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Gold Dome

Jan. 19, 2021

Gold Dome Report — Budget Hearings, Day 1

The House and Senate Appropriations Committees convened jointly today to begin their review of Governor Kemp’s proposals for the Amended FY21 and FY22 State Budgets revealed last week. With most members participating remotely via Zoom, Chairmen Terry England (R-Auburn) and Blake Tillery (R-Vidalia) opened the hearings in the mostly empty meeting room by inviting remarks by Governor Kemp and State Fiscal Economist Dr. Jeffrey Dorfman. After each presented a relatively positive take on tax revenues (and State spending) for the remainder of this year and next, legislators got into the details of two agency budgets heavily impacted by the COVID pandemic — the Department of Public Health and the Department of Education. Agency presentations will continue throughout the week, but find all the details of today’s discussions in this edition of the #GoldDomeReport.

In today’s Report:

  • Governor, State Economist Express Optimism for State Revenues, Spending
  • IN DEPTH: Education, Public Health Budget Presentations

Governor, State Economist Express Optimism for State Revenues, Spending

As legislators began their work on the Amended FY21 and FY22 State Budgets today, Governor Brian Kemp opened the Joint Appropriations Committee hearings with words of appreciation and optimism. Before providing a recap of major funding priorities debuted in Thursday’s State of the State Address, Kemp highlighted the “strong position” of Georgia’s finances despite the pandemic. He thanked legislators for their foresight in budget reductions implemented in June, turning a potential $1 billion to an addition of more than $150 million to the State revenue shortfall reserve without additional State agency cuts or furloughs for State employees. Kemp also thanked State agency leaders for their prudence and foresight, accenting their reduction of real estate costs by embracing remote working opportunities.

Turning to his budget priorities for Amended FY21 and FY22, Governor Kemp focused on his proposals to invest additional tax revenues in education, principally through restoring $567 million in austerity reductions to the Quality Basic Education program in the amended and new budgets. He also highlighted restorations to other Department of Education programs, as well as additional funding for testing, school construction, and equipment. Kemp’s proposals also provide for funding for enrollment growth in the University System of Georgia and the Technical College System of Georgia. In the Departments of Health and Human Services and Community Health, Kemp highlighted funds in the Amended FY21 and FY22 spending plans to implement the Patients First Act and added funds for adoptions, as well as $329 million for Medicaid and PeachCare in FY22. He also reviewed a number of other budget priorities first discussed during last week’s address.

Following Governor Kemp, State Fiscal Economist Dr. Jeffrey Dorfman presented his economic and budgetary outlook for the state. Dr. Dorfman opened his remarks with a “thank you” to legislators for passing Marketplace Facilitator legislation last year, which allowed the State to capture previously under-collected sales tax revenue from internet sales and services.

Dr. Dorfman’s overall analysis of Georgia’s economy was positive. According to Dorfman, Georgia had approximately 4.65 million jobs prior to the pandemic, and that has rebounded to 4.52 million after a drop to 4.12 million in April. Dr. Dorfman suggested that the delta between the previous high and current employment is from individuals who were working part-time by choice and have not returned (high school and college students, parents working side jobs). He also highlighted that Georgia’s incomes remain relatively stable, while retail sales are up across the nation. Sales tax collections are up 0.4% through the first half of FY21 (which was skewed by refunds to local governments; otherwise collections up 8%).

Notably, savings and credit scores have increased and credit card debt has decreased during the pandemic, suggesting a “strong and swift” economic recovery. However, Dr. Dorfman cautioned legislators in the long term, explaining that growth in the labor force in Georgia has slowed to less than 1% per year, suggesting tax collections may also slow.

After Dr. Dorfman completed his prepared remarks, Chairman Tillery asked when he expects the “joy ride” of steady revenue collections to end, to which Dr. Dorfman suggested that the remainder of FY21 and first half of FY22 are likely to be stable, but there may be more business failures in the second half of FY22 as federal aid goes away.

IN DEPTH: Education, Public Health Budget Presentations

Dr. Kathleen Toomey, Commissioner of the Department of Public Health, opened agency presentations to the Joint Appropriations Committees with words of appreciation to the General Assembly for their support of the State’s response to the COVID-19 pandemic. Dr. Toomey provided a brief update on the pandemic in Georgia, noting increasing infection rates and deaths due to “COVID fatigue” and imploring Georgians to continue to take precautions until everyone is vaccinated. She also detailed the Department’s response, including 188 specimen points of collection around the state, approximately 1,500 contact tracers and case investigators, and a current focus on vaccine distribution with a centralized registration system and potential mass vaccine sites in the future. Two million Georgians are currently eligible to receive the vaccine, including any person over age 65 and health care and other frontline emergency workers, and 451,000 Georgians have received vaccines to date. The Department is operating a dashboard that shows the current vaccine allocation and administration.

Public Health has received $1.035 billion in federal funds to implement its COVID response, nearly $900 million of which has gone toward testing. The Department’s budget for FY21, as passed in June 2020, was only $690 million (consisting of $269 million in State funds and $396 million in non-COVID federal funds). For Amended FY21, Governor Kemp recommended shifting funding from E-FMAP to pay for the Grady Regional Coordinating Center ($289,000) and adding funds to Infectious Disease Control to reflect an accurate count of funded positions ($144,026). For FY22, Kemp recommended allocation of $506,000 for the Grady Regional Coordinating Center and continuation of the $144,026 increase to Infection Disease Control. The FY22 recommendation also adds $85,650 for the PrEP pilot program established by HB 290 in 2019 and $173,600 for Body Art Licensure required by SB 214 in 2019.

State School Superintendent Richard Woods presented to the Joint Appropriations Committee on the Department of Education’s budget proposals and public education’s response to COVID-19. Superintendent Woods opened with his appreciation to legislators for prioritizing education in difficult budgeting times. He also addressed school re-opening at the outset of his presentation, noting that almost all local school districts are actively or imminently offering some level of in-person instruction; approximately only five districts remain in an all-virtual format. Superintendent Woods reiterated his Department’s focus on compassion over compliance during the pandemic to keep students, teachers, staff, and family safe (providing PPE and public health guidance to districts); address learning loss (training 15,000 teachers on virtual learning and doubling Georgia Virtual School capacity); expand connectivity (deploying 3,000 bus WiFi rangers and broadband signal extenders in school buildings and providing $21 million in digital learning grants to schools); and address mental and physical health (helping districts serve over 111 million meals and issuing guidance on student and staff mental health and wellness).

Turning to the Department’s budget priorities, Superintendent Woods asked legislators to consider providing additional funding for school counselors, a school social worker and school nurse position at the Department, and a Military Liaison position. Rusk Roam, Department CFO, discussed the details of the Governor’s proposed budgets, which include restoration of approximately 60% of the austerity cuts to the Department and QBE Formula implemented in June 2020 for FY21.

This year, Georgia public schools have enrolled approximately 36,000 (2%) fewer students, mostly at lower grades. Mr. Roam noted that the Department expects that most of these FTEs will return after the pandemic subsides. This enrollment decline does not have an impact on QBE Formula funding for Amended FY21 due to a statutory hold harmless provision. However, it will result in a QBE Formula reduction of $166 million for FY22. Mr. Roam explained that, if enrollment does rebound, this reduction could be resolved in the Amended FY22 budget process in spring of 2022.

Mr. Roam detailed the other elements of Governor Kemp’s proposals for the Department, which include partial restoration of austerity reductions in Amended FY21 and FY22 to the Agricultural and Technology/Career Education programs to support Extended Day/Year, area teachers, youth apprenticeship, industry certification and other supports; partial restoration of reductions to RESAs; and increased funds for testing necessitated by the denial of a federal waiver of testing requirements for the 2020-21 school year. Notably, the Department’s three budget-related priorities discussed by Superintendent Woods were not included in the Governor’s proposals.

The Joint Appropriations Committees will reconvene tomorrow at 8am to begin hearing from the State’s public safety agencies before turning to transportation, economic development, and natural resources in the afternoon. Hearings will be livestreamed here.