Georgia Budget and Policy Institute

This Week in the Georgia Legislature

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House and Senate Calendar 
  
The House and Senate are scheduled to be out of session the week of April 4, and back in session on Monday, April 11 for the 38th legislative day, and Tuesday, April 12 for the 39th legislative day. The General Assembly is scheduled to Sine Die (40th legislative and last day) on Thursday, April 14.
Fiscal and Tax Policy 
 

Tax Reform on the Move

 

The Special Joint Committee on Revenue Structure passed a substitute to House Bill 387 on Tuesday with the following tax changes:

  • 4.5 percent income tax rate, a limit on itemized deductions, elimination of standard deductions and personal exemptions, $2,000 dependent exemption, $35,000 retirement exclusion, dependent tax credit for those earning less than $70,000, and a tax credit for those earning less than $50,000;
  • Sales tax on casual sales of cars, boats, and aircraft, as well as on automotive repair services;
  • Sales tax exemption on energy used in manufacturing, mining, and agriculture;
  • Revised sales tax exemptions on inputs for manufacturing, agriculture, and mining; 
  • Communications services tax to replace existing franchise fees and other related taxes; and, 
  • Sales tax exemption for telecommunications providers, capped at $90 million.

The proposal does not include putting the state sales tax back on groceries, as recommended by the Council. It also leaves the corporate income tax rate at 6 percent, leaves most services untaxed, leaves the tobacco and motor fuel tax rates untouched, and leaves exemptions and credits as is.

 

Controversy surrounds the limit on itemized deductions. Further changes to that provision might be coming. The bill was revenue neutral as voted on by the committee, but additional changes may turn the bill into a revenue loser.

 

Georgia is in a fiscal hole. The state faces a serious structural deficit even after the economy fully recovers due to its outdated tax system. The bill should be returned to committee so they can make adjustments to ensure tax reform fairly and adequately raises revenue to assist with the state's short- and long-term fiscal challenges. Read more about suggested changes to the bill in GBPI's policy brief.

   

Senate Finance Takes Up House Bills

 

The Senate Finance Committee held meetings on Wednesday and Friday to begin work on tax bills from the House. The committee passed a substitute to HB 325, which deals with tax credits for student scholarship organizations. The substitute raises the $50 million cap on the tax credit program by indexing the cap to government inflation.

FY 2012 State Budget

Governor Nathan Deal released his proposed budgets on January 12, 2011. Download the proposed budgets. 
  
The House of Representatives passed their version of the FY 2012 budget (HB 78) by a vote of 132-33. The Senate passed their version of HB 78 on Wednesday by a vote of 47-4. The Conference Committee has scheduled their first meeting for Monday, April 4 at 9 a.m.
  
HB 78 as proposed by the governor contained more than $500 million in additional cuts as compared to the FY 2011 budget. Total budget cuts since FY 2009 equal $2.9 billion.
  
The House version of HB 78 closed an additional $250 million shortfall in the State Health Benefit Plan as well as restored some of the governor's recommended cuts. Highlights for the House of Representatives' budgets for the Department of Human Services, Department of Community Health, and the education agencies are contained in the fact sheets below. 

For analysis of the Senate version of HB 78, see Senate Budget Continues Cuts, Leaves Georgians with Critical Gaps in Services.

 

Analysis of the governor's original proposed budget are below: 

Education Bills that Have Passed the House and Senate

HB 172 - Extension of multiple flexibility provisions

 

House Bill 172 extends the date by which school systems must decide whether to request increased flexibility or remain status quo. By June 30, 2015 school systems must decide whether to become a charter school, enter into an Investing in Educational Excellence partnership with the state, or remain in status quo form. Furthermore, this extension pertains to flexibility in maximum class size requirements and to certain expenditure control waivers related to earned state funding. HB 172 has been referred to the Senate Committee on Education and Youth.

 

HR 495 - Creates Joint Higher Education Finance Study Committee

 

House Resolution 495 creates a Joint Higher Education Finance Study Committee to study the funding formula for the University System of Georgia and higher education funding. The committee would undertake a comprehensive study and evaluation of the cost and resources needed to educate a child through a review of the core issues relating to higher education financing and by evaluating the various components of the funding formula. The committee would consist of 14 members and would report its findings and recommendations to the General Assembly and the governor, with suggestions for proposed legislation, by December 31, 2011.

 

 

SB 119 - Revises provisions for Tuition Equalization grants

 

Senate Bill 119 extends the period for which a private higher education institution, which was previously accredited but currently working to regain such accreditation, is considered an approved school from seven to 11 years. In addition, SB 119 deems an eligible high school for HOPE scholarships and grants to include schools that were accredited within the previous two years between July 1, 2011 and June 30, 2013. SB 119 has been referred to the House Appropriations Committee.

Georgia's unemployment trust fund is insolvent in part due to continued employer state unemployment insurance (UI) tax breaks. Read GBPI's brief for more background information: Georgia's Unemployment Trust Fund: More than $600 Million Owed to the Federal Government
 
Legislation being considered this session will not put Georgia on the path to solvency.
 
HB 292 -   Employment security; extend rates and credits; change certain provisions
 
Following a three year tax holiday, from 2002 forward, Georgia policymakers passed legislation to suppress employer state UI tax increases that would have built back the unemployment trust fund. HB 292 continues to suppress the automatic overall rate increase through 2012, but gives the DOL commissioner discretion to increase the overall rate by a maximum of 50 percent (an increase over last year's maximum of 35 percent), a discretion which the former DOL commissioner never exercised.
 
HB 292 also contains provisions that keep employer standard state UI tax rates level for the next five years. Under current law, new employers were scheduled to pay an increased state UI tax rate of 2.7 percent (up from 2.62 percent) beginning in 2012; however, HB 292 suppresses that increase for five years. Also, HB 292 would suppress the scheduled increase in the employer state UI tax rates until after December 31, 2016.
  
Suppressing the surcharge and keeping employer state UI tax rates level for five years will not move the unemployment reserve to solvency.
  
This bill passed out of the House on Monday, March 14 and passed out of the Senate on Thursday, March 31, 2011 without amendments.
  
Fix still needed to continue unemployment benefits for 22,000 Georgians
 
A small technical fix is needed to continue federally funded unemployment extended benefits for 22,000 Georgians each week.  Georgia currently receives $29 million per month from the federal government for this program. The most recent federal extension legislation continues these benefits through 2011, and may be extended again. However, the legislation changed the qualifying formula to determine which states meet the high unemployment threshold, providing a more generous three year lookback in place of the two year lookback. Without adopting this new formula, Georgia would lose out on approximately $175 million from July through December 2011, which would not only sustain workers unemployed due to no fault of their own, but would provide a boost to local economies across the state. This fix was not included in HB 292 that now goes to the governor to sign.  

Health Care Legislation

 

Several health care bills that address a wide variety of health care issues were passed by their originating chamber before crossover day. Key bills that are still alive in the 2011 session are listed below.

 

Private Insurance Regulation

 

HB 47 is similar to legislation introduced in recent years to allow health insurance companies to sell health insurance products licensed in other states. This bill would allow Georgia insurers to offer policies they currently offer in other states, even if those policies do not cover services required under Georgia law. The bill has passed the House and is assigned to the Senate Insurance Committee. 

 

SB 17 would create a Special Advisory Commission on Mandated Health Insurance Benefits, effective in 2012. The Commission would be charged with a variety of duties, including developing a system to assess the effect of mandated benefits taking into account the costs and impact of treatment and the cost savings to the health care system. This bill has passed the both the Senate and the House.

 

State Health Care Programs

 

HB 214 establishes a new state Department of Public Health as a separate cabinet-level agency reporting directly to the governor. This bill implements a recommendation by a special commission created to help guide the long-term structure of the state's public health activities. Both chambers have passed the bill, and it now moves to the governor for his signature.

 

SB 63 has undergone significant changes since it was originally introduced, though the goal of the bill to reduce provider and consumer Medicaid fraud is still the same. 

 

The version of the bill that passed the Senate would direct the Department of Community Health to conduct a pilot program to develop a new Medicaid smart card to be used to verify eligibility and identity at the point of service. This version no longer requires the pilot program to include biometric finger imaging.

 

The current bill gives the agency more flexibility in crafting the pilot program and in deciding whether to implement the program on a statewide basis.

 

A fiscal note was prepared on the original version of the bill, and estimated only a portion of the costs of the proposal. In particular, the costs of the new cards and other equipment was estimated to be $575,000 and $600,000, for a three- or six-month pilot program, respectively. These costs would total $23.2 million in the first year, with ongoing annual costs expected to be at least $3.2 million. 

 

Additional costs for computer and information system upgrades could not be estimated; however, these costs could be significant.

 

The fiscal note was unable to forecast potential savings because of the difficulty in estimating what portion of existing fraud could be curtailed by this program as well as the potential for new types of fraud that can arise with new technologies.

 

The bill has passed the Senate and is assigned to the House Health and Human Services Committee.  

 

Affordable Care Act

 

Several bills have been introduced that seek to prevent state agencies from, or limit the ways in which state agencies go about, implementing the Affordable Care Act that did not make it past crossover day.

 

One notable bill that did not survive was HB 476, which would have created the Georgia Health Insurance Exchange Authority as the governing body for the state health insurance exchange required under the Affordable Care Act. The governor has indicated that he will use executive authority to create an advisory committee to study the issue and make recommendations to the state on how to proceed. 

April 1, 2011 

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There Is Still Time to Get Tax Reform Right

 

The Special Joint Committee on Revenue Structure met on Monday and provided an alternative proposal to the Tax Council's recommendations. While there was some good policy included, the committee missed several opportunities. GBPI Executive Director Alan Essig offers this week's commentary addressing the proposal.  

 

Click here to read the commentary.

GBPI in the News

 

Legislators pass fewer tax breaks this year

Savannah Morning News
 
Atlanta Journal-Constitution
 
Savannah Morning News

 

Ledger Enquirer

 

Atlanta Journal-Constitution

 

Macon Telegraph
 
Athens Banner-Herald

 

Atlanta Journal-Constitution

 

New  York Times
  
Atlanta Journal-Constitution

 

Atlanta Journal-Constitution

 

Atlanta Journal-Constitution

 

Times Herald
 
NPR Weekend Edition
 
Atlanta Journal-Constitution
 
Savannah Morning News
Rome News-Tribune

2011 Legislative Session:

 

 

GBPI's Latest Analysis

 

 

FACT SHEETS:
 
 
  
 

 

 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
POLICY BRIEFS:
 
 
 
 

 

 

 

  
  
 
  
  
  
  


Have We Hit the Bottom?

An overview of the governor's FY 2012 budget

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GBPI is the state's leading independent, nonpartisan nonprofit engaged in research and education about the fiscal and economic health of the state of Georgia. GBPI provides reliable and timely analysis of Georgia's budget and tax policies and promotes greater state government fiscal accountability, improved services, and an enhanced quality of life for all Georgians. Visit www.GBPI.org for more information.