Georgia’s chief economist told lawmakers Thursday that a return to normalcy is needed to soften the blow to the state’s $27 billion budget, which is set for deep cuts amid coronavirus-prompted closures.
That assessment was one of several that budget-writing state lawmakers got Thursday in a sobering overview of the sharp drop in tax revenues poised drive the General Assembly’s upcoming budget negotiations.
Whether Georgia bounces back enough to soften the budgetary blow will depend on how confident consumers feel to venture out of their homes to shop and return to work, Jeffrey Dorfman, the state economist, told lawmakers Thursday.
“It’s all going to depend on consumers and when we feel safe,” Dorfman said. “When we choose to [return to] normal is what’s going to matter.”
Revenues from income, sales and other taxes in Georgia were down almost $1 billion for the month of April compared to April of last year, as both mandatory and voluntary actions taken to curb the virus’ spread saw businesses close and people stay put in their homes.
Lawmakers now face the need to make steep spending cuts, press for federal relief and pull from Georgia’s emergency reserves to balance the budget.
Some measures have eased the pain from coronavirus like a boost in online retail sales and purchases of alcohol by home-bound Georgians. But a spike in unemployment claims, plummeting of sales taxes on hotel stays and general merchandise, and the delayed deadline to file state income taxes have combined to put Georgia in a serious financial bind.
“You’re going to see some crazy economic numbers in the news over the next couple of months,” Dorfman said Thursday.
Members of the Georgia House and Senate Appropriations committees met jointly Thursday in an online meeting for the first time in the coronavirus era. They plan to hold another virtual meeting next Wednesday before convening in person later this month, ahead of a June 30 deadline to pass the 2021 fiscal year budget.
Lawmakers have already asked state agencies to start preparing for 14% cuts across the board in next year’s budget, with revenue forecasters expecting a decline of between $3 and $4 billion in tax collections in the coming months. Those cuts will almost certainly lead to scaled-back services and furloughs for teachers, social workers and more.
“We understand that times are tough for y’all and for us,” said House Appropriations Committee Chairman Terry England, R-Auburn. “We appreciate and take very seriously our roles here and what we’re trying to do and to be good stewards of taxpayer dollars.”
Dorfman, the state economist, told lawmakers Thursday the full impacts of the crisis are tough to predict since the only comparable historical event was the Spanish Flu of 1918, for which he said there is not much useful data.
Instead, lawmakers should plan to see a continuing downward trend in revenues through at least this month in sales taxes and for much longer when it comes to corporate tax collections, with businesses poised for months of diminished profits, Dorfman said.
“We don’t really have a good idea based on history of how this is going to go,” Dorfman said. “Hopefully, in the weeks and months to come, we’ll get a better idea as we experience this together.”
The worst economic data is expected to come after Memorial Day (May 25) when officials will learn how bad tax collections were during Georgia’s mandatory shelter-in-place period last month, said Kelly Farr, director of the state Office of Planning and Budget.
Speaking at Thursday’s meeting, Farr credited lawmakers for carrying out the bulk of 4% cuts that Gov. Brian Kemp ordered earlier this year for the current state budget, before coronavirus was ever an issue. But the shortfall will likely force officials to tap into the state’s roughly $2.8 billion reserve fund to float the fiscal 2020 budget until July 1, Farr said.
“We basically start spending out of the rainy day fund to make up for the lack of revenue,” Farr said Thursday.
Appropriations chiefs urged calm and courage as lawmakers hash out the budget. Senate Appropriations Committee Chairman Blake Tillery, who assumed the role following the death of former budget guru Sen. Jack Hill last month, said Georgia’s budget experts have already set to figuring out solutions.
“We’re in a time that’s going to require a lot of us to pull together and work together,” said Tillery, R-Vidalia.
ATLANTA – Nearly 230,000 Georgians filed initial unemployment claims last week, down from more than 266,000 claims filed during the previous week, state Commissioner of Labor Mark Butler reported Thursday.
That brings to nearly 1.6 million the number of initial unemployment claims filed in Georgia during the last seven weeks, since the state began feeling the economic effects of the coronavirus pandemic.
The largest number of claims by far – 446,437 – has come from the accommodation and food services sector. Health-care and social assistance workers have accounted for 183,328 claims, followed by the retail trade sector with 182,663.
The labor department has paid out more than $1.7 billion in combined state and federal unemployment benefits during those seven weeks.
“Over half a million Georgians have received a payment from the Georgia Department of Labor,” Butler said. “We have been enhancing our current systems and creating new ones to make sure every eligible applicant receives their [unemployment insurance] benefits as quickly as possible.”
Butler said Georgians whose claims are denied or ruled invalid still might be eligible for Pandemic Unemployed Assistance (PUA). This includes gig workers, people who are self-employed or 1099 contractors, or those who work for a church or other nonprofit.
The state began paying out PUA claims last week totaling more than $4 million.
The labor department is continuing to work with employers that are still hiring workers. More than 100,000 jobs are listed online at www.EmployGeorgia.com.
University System of Georgia Chancellor Steve Wrigley
ATLANTA – University System of Georgia faculty and staff are facing potential furlough days to help offset the economic impacts of the coronavirus pandemic.
The system’s Board of Regents voted Thursday to authorize either four or eight furlough days for most employees at all 26 of Georgia’s public colleges and universities, depending on their salary level. Employees earning salaries of $99,000 a year to $154,000 would take 12 furlough days, while those making $154,000 or above would take 16 furlough days.
System Chancellor Steve Wrigley and all university and college presidents would take 26 furlough days, equivalent to a salary reduction of 10%.
The furlough days are part of a plan to comply with 14% across-the-board state agency spending cuts Gov. Brian Kemp’s budget office and the heads of the Georgia House and Senate appropriations committee ordered last week.
For the university system, that represents a $361 million budget reduction in fiscal 2021, which starts July 1, on top of $350 million in losses the system suffered during the spring semester when the COVID-19 outbreak prompted the shutdown of all system campuses and the schools switched to online instruction, system Chancellor Steve Wrigley told the regents Thursday.
Wrigley said the university system has worked during the last three years to stream administrative costs, an effort that will result in savings of $100 million. A five-year initiative to tighten up on the system’s academic offerings has resulted in the termination of about 700 degree programs, he said.
“We’ve been making efforts to be more efficient and streamline,” he said. “But this is an unprecedented situation.”
State agencies have until May 20 to submit plans for how they will cut 14% from their fiscal ’21 budgets.
Wrigley said no firm decisions will be made on furloughs and other spending reductions until the General Assembly adopts a state budget for next year, which likely won’t happen until June.
“Employees of the University System of Georgia and our 26 colleges and universities continue to show resilience and dedication despite facing uncertainty and unprecedented challenges during the COVID-19 pandemic,” Wrigley said. “I deeply appreciate the contributions of our employees impacted by these measures.”
ATLANTA – Legislative Democrats stepped up the heat on the University System of Georgia Wednesday to let students forced off campus by coronavirus to opt in to a pass-fail grading system for the spring semester.
A group of Democratic state representatives held an online discussion of the issue featuring several students who have led the charge for pass-fail. With the deadline for professors to turn in grades looming next week, time is of the essence.
“We don’t think it’s too late if the [university system Board of] Regents would lift the handcuffs from the universities,” said Rep. David Wilkerson, D-Powder Springs, who hosted Wednesday’s discussion on Facebook. “It’s never too late to do the right thing.”
With the coronavirus pandemic gripping Georgia in mid-March, Gov. Brian Kemp ordered all of Georgia’s public colleges and universities to close until March 31, an order he later extended to the full spring semester. The university system moved to convert in-person classes to online instruction, but it took a couple of weeks for the changeover to fully take effect.
More than 10,000 students have signed a petition during the past several weeks asking the Regents to allow a pass-fail grading option. Student governments at the University of Georgia, Georgia Tech and Georgia State University have passed resolutions supporting the proposal.
Briana Hayes, one of the students who organized the petition drive, said many students from rural Georgia lack the internet connectivity necessary for online instruction.
“They need this because they’re living in an environment that is not conducive to learning,” she said.
Ciera Thomas of Augusta, a pre-med student at UGA, said online instruction is different from in-person classes.
“As much as our professors have done their best, some things are going to get lost,” she said.
University system spokesman Aaron Diamant said the Regents considered switching to a pass-fail system this semester but ruled it out because of potential long-term impacts including eligibility for financial aid and scholarships, admission to graduate school and professional licensure.
“These are truly unprecedented times, and we understand some of our students may be experiencing significant hardships,” he said. “ However, we are working hard to connect our students with critical resources.
“We trust our faculty to teach and grade students effectively, while also being compassionate and understanding of the life challenges we all find ourselves navigating now and in the months ahead.”
ATLANTA – As expected, the economic impacts of the coronavirus pandemic sent state revenues plunging last month.
The Georgia Department of Revenue collected nearly $1.84 billion in April, a 35.9% drop compared to April of last year. Tax revenues for the first 10 months of this fiscal year are 3.4% below the comparable year-to-date total for fiscal 2019.
Revenue agency officials attributed the sagging revenues in part to the coronavirus-related decision to postpone state tax payment deadlines from April 15 until July 15.
Individual income tax collections last month fell by $732 million, or 46.2%. Both tax payments and refunds issued decreased sharply.
Net sales tax collections also declined by 14.3% as Georgia’s economy shut down, with businesses closing and laying off employees.
Corporate income taxes were down 70.6% last month, driven largely by a 78.3% decrease in tax return payments.
Members of the Georgia House Appropriations Committee will be confronted with those dismal revenue numbers when they meet Thursday for the first time since the 2020 General Assembly was suspended in mid-March because of COVID-19.
The state is facing an estimated budget shortfall for fiscal 2021 of $3 billion to $4 billion. Working with state Senate budget writers, the House panel will have to find ways to cut spending across the board by 14%, far deeper than the 6% reductions Gov. Brian Kemp ordered last summer to address slow revenue growth that was plaguing the state well before the coronavirus pandemic began.
