year of the two year biennial session, bills that were filed in 2011 are still alive for possible passage this year and start in the position they were in as of the end of last year’s session. So bills that passed out of committee or out of one chamber or the other last year start this session in the same position and do not have to start the legislative process all over again. Senate Majority leader Chip Rogers summed up the message legislators intended to send, stating “We should start our business on Day 1, setting ceremony aside. We don’t need to waste taxpayer money.”

The House & Senate met Monday through Friday but will not reconvene for the sixth legislative day until next Monday, January 23, 2011. Traditionally, the General Assembly takes the week following the first week of the session off to observe the Dr. Martin Luther King, Jr. Holiday and to devote the rest of the week to the budget presentations by state agency heads to the House and Senate Joint Appropriations Committee.

State of the State

On Tuesday, Governor Nathan Deal delivered his second State of the State Address, in which he outlined his legislative agenda for the 2012 session. Highlights include:

• Elimination of the sales tax on energy used in manufacturing.
• Creating sales and use tax exemptions for construction materials used in “projects of regional significance” to allow Georgia to better compete with other states for economic development projects (such as major job center relocations or expansions).
• Restructure Georgia’s job tax credit programs to allow the credits to be applied to smaller projects (decreasing the threshold to qualify for these credits from the current minimum of 50 or more new jobs down to include projects that create 15 or more new jobs).
• New funding for criminal justice reform, including: $10 million for “Accountability Courts” to handle drug, DUI and other similar offenses and $35.2 million for additional prison beds for dangerous offenders. (Look for more comprehensive criminal justice reform legislation later this session that will address Georgia’s unsustainable prison population growth and which may include some Texas-type reforms, such as creating alternative sentencing options for non-violent offenders and more focus on the treatment of drug addiction and job training for inmates – in the Governor’s words “transforming our corrections system into a last resort of opportunity – a place where low-level offenders are reclaimed and restored to society as functioning members of the community…working to support their own families and paying taxes.”)
• Restoring the 10 days that were cut from public Pre-K as part of last year’s HOPE cuts (increasing the total number of Pre-K days back to 170).
• Full-funding of the Quality Basic Education (QBE) enrollment growth funding formula (an additional $146.6 million over the Amended FY 2012 and FY 2013 budgets), with no cuts to QBE, Equalization Grants or other enrollment based state funding programs to K-12 education.
• An additional $111.3 million to the Technical College System and University System to fund the massive enrollment growth both systems have experienced in recent years.
• An additional southbound lane and “flex shoulders” which could be utilized as traffic lanes onGeorgia400 during peak traffic periods.
• $45.7 million in additional funding for reservoir creation and expansion (this is the FY2013 portion of the $300 million investment in water supply over four years that was committed by Governor Deal last year).

The Governor also stressed his continued support for the deepening of the Savannah Harbor to accommodate the larger “Panamax” ships that will be used once the Panama Canal enlargement is completed in 2014. The Governor requested an additional $46.7 million toward deepening the Port on top of the $136 million already invested by the State thus far. The State’s investment serves as significant “skin in the game” invested by the State of Georgia in the context of attracting the additional Federal funding needed to complete this important project.   

BUDGET

Despite 18 months of positive tax revenue reports and year-to-date revenue being up 6.8%, no one is expecting to see any increased spending in the FY 2013 budget. The Governor and the leadership in both the House and Senate have made it clear that they want to continue to use the lean budgetary reality of the past several years as an ongoing impetus to find ways to make state government more efficient and to use any additional funds coming in from increasing tax revenue to restore the Revenue Shortfall Reserve Fund (“rainy day fund”) which was depleted by the economic downturn. As the Governor stated in his State of the State Address, when he took office last January “the Revenue Shortfall Reserve Fund…had only enough money to fund state operations for less than two days…the balance today is $328 million, an increase of 183%. I remain committed to building up this strategic reserve by keeping our spending in check.” Georgia is one of only eight states with a AAA credit rating from the three major rating agencies. 

TAX REFORM

Despite pre-session talk of a more wide-ranging restructuring of Georgia’s tax code, Governor Deal indicated that he is focused only on proposals that he believes will result in immediate job creation and retention. Specifically, (1) eliminating the sales tax on energy used in manufacturing, (2) allowing a sales tax exemption on construction materials used in building or expanding facilities of regional importance, and (3) reducing the eligibility requirements for a relocation or expansion project to qualify for Georgia’s job tax credit program from projects that create 50+ jobs down to projects that create 15+ new jobs. All three of these proposals came from the Governor’s Competitiveness Initiative Task Force, a joint effort of the Georgia Chamber and the Georgia Department of Economic Development.

While there was some talk before the session of more wide ranging tax reforms, the Governor and legislative leaders have made it clear that any tax cuts will have to be paid for in offsetting spending reductions, which is tough to do within an overall state budget that has already been drastically shrinking for several years. That is why the Governor chose to focus only on job creating tax cuts rather than a larger set of tax cuts that would be even more difficult to pay for.

EDUCATION

SB 184 – Passed the Senate on the first day and eliminates so-called “last hired, first fired” policies which could result in teachers with the most seniority being retained while more recently hired teachers would be fired or laid off, even if they had better classroom performance than the more senior teachers. Senate testimony indicated that teachers who had been named teacher of the year in their schools had later been forced to be let go because of the seniority policies. Senate Majority Leader Chip Rogers stated it thusly: “We have teachers of the year who are fired because of this ridiculous policy. We want the very best teachers in the classroom regardless of what day they were hired.”

SB 38 – Also passed by the Senate on the first day. Gives the State School Superintendent the power to hire and fire the employees in the Georgia Department of Education.

HOPE

In a presentation to the House and Senate Joint Economic Development & Tourism Committee on Monday, Tim Connell, Executive Director of the Georgia Student Finance Commission (which administers Georgia’s HOPE scholarship & grant program) indicated that lottery revenues are not increasing as fast as the number of HOPE eligible students requires and that absent further changes, there would be a $107 million shortfall in FY 2014 and increasing to $163 million by FY 2016.

BOARD OF REGENTS APPROVES COLLEGE MERGERS

Two weeks ago, University System Chancellor Hank Huckaby recommended the merger of eight colleges into four and on Tuesday, the Board of Regents unanimously approved that plan. The mergers are:

• Augusta State and Georgia Health Sciences University(formerly known as the Medical College of Georgia)
• Gainesville State College and North Georgia College
• Macon State College and Middle Georgia College
• South Georgia College and Waycross College

No campuses will be closed as a result of the mergers. The idea is that significant savings will result from combining nearby institutions into a unified administration, eliminating an entire set of administrative positions, such as college presidents, vice presidents and their support staffs. In 2008, the Technical College System of Georgia began the process of merging 14 of its colleges and saw significant savings and administrative efficiencies as a result and the success of those mergers caused legislators to question whether mergers of nearby University System institutions might not be similarly successful. Should these mergers go smoothly, don’t be surprised if other mergers of University System institutions are proposed. In fact, many legislators responded to these four mergers with comments along the lines of “why didn’t they do more colleges?” or “why didn’t they merge X college and Y college while they were at it?” Mergers of some of those x and y colleges are fraught with considerably more political peril than the four named in this round (including some historically Black colleges) but not merging those colleges will get a lot harder to defend once others have already been successfully merged. 

The Week Ahead

The legislature will not be in session the week of January 16th in observance of the Dr. Martin Luther King, Jr. Holiday and to devote the rest of the week to the budget presentations to the House and Senate Joint Appropriations Committee. The General Assembly will reconvene on Monday, January 23, 2012.