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Legislators wary of adviser's economic optimism

ATLANTA - Georgia lawmakers Tuesday questioned the moderate growth forecast of Gov. Sonny Perdue's economic adviser in light of signs that recession may lie ahead.

"Everything I'm seeing is that the economy is down," Rep. Ben Harbin, R-Evans, chairman of the House Appropriations Committee, said as legislative hearings on the governor's $21.4 billion budget request began at the Capitol. "I appreciate your confidence. ... (But) we have to act in terms of reality."

Economic adviser Kenneth Heaghney told House and Senate budget writers that growth during the fiscal year starting July 1 should be strong enough to support a 5.2 percent increase in spending. That's an improvement over the current fiscal year but moderate compared with the high growth numbers the state experienced in 2005 and 2006.

Heaghney said Georgia's housing slump, which never was as severe as in some states, has bottomed out and should start picking up by this summer.

Also, he said he expects moderate job growth in most sectors of the state's economy, which should help prop up consumer spending.

"Construction is weak. Finance is weak," Heaghney said. "Most of the other sectors are pretty healthy."

Addressing the two committees before Heaghney, Perdue said he has built his budget on conservative revenue estimates.

But even if the economy tanks, the governor said the state could fall back on the $1.5 billion in reserves that he has built up during the past several years from a low point of just $50 million when he took office.

"The budget reflects a prudent cautiousness," Perdue said.

But several lawmakers questioned Heaghney's prediction that the sluggish economy will start to recover early during the coming fiscal year.

"I'm still not at a comfort zone," Harbin told Heaghney.

Harbin said he would prefer underestimating revenues and revising the budget later if more money than expected comes in rather than overestimating and being forced to raid the reserves, which is what happened during the economic slump that hit Georgia earlier in this decade.

"We don't want to see what happened to us in 2003," he said.

Perdue also used Tuesday's presentation to give another plug to the budget initiatives he unveiled last week during his annual State of the State address.

He again pitched his requests for $120 million in water projects to help prevent future droughts from depleting Georgia's water supplies, $53 million to launch a statewide trauma care network and $11.3 million to beef up training programs to allow the addition of 200 state troopers.

On water, Perdue said the state's role should be to help local governments pay for regional reservoirs and other improvements without taking over those projects.

"Don't be too quick to want to solve problems that usurp the rights and responsibilities of local governments," he said. "One hundred and twenty million dollars is a lot. But it's meant to incentivize."