GEORGIA'S FISCAL CRISIS
As state cuts back, schools and counties scramble
By JAMES SALZER
The Atlanta Journal-Constitution
Published on: 08/04/08
One way or the other, homeowners may wind up paying higher property taxes because of the state's fiscal crisis.
Gov. Sonny Perdue late last week placed a hold on the $428 million homeowners tax relief grant program and cut spending for schools and other programs.
The two moves were part of the plan Perdue and legislative leaders developed to deal with possible $1.6 billion shortfall brought on by the slow economy.
If the economy picks up, some of the cuts may not be needed.
But the hold on the tax relief grants and education cuts have city, county and school officials scrambling to figure out what to do at a time when they say their budgets are already stretched.
One way to make up the lost revenue would be for local governments and schools to pass the cost of the state cuts on to property owners. That could cost homeowners a few hundred dollars more a year in taxes.
"It will be lost revenue to the counties that you can bet will be made up somewhere ... by an increase in property taxes," said Rep. Rob Teilhet (D-Smyrna).
House Majority Leader Jerry Keen (R-St. Simons Island), said cities, counties and school districts shouldn't look first to raise property taxes.
"If the state is going to tighten its budget, maybe the local governments will have to do the same thing," he said. "Every branch of government ought to be looking at ways they can cut back."
With tax collections flagging because of the sluggish economy, Perdue on Friday announced a 6 percent cut in spending for most state agencies. Medicaid, the public health care system for the poor and disabled, and K-12 education were slated for smaller cuts.
Agencies have been told to brace for possible cutbacks of up to 10 percent. They were also told to stop hiring, cut travel and hold off on buying new motor vehicles.
Former Gov. Roy Barnes started the homeowner grant program in the late 1990s to lessen the impact of rising property assessments. Some estimates put the average value of the grant at $150 to $200 a year for homeowners, although it depends on the local tax rate.
It works like this: the state figures out how much it will need to fund what is essentially an expanded homestead exemption. The state then sends that money to counties, which use it to reduce local property tax bills.
Senate Appropriations Chairman Jack Hill (R-Reidsville), said lawmakers didn't really want to go along with the hold on homeowner grants.
"Politically, it's a tough call," Hill said. "For a Republican Caucus that fancies itself as being tax-cutters, this is a hard [decision] to make. But there are no good choices when you're $1.6 billion down."
Perdue was lambasted by Republicans and Democrats alike in 2003 when he proposed limiting the grants because of a budget shortfall that year.
Lawmakers may try to reinstate the grants when they return next year for the 2009 General Assembly session.
But in the meantime, counties are already sending out property tax bills.
Jerry Griffin, executive director of the Association County Commissioners of Georgia said the next step isn't clear.
"It does pose some serious problems for us," Griffin said. "To come back now and say we don't have the money is awkward to say the least. At this point, we don't have a strategy."
Amy Henderson of the Georgia Municipal Association, which represents cities, said local governments have their own financial problems to deal with. For instance, many rely on sales taxes, which are down because of the economy. Fuel prices have hammered local budgets as well. Some cities, like Atlanta, have laid off workers.
"They just don't have the money to make up this shortfall." she said. "Local governments are really having a hard time. When you're talking about cutting budgets, you're talking about cutting services."
Henderson said local governments have a few choices: send out new tax bills; wait and see if the economy improves and lawmakers bring back the property tax grants; or cut spending and use reserves to make up the difference.
Herb Garrett, executive director of the Georgia School Superintendents Association and a former Henry County superintendent, said some school districts don't have the same options. Garrett said after six years of state spending cuts, many are already at or near the state cap of 20 mills of property taxes. And some have drawn down their reserves.
"The ones with healthy reserves can absorb this," he said. "There are some systems that won't be able to handle it."
Why no quote from Speaker Glenn Richardson... he hemmed and hawed all session long about how cutting taxes and shifting the rest to sales taxes would just be keen...
hmmmm... would love to hear his thoughts. Or at least someone call his statements to question.
sigh....
--------------
Jim Nichols
A Speculative Fiction
www.JimNichols4.com
