December 5, 2019Cybersecurity Attorney Kevin Mekler Joins Nelson Mullins in Tampa
September 26, 2019
The House and Senate Appropriations Committees convened for a rare pre-legislative session joint meeting today to begin their work assessing the health of the State’s economy and planning for the legislative budgeting process--nearly four months before a spending proposal is expected to hit their desks. Today’s meeting, which will continue tomorrow, was scheduled in the wake of Governor Kemp’s request earlier this summer that most State agency heads submit budget proposals reflecting 4% cuts to their current year budgets and 6% to next year’s budget proposals. As legislators convened to begin to “get a handle on” the State’s economy and budget, these same agency heads were notably barred by the Governor’s Office from participating in testimony.
Without testimony from agency heads, typically a hallmark of Appropriations meetings, legislators heard from economists and other experts on the health of various sectors of the state’s economy. Details on that testimony inside today’s Special Joint Appropriations Committee Edition of the Report, and continuing coverage on Twitter using #GoldDomeReport.
Dr. John McKissick, University of Georgia Center for Agribusiness and Economic Development
Dr. John McKissick, Agriculture Economist at UGA’s Center for Agribusiness and Economic Development, opened testimony by providing an overview and outlook on Georgia agribusiness. Dr. McKissick began by addressing the scale of agribusiness in Georgia’s economy--in 2017, agriculture contributed $73.7 billion in output ($14 billion in direct production; $60 billion in processing and directly related businesses) to Georgia’s $1 trillion economy (the largest share of any single industry). Additionally, Georgia agribusiness accounts for almost 400,000 jobs and two-thirds of Georgia counties count agribusiness as either there #1 or #2 economic engine.
Looking ahead, Dr. McKissick highlighted the cost and availability of labor and the impact of tariffs on the cost of inputs as areas of particular concern. He also highlighted the continuing impact of Hurricane Michael, noting that while it will continue to be a “stress factor”, total loss will be “well short” of the initial $2.5 billion estimate thanks to state and federal disaster aid and insurance. He reviewed the expected performance of several specific agribusiness sectors: poultry (2019 has been a good year and 2020 is expected to be good); eggs (2019 not a very good year); row crops (peanuts and cotton prices have declined, but offset expected by federal programs); vegetables, fruits, and nuts (strong competition from Mexican production and no federal offset); ornamental horticulture (dependent on economy).
Dr. Alex Ruder, Federal Reserve Bank of Atlanta
Dr. Alex Ruder, Senior Advisor for Community and Economic Development at the Federal Reserve Bank of Atlanta, presented to the Joint Committee on workforce development, particularly economic mobility among low-income families. Dr. Ruder noted that economic mobility is particularly low in the Southeast region and poverty is particularly concentrated. He emphasized that top reasons for hiring difficulties included several in the educational realm--lack of technical skills, lack of soft skills, and lack of general reading, writing, and math skills. Workforce development programs are generally focused to address these deficits. Dr. Ruder focused on the traditional career pathway model of workforce development, which starts with a person taking an entry-level job and then following a pathway to train up to more advanced jobs. Looking to a typical healthcare pathway, from CNA to LPN to RN, he posited that few persons who start the pathway actually move ahead to the LPN or RN levels. Dr. Ruder blamed this phenomenon on benefits cliffs in which, as a low-wage worker seeks to move up, the immediate costs (leaving a job or cutting back hours to allow for training, as well as losing public benefits) outweigh the long-term benefits (increased lifetime pay) and disincentivize that movement. He suggested adjusting government supports (like TANF, SNAP, and WIOA) to mitigate the benefit cliffs and increase short-term incentives to pursue pathways.
William Pate, Atlanta Convention and Visitors Bureau
William Pate, President and CEO of the Atlanta Convention and Visitors Bureau, provided an update on the hospitality industry in Atlanta. In 2018, meetings, events, and tourism accounted for 300,000 jobs in metro Atlanta who welcomed 56 million visitors driving $16 billion in visitor spending. Mr. Pate projected a softening in tourism for the first half of 2020, but growth in the last half, resulting in stable or slightly higher tourism for the entire year. He also projects stability or growth over the next five years. Atlanta will add 2,500 new hotel rooms next year, and development at Centennial Yards (the Gulch) is ongoing. International tourism, which accounts for 1.2 million visitors per year, is also expected to grow. The ACVB is looking to grow Chinese tourism from approximately 70,000 per year to 250,000 per year because, according to Mr. Pate, Chinese visitors spend seven times more than the average visitor to Atlanta.
Frank Norton, The Norton Agency
Frank Norton, Chairman and CEO of the Norton Agency, spoke to the Joint Committee on an outlook for housing real estate in Georgia. Looking at the current status of the real estate market, Mr. Norton noted that most population growth (and therefore residential real estate growth) has been occurring in and around metro Atlanta outside of the urban core. Georgia has also seen substantial economic development announcements in some non-metro areas (Commerce, Augusta, Savannah) that is driving a need for real estate--and appreciation in property values. For every two new jobs, one new housing unit is required. Due to economic development and the subsequent appreciation of property value, fewer houses are being built (building permits at the same level as in the 1970s), and Mr. Norton projects that Atlanta will be 300,000 to 350,000 units short on housing by 2020. Georgia’s shortage is projected at over 400,000. Some of this shortage is being addressed with multifamily housing, as well as modular and mobile homes.
According to Mr. Norton, since 2007, 75% of the builder industry has evaporated in Georgia.. The average new home price increased 42% since 2010. Regulation adds 30-55.9% to the cost of single and multifamily housing. Most towns across Georgia have only a 1-3 month supply of homes for sale. Due to regulation and labor shortages, Mr. Norton predicted that new home construction will never be cheaper than today and will hover between 22,000 and 32,000 units annually. Yet, most of these homes will still be financially out of reach of the average new workers. Mr. Norton closed by emphasizing that the State’s economic development efforts must be matched with efforts to increase housing and home affordability.
Dr. Jeffrey Dorfman, State Fiscal Economist
Dr. Jeffrey Dorfman, State Fiscal Economist, closed the meeting by presenting to the Joint Committee on his processes for determining the State’s annual revenue estimate and tracking revenue collections throughout the fiscal year. In terms of revenue forecasting to set the annual revenue estimate, Dr. Dorfman admitted that he aims to be conservative in his projections. Looking at FY 2020 so far, Dr. Dorfman called collections “disappointing”. For the first quarter of FY 2020, it appears that revenue will be down 0.5% year over year against projections of 2% growth. While he noted he is still crafting the revenue projection for FY 2021, Dr. Dorfman did note that his estimates take into account a 50/50 chance of a mild recession in calendar year 2020, likely in the first part of the year. However, he qualified that any recession, if it occurs, will be much milder than the recession a decade ago, and economic growth is likely to resume in 6 to 9 months. According to Dr. Dorfman, the State’s reserves will be more than sufficient to weather such a storm.
When pressed on his rationale for predicting a mild recession, Dr. Dorfman noted that with national economic growth of only about 1.5%, any hiccup (like continued trade wars, Brexit, or the fact that Germany and China are already in recessions) can tip the U.S. economy into a recession. He also noted that, notwithstanding a recession, the State’s budget will be tight because there is nearly $700 million less in State revenues this year due to the income tax rate cut ($500M) and reallocation of TAVT collections from the State to counties ($150-200M). Due to these reductions, Georgia’s economy would have to grow by 2.5%, well above the national average, to maintain the same revenue as last fiscal year.
The Joint Committee reconvene at 8AM tomorrow morning to hear additional testimony.
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