Perdue 2007 budget sparks praise, worry

ATLANTA - Georgia teachers had a lot to be excited about last Wednesday when Gov. Sonny Perdue delivered his annual State of the State address.

He told them his 2007 budget would dedicate 72 percent of more than $1.2 billion in new revenues to education, including bigger raises, a freeze on health insurance premiums and an initiative to reduce class sizes.

But teachers woke up Thursday to find out what the Republican governor hadn't said in his speech: His budget also would make further cuts to the formula governing per-pupil expenditures, continuing a pattern of annual reductions that Democrats blame for local property tax increases in school districts across Georgia.

"The euphoria of the party gives way to a hangover the next day,'' said Tim Callahan, president of the 65,000-member Professional Association of Georgia Educators. "You could make the case that the governor is funding some of the new initiatives with continuing cuts.''

A mix of good news tempered by nagging concerns is to be found throughout the $18.6 billion budget Perdue proposed to the General Assembly last week, up from this year's $17.4 billion.

Spurred by surging tax revenues generated by a recovering economy, the governor is sparing doctors, hospitals and nursing homes the cuts in reimbursement rates they have been forced to absorb during the last few years.

Perdue also is promising to restore full funding to two environmental cleanup funds that he and lawmakers have raided in years past to help make ends meet elsewhere.

And, armed with a surplus in gasoline tax money due to higher pump prices, the governor is recommending a major boost to the state's perennially underfunded local roads program.

"It makes it a lot easier to do anything in government when you've got money,'' said Rep. Ben Harbin, R-Evans, chairman of the House Appropriations Committee.

Uncertainties cited

On the downside, there are worries that a significant chunk of the budget is based on assumptions that may or may not work out.

Health providers would escape the ax largely because of huge anticipated savings in the Medicaid program, much of which is to be converted to managed care on April 1.

Perdue's proposal to borrow more than $900 million mostly for construction projects, his third large bond package in a row, also has stirred fears that the state might be getting too deep into debt.

And there are concerns that the state's "rainy-day fund,'' drained down to just $50 million at the height of the recession, isn't being rebuilt quickly enough. That surplus had been brought back up to about $250 million at the end of the last fiscal year, far below a pre-recession peak of more than $900 million.

"If we're going to keep (increasing) it by $200 million a year, it will take three years to get back to where we were,'' said Alan Essig, executive director of the Georgia Budget and Policy Institute. "If a recession happens sooner that that, we'll be in


Perdue called education "the big winner'' in his budget almost a week before his State of the State message. Most of the spending tidbits he revealed in the days leading up to the speech were education initiatives, including a plan to resume class size reductions begun during the administration of former Gov. Roy Barnes.

Several key budget items in this election year are aimed directly at teachers, a group of voters considered instrumental in Perdue's upset victory in 2002 over Barnes, who had angered teachers by attempting to eliminate tenure.

While state employees would get raises of 2 percent to 4 percent next year, Perdue is proposing the full 4 percent for teachers. They also would get $100 gift cards they could use to buy school supplies.

However, the budget also includes a $170 million cut in K-12 formula funding, roughly equivalent what the governor is proposing to spend on reducing class sizes.

"Many school systems are going to continue having to do more with less when they believed the improving economy was going to lift that burden from them,'' Callahan said.

Smaller cut

But Rep. Brooks Coleman, R-Duluth, chairman of the House Education Committee, said the cut represents only about half of the annual formula reductions Perdue and the legislature made during each of the last three years.

"We've made great progress in restoring that,'' he said.

Environmental advocates also subscribe to the half-a-loaf theory when it comes to Perdue's treatment of their concerns.

They are delighted that he wants $8.3 million for the state's Hazardous Waste Trust Fund and $7.5 million for the Solid Waste Trust Fund, fully funding both for the first time in four years.

But Neill Herring, a lobbyist for the state chapter of the Sierra Club, said the governor's recommendation to hire eight new erosion inspectors for construction sites is woefully inadequate.

"I think there are 80 vacancies with soil erosion,'' he said. "They're really letting us down.''

There wasn't such a mixed reception for Perdue's transportation budget. His plan to pour $234 million in gas tax money into his "Paving the Way Home'' initiative for local roads has gotten as enthusiastic a response as any of his budget proposals.

About $60 million would go to the Local Roads Assistance Program, which pays for maintenance of county highways.

"It's lagged behind. It's desperately needed,'' Sen. George Hooks, D-Americus said of LARP, a program created decades ago but seldom funded at the level originally intended.

Providers happy

Doctors and hospitals, too, will have less to argue about during the upcoming legislative review of the governor's


"We're delighted that there were no additional cuts,'' said Jimmy Lewis of HomeTown Health Care, which represents rural hospitals across the state. "We're pleased with what we see.''

Nursing homes would fare even better. Hit hard by reimbursement-rate cuts in recent years, they're due for a $20 million increase in reimbursements next year.

But those steps are predicated on almost $500 million in savings anticipated from the upcoming conversion of Medicaid to managed care, a new disease management program for aged, blind and disabled Medicaid recipients and steps the state is taking to make sure only eligible patients receive benefits.

"If we get (the savings), fine,'' Essig said. "If we don't, we have a hole.''

Harbin said he is confident that the Legislature's budget committees will figure out how to achieve those savings without compromising patient care.

"We don't want to do something that limits access,'' he said. "But we have to find a way to keep costs down.''

Harbin conceded that the state's reserves won't be as healthy as he would like next year. He said the needs of a growing state won't allow for building the reserves back to where they once were in a year or two.

"With the economy picking up, we'll get there eventually,'' he said.