September 27, 2019
The House and Senate Appropriations Committees convened early today for their second day of hearings on Georgia’s budget and economy. As with yesterday, the agenda was dominated by experts opining on different sectors of the economy. But not only did opinions vary based on industry and area, there were also, as Chairman Terry England (R-Auburn) recognized at the end of the meeting, “significant differences” in what economists forecast for the future. While most agree the economy continues to slowly expand, the probability of a recession is less clear today than yesterday.
In addition to various experts, the Joint Committee heard from Kelly Farr, Director of the Governor’s Office of Planning and Budget. While most State agency heads were instructed to stay away from the meeting, Mr. Farr took questions on behalf of the Executive Branch. Even so, details on where and how reductions will manifest in the Governor’s budget proposals for AFY 2020 and FY2021 remained obscure, and Chairman Terry England (R-Auburn) and Chairman Jack Hill (R-Reidsville) both recognized there will be continued work for their Appropriations Committees to do throughout this fall. We will be following that work, and encourage you to join us at #GoldDomeReport!
Dr. Michael Toma, Georgia Southern University
Dr. Michael Toma, Professor of Economics at Georgia Southern University, opened the day’s testimony with an assessment of Georgia’s coastal economy. At the outset, he highlighted the continued decrease of unemployment throughout the coastal area matched with continued, but slowing, employment growth. Wage growth in the area for 2019 is a notable 5%. Containers, handled through Georgia ports, also continue an upward, although more volatile, trend. Volatility has been caused by the trade war with China, but although trade activity with China has decreased, overall global trade through the ports is stable to growing. Still, trade with China makes up 25% of Georgia’s global trade, accounting for $3 billion in Georgia exports. In sum, Dr. Toma noted that the coastal economy is performing well, but growth is moderating. Tourism, manufacturing, and ports are contributing to the growth.
Kelly Farr, Governor’s Office of Planning and Budget
Kelly Farr, Director of the Governor’s Office of Planning and Budget (“OPB”), appeared to testify to the Joint Committee on the Governor’s budgeting process. In brief remarks, Mr. Farr provided an overview of the process so far, from the Governor’s request in July that agencies submit budget reductions to the ongoing review of OPB at this point. Other than noting that OPB is looking particularly at personal services, travel, technology, and vacant positions, Mr. Farr’s testimony was sparse on specifics.
Mr. Farr fielded questions from a number of legislators. Rep. Andy Welch (R-McDonough) asked for details about cuts to positions and closures and conversions of facilities within the Departments of Corrections and Juvenile Justice, to which Mr. Farr stated that he has not talked to any agency head about rationale for specific proposed cuts or changes. Sen. Freddie Powell Sims (D-Dawson) called for specific attention to regions like Southwest Georgia that may have had disparate challenges and have special needs in the budgeting process. Rep. Katie Dempsey (R-Rome) expressed appreciation for the Georgia Data Analytic Center (created by HB 197) and hope that its implementation will help build better budgets in future years. Rep. Darlene Taylor (R-Thomasville) asked whether there is a hiring freeze in State agencies, to which Mr. Farr stated that he was not aware of any blanket freeze. Rep. Robert Dickey (R-Musella) asked about the State’s rainy day reserve (which is around $2.7 billion), to which Mr. Farr noted that 1% of the reserve is used annually in the midterm budget, and bond rating agencies watch the size of the reserve closely – wanting to see those funds used for necessary expenses. Rep. Trey Kelly (R-Cedartown) asked if the proposed budget cuts are aimed at increasing the rainy day reserve or grappling with lower revenue, to which Mr. Farr said it could be either depending on how the economy performs. Rep. Pat Gardner (D-Atlanta) called for attention to maternal mortality allocations (as that had been a priority of the House Appropriations Committee’s Subcommittee on Healthcare) in the current fiscal year amidst the reductions given Georgia’s low ranking in maternal mortality. Rep. Al Williams (D-Midway) called for OPB and agency heads to communicate with employees about plans as many feel uninformed and insecure in their roles, to which Mr. Farr stated that is exactly why OPB has instructed agencies to submit rationales for any job cuts. However, he did note that “[t]here may be people who lose their job in the [budget reduction] process.”
Michael Alexander, Atlanta Regional Commission
Michael Alexander, Director of the Center for Livable Communities at the Atlanta Regional Commission, spoke to the Joint Committee on long-term growth trends. Georgia has led the Southeast (with North Carolina) in growth over the last 50 years, and it is projected to continue to do so into the next 50 years. Metro Atlanta’s growth has been solid, tracking with Washington, DC, and Miami, but behind the traditional major metro areas. According to Mr. Alexander, population growth continues to move into the core of Metro Atlanta with record residential permitting and inward school district migration. The ARC is projecting that we will add 3 million people to Metro Atlanta by 2050.
Dr. Tom Cunningham, Metro Atlanta Chamber of Commerce
Dr. Tom Cunningham, Chief Economist for the Metro Atlanta Chamber of Commerce, presented on the growth of Metro Atlanta. He noted that the area’s population growth has outpaced the rest of the nation “for quite some time.” Due to the immigration from other areas that has driven that growth, Dr. Cunningham stated that the area economy is particularly broad and diverse (larger than the economy of Norway). He cautioned against a conclusion that we are “due a recession” because we have not had one in a while and emphasized that something has to actually cause a recession. Sustainable growth patterns can be sustainable over a long period of time. He noted that trade issues are likely the only things that could derail national expansion at this point in time. Focusing on the Metro Atlanta area, Dr. Cunningham noted the area’s attractiveness to relocation of business but is facing a challenge to attract and create enough workers. Bringing in workers from other states is a challenge, but Georgia does have training powerhouses in TCSG and USG institutions like Georgia Tech (although volume and retention in Georgia can also be problems).
Dr. Roger Tutterow, Kennesaw State University
Dr. Roger Tutterow, Professor and Director of the Econometric Center at Kennesaw State University, closed testimony by providing additional perspective on the prospect of an impending recession. He noted that, although the U.S. economy is in its longest expansion since World War II, a recession is not coming just because of the calendar. While he admitted that growth has slowed, based on the metrics he watches, he only believes there is a one in three chance of a recession in the remainder of 2019 or first half of 2020. While the trade war does present a concern, Dr. Tutterow reminded legislators that consumption is strong. He did not express concern about inflation being caused by labor force tightness, but he did admit it could challenge retention and continued growth. Dr. Tutterow called for continued focus on maintaining Georgia’s AAA bond rating, which depends at least partially on maintaining a broad tax base.
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