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01/15/2003 Governor Perdue's State of the Budget Address

Prepared Remarks of Governor Sonny Perdue's 2003 Budget Address

(Note: The Governor sometimes deviates from prepared remarks)

Lieutenant Governor Taylor, Speaker Coleman, Members of the General Assembly. I appreciate the invitation to address you today and to present my budget recommendations.

We met on Monday to celebrate one of the basic rituals of free government-the people's elected leaders taking our oaths of office in an orderly transfer of power.

We meet today to do the hard work of free government and fulfill one of our basic responsibilities as leaders-the allocation of public resources for the public good.

How we spend our money tells a lot about us.

Show me your checkbook register and I can find out pretty quickly what your values are and what is important to you.

Are you a saver or do you live above your means?

Do you hunt for bargains or pay top dollar? Do you pay your bills on time?

When money is tight, where do you cut back and what can you not do without?

Where your money goes paints a picture of what kind of person you are-and that is just as true for state government as it is for individuals. What kind of state is Georgia? We're going to answer that question together during this legislative session.

The budget we adopt will tell that story.

These are tough times. Our state, along with the nation, has been struck by recession. Thousands of Georgians have lost their jobs. Our state revenues have fallen short of projections. And the light at the end of the tunnel isn't yet clear.

The surpluses we enjoyed in recent years aren't there anymore. Tough choices we could put off before have to be made now. Decisions we deferred until another day-that day has come.

This will not be a painless budget. This will not be an easy process. We're going to make trade-offs we don't want to make. We'll have to do some things we'd rather not do.

We're going to feel some tremendous heat and pressure, all of us, from our constituents, as we tackle this job.

But we'll hunker down and we'll get it done, together. Because that's what the people of Georgia hired us to do and we will be good stewards of their trust.

As you all know, I put in for a promotion last year. And I got word on November 5 that it had been approved.

Before that week was out, I sat down for the first of what would be over 150 hours of budget briefings.

I met with almost every department of state government and reviewed their plans, their programs, and-as much as possible in the limited time we had-their performance.

As these meetings took place, the extent of our revenue shortfall for fiscal 2003 was becoming clear. Revenues have declined in all but three of the last 18 months, leading to a $620 million downward adjustment to state spending.

It was clear to me that the state needs to go on a diet, and fast.

State revenues were already declining when the General Assembly adopted the fiscal 2003 budget last spring. That budget included 5% cuts to department budgets across the board. After the start of the fiscal year, an additional 5% cut was required.

Agencies were instructed to find these cuts in their 2003 budgets. I accepted most of their recommendations for cuts, which are incorporated into the amended FY 2003 budget recommendation, for a savings of $459 million.

These cuts will be maintained in the FY 2004 budget, saving $721 million, along with an additional 1% austerity cut affecting all departments, exempting education direct instruction, to save an additional $42 million.

With these cuts, we have pared significant savings out of the state budget. We have done so responsibly, without jeopardizing vital functions and without eliminating current jobs.

I wish I could tell you these recommended cuts alone will produce a balanced budget. But they will not.

What can we not do without, even when times are lean? I have recommended minimal enhancements in these budgets, in line with our core principles.

One of those principles is the importance of education.

Georgia is a state that understands investment in education is the cornerstone of economic development and our future quality of life.

We cannot afford to shortchange the children of our state or those who seek a higher education. We cannot expect our economy to grow stronger if we do not invest in producing educated minds.

That is why reductions to the QBE formula and to formulas for the University System and Technical and Adult Education are 3% less than the reductions to most agencies.

I am recommending $131 million in the amended 2003 budget to fully fund the mid-year adjustment to the QBE formula for enrollment growth and $193 million for QBE formula grants in FY 2004.

I am also recommending $1.1 million for additional funds to provide the 10% salary supplement for the 380 teachers who achieved National Board Certification in 2002, and $2.3 million in FY2004 to fund the supplement for our total of over 800 National Board Certified teachers in Georgia.

The fiscal 2004 recommendation includes $186 million in bonds for school construction and $250 million for Georgia's voluntary Pre-Kindergarten Program, which is a model for the nation.

In higher education, we will continue support of the HOPE Scholarship program by providing $373 million for tuition and other expenses for eligible students in fiscal 2003.

For FY2004, lottery funds are preserved for the HOPE Scholarship and Pre-Kindergarten program and I propose $57 million to provide for an increase in the number of students eligible for the HOPE Scholarship and $5.5 to increase the Pre-Kindergarten program.

We will also provide $81 million in university system formula funding to reflect increased enrollment and $28 million in bonds for major capital outlay projects on our university campuses.

In total, 55% of my recommended FY 2004 budget-$8.8 billion dollars-goes to education. That tells the story of how we value education in Georgia.

But Georgia is also a state that believes in family and children and meeting the most basic human needs of our citizens.

We have a moral obligation to ensure the safety of our children in state custody.

My budget recommendation includes $5.8 million to add 125 new Child Protective Services positions. I propose $9.9 million in additional state funds to convert to a Level of Care placement system for children currently in the CPS system.

For children in foster care, I am recommending $579,000 to double the annual clothing allowance for each child-the first increase since 1975- and another $825,000 to identify and recruit new foster and adoptive parents.

For fiscal 2003, I am recommending $9.4 million to provide additional funds for Specialized Foster Care services.

And $2.9 million to support the closure of the Fulton and DeKalb County emergency shelters for children and adolescents and to seek alternate placements and services for those housed there.

We care for our children. Georgia is also a state that cares for the health of its citizens.

Healthcare costs in Georgia and to state government continue to rise year after year, particularly in Medicaid. The FY 2004 recommendation for the state's portion of Medicaid is $1.7 billion.

Medicaid is a large and growing part of our health services budget. But we will be making other investments to improve the health of Georgians.

To fight the scourge of cancer, I propose $8.6 million to continue construction of the Cancer Research Center at the Medical College of Georgia. An additional $36.6 million in private and federal funds will go to this project, making this a wise use of the state's investment.

We will also continue to work toward full implementation of the Olmstead decision of the United States Supreme Court regarding services for the disabled. I recommend $11.2 million to facilitate those moving from institutions to community-based settings.

I propose $2.3 million to accommodate those waiting for community-based services.

$3.2 million to provide community-based residential care for those citizens currently in nursing homes who are medically able and wish to live in the community and $5.6 to identify, assess, and transition persons from state institutions to the community.

What else can we say about Georgia? We are a state eager for prosperity and optimistic about our prospects for economic growth, even in tough times.

I recommend $52.1 million in tobacco settlement funds for the One Georgia Authority to continue grant and loan programs targeted at our most economically challenged counties.

I am also recommending $100 million for the Governor's Road Improvement Program-GRIP.

GRIP funds are the foundation of many essential transportation projects that link our small towns and counties with major transportation arteries, helping them attract new businesses, industries and jobs.

And, I am proposing increasing funding for the Local Assistance Road Program (LARP) by $10.5 million to a total of $38 million.

I also propose $16.1 million in the FY 2003 amended and $77.2 million in the FY 2004 budget in state funds, bonds and Port Authority debt reduction for support of a major economic development project in Pooler on land owned by the Ports Authority.

This will create 3,300 new jobs for Georgians.

This is a project on which the state has already invested $25 million and we must honor our commitments to see it through.

We can say proudly that Georgia is a state that keeps our word and meets our obligations.

As proof, we hold the highest bond rating a state can have. We maintain that AAA rating by not taking on more debt than we can handle. Actually, we maintain it by taking on less debt than we could.

Maintaining our AAA bond rating is important because it gives us a better interest rate when we do borrow money and saves our state millions of dollars.

When we met with the bond agencies in New York, they were impressed with our proposed plan. They felt that we were proceeding in the most fiscally responsible way.

As good stewards of the public purse, I believe we must maintain Georgia's sterling reputation in the financial markets and protect our bond rating.

We must resist any temptation to mortgage our future, and our children's future, to deal with the challenges on our watch.

By investing in education...
Protecting our children...
Meeting the health and human needs of our citizens...
Making investments that will spur economic growth and job creation...
And meeting our obligations to maintain our state's excellent credit rating...

I believe we tell the right kind of story about our state. I believe these priorities show the true face of Georgia and reflect our true values.

We are compassionate, responsible, loving, trustworthy, and confident in our future.

Those values will shine through in our budget.

These are the essentials we cannot do without, in good times or lean.

But to fund them we must make hard choices. We must do without other things that might be nice to have-just not right now.

Here is the simple truth-the cuts we have already absorbed do not free enough revenue to meet our education, child safety, economic development and human needs in a way that preserves our sound fiscal rating.

We must take additional steps. The ones I propose are difficult, but, in my judgment, necessary.

Our current economic conditions require us to use a portion of the Revenue Shortfall Reserve-the "rainy day" fund. I will use my statutory discretion as Governor to make $138 million in Reserve funds available for appropriation in FY 2003 and an additional $142 million available in FY 2004.

We must also adjust to the fact that the budget surpluses we enjoyed in recent years are no longer available to us. As a consequence, programs and initiatives that were funded principally or entirely from surplus funds must get a hard look.

One such program is the Homeowner Tax Relief Grant. The goal of this program, funded from the annual budget surplus, was to raise the property tax homestead exemption, putting more dollars into the taxpayer's pocket.

That is a worthwhile goal and a principle I support. Unfortunately, as we know, the surplus is no longer there. If we desire to continue this program we must now dip into the general funds budget.

In short, we would be taking money out of the taxpayer's left pocket to put it into their right pocket. That is unwise and unproductive, especially when the price comes out of meeting our basic human needs.

We will revamp this program, so that it is funded responsibly. Our local governments have already sent out current year property tax bills, with the expectation that in FY 2003 the homestead exemption value will rise from $8000 to $10,000.

I am recommending $24.5 million in the FY 2003 amended budget to preserve this exemption increase to $10,000 for the current year, which will result in no tax liability for the first $25,000 of fair market value on homesteads, saving the average property tax paying family $210.

However, for FY 2004, I am proposing only $95 million, which will fund the statewide homestead exemption value at $4000 and result in no property tax for the first $10,000 of fair market value on homesteads.

To maintain the full $10,000 exemption for FY 2004 would cost $378 million. By stepping the grant program down to the $4000 level, we will save approximately $283 million for other priorities.

I am also proposing that we eliminate the $7 reduction in the price of driver's licenses for applicants who check the "organ donor" box. This price differential is a well-intentioned attempt to encourage people to become organ donors.

Experience shows, however, that the fee break has little impact on the number of people who become organ donors. It is an incentive that doesn't incentivize a significant number of people. Eliminating the fee break will generate $4.4 million in additional revenues.

That may be a modest amount in the overall budget, but we need it.

Let me be clear that I completely support organ donation and encourage Georgians to become organ donors and help save lives. This is simply not the best way to go about it.

Even with these measures, we have a need for new revenue if we are to balance our budget while honoring our commitments and human priorities.

I am therefore proposing a modest temporary-and let me emphasize that: temporary-increase in the state excise tax on tobacco and alcohol products.

This measure will generate approximately $91.5 million in new revenue applied to the FY 2003 budget and $387 million for FY 2004. We will sunset this provision in four years, with the hope that our revenue will have improved by then.

In the meantime, the fact that this is a temporary revenue increase, with a sunset, will force state government to undergo systematic and structural changes to ensure that we never find ourselves in this situation again.

This kind of fundamental change is long overdue.

While it is in effect, the increased excise tax of 58 cents per pack on cigarettes and the excise on other tobacco products will also promote our goal of a healthier Georgia.

This action will prevent as many as 3,500 teenagers per year from starting to smoke. Teens are especially price-sensitive and cost is a major deterrent to teen smoking.

This proposal will also encourage many adult smokers to stop and will curb the use of other harmful tobacco products, improving the health of our state.

I want everyone in this state to understand that revenue produced by the proposed increase will be directed to offset increases in health care costs to the state.

This is not a step I propose lightly, but I believe it is the most responsible option available to us. Georgia has among the lowest state excise taxes on these products.

This action produces both needed revenues and public health benefits. If we must raise a tax to meet our goals as a state, this is the one to raise.

In closing, let me say that I present these budget proposals to the General Assembly with humility.

The 150 hours of budget meetings I had were not nearly enough to dig as deeply into our state's spending habits as I would have liked.

The budget process I was called upon to manage was already well-advanced by the time I became involved.

Time was short. I had less than one month after Election Day to prepare a budget proposal.

The budget proposals I have outlined today and which you will soon examine in detail are lean. You will find no fat in this budget.

If you do, let me know and I'll take care of it.

You've all made promises to your constituents to support programs and projects.

So have I.

There are things I campaigned on that I can't do right now because of this budget situation.

It is frustrating not to be able to do all the things you want to do or have all the things you want to have.

But dealing with that hard truth is part of maturity and a sign of character.

When I spoke to the members of this body a few weeks ago in Athens I told you we'll be able to have the things we want and fulfill our promises to those we represent-just not right now.

For now, we're on a diet, and a pretty strict one.

We can and should see this as an opportunity to improve our overall fitness by reforming the budget process. We have four years to do so.

We must return to an era of true results-based, performance-based budgeting.

Every year we will examine each agency or department's funding request in its entirety. Line items that are no longer needed or that do not align with our core principles will be eliminated.

And we will carry out a sustained series of performance audits to ensure that Georgians are getting the best value for their tax dollars.

We can change our habits and improve our situation for the future.

For now, we must be equal to the task at hand.

This is not the kind of budget I wanted to propose. The cuts are real and will cause real pain.

And no Republican governor wants to propose even a modest tax increase his first week in office.

But this it is the budget I believe the situation demands.

I've said repeatedly since the election, you and I are partners.

We are members of the same team, Georgia's team.

Hired by Georgia to do the people's work and be good stewards of their resources.

If this General Assembly, in your wisdom, can come up with a better solution than what I have proposed, I am ready to work with you.

If there are things in this budget you don't like-and I'm sure there are-then find an alternative.

Find us a better solution.

If you can produce a budget that lives up to the kind of state Georgia is...
Meets our obligations to the educational, economic, and human needs of our citizens...
And maintains our sound financial rating ...

Then I am here to work with you.

Let's work together and show the people of Georgia that their trust in us is well placed.

Tough times test our character.

Let's represent the true character of our state.

Let's produce a budget that tells the story of a Georgia that is compassionate and confident ... Bold and optimistic ... A Georgia that sustains its principles in good times and bad ... A great state that is equal to its greatest challenges.

Thank you.

God bless you all ... and God bless Georgia.