Having just listened to details of the $1 billion fall in state revenue collections last month, House Appropriations Chairman Terry England closed the first legislative meeting since mid-March by stating the obvious.
"There is not a whole lot of positive news in this at all," said England, a Republican from Auburn, who served in the same role through the tail end of the Great Recession.
One example of what the new pandemic recession means for state government was made clear before the House and Senate Appropriations committees held their virtual meeting Thursday: The Georgia Board of Regents approved a plan giving University System of Georgia leaders the authority to furlough employees, with those earning higher salaries taking larger cuts.
Most University System employees would have to take four or eight furlough days as part of the plan, system Chancellor Steve Wrigley said.
Wrigley and the presidents of each of the system’s 26 public colleges and universities would take the equivalent of a 10% pay reduction, including 26 furlough days for the new fiscal year that begins July 1. Wrigley was paid about $515,000 during the last fiscal year, and University of Georgia President Jere Morehead received $966,000, according to the state’s transparency website, Open Georgia. Georgia State University President Mark Becker’s compensation package was scheduled to exceed $1.1 million this year.
In the legislative meeting, Kelly Farr, the director of the Office of Planning and Budget, told lawmakers that state tax collections could go from bad to horrific over the next few months. The $1 billion drop in April was based in part on sales numbers for March.
The state didn’t start shutting down because of the coronavirus until the second half of that month. So next month’s report — which will include April sales — will likely be worse.
The decline in revenue means the state will have to dip heavily into its $2.7 billion rainy day reserve to pay for this fiscal year's $27.5 billion budget, Farr said. This fiscal year ends June 30.
Jeffrey Dorfman, the state fiscal economist from the University of Georgia, said with internet sales up during the pandemic shutdown, the state could get a boost of about $15 million a month from legislation the General Assembly passed in January to increase tax collections from online- and app-based sales. Particularly if consumers continue that buying trend.
But he warned lawmakers that the increase won’t come close to making up for declines in collections from income and non-internet-based sale taxes.
“It’s a lot better to have an extra $15 million than not,” he told lawmakers. “But that is not going to save you from the hard choices you and your fellow legislators are going to have to make.”
Dorfman said consumer confidence numbers dropped in recent months as businesses shut down and tens of millions of Americans lost their jobs or had their hours cut dramatically.
“The question everyone wants to know is, when will the economy get back to normal economic times?” he said. “It all is going to depend on consumers and when we feel safe taking a vacation, going to a restaurant, going to a shop for the fun of it.”
He said making any kind of prediction about what the future holds will be difficult to impossible because the best comparison to the coronavirus recession was during the Spanish Flu outbreak more than 100 years ago. And there isn’t good economic data from that era, he said
“We don’t really have a good idea, based on history, how this is going to go,” Dorfman said.
Lawmakers shut down the 2020 General Assembly session in March because of the pandemic, and they only recently made plans to hold virtual meetings. They are expected to begin meeting in person later this month and restart the session in June. Their main task will be passing a 2021 budget.
State agencies were told last week that they'd have to develop plans to cut 14% from their budgets, or more than $3.5 billion. They only have a few weeks to come up with those plans, and the Board of Regents moved quickly to get started Thursday.
Colleges and universities in Georgia and across the nation are making similar cuts. Early estimates by the system show the furlough plan would save the system about $40 million in state funds. The system needs to cut about $361 million to meet the state’s 14% budget cut requirement.
Wrigley said in a letter Friday that layoffs and furloughs may be necessary to meet the budget gap. “We don’t really have a choice,” Wrigley told members of the Board of Regents during a conference call Thursday. “We want to be strategic. We want to be fair.”
The United Campus Workers of Georgia, a union of system staffers, said the state-mandated budget cuts “will only deepen the profound unemployment crisis” and that Gov. Brian Kemp and state leaders want to maintain a business-friendly environment “at the expense of students and workers.”
“Following this course of action, furloughs and layoffs will happen,” it said. “Georgia’s college students will receive lower quality education. And the state will receive less income and sales tax revenue. This is the opposite direction from where our state should be headed.”
Among other things, the group wants the Board of Regents to make sure any system employee earning less than $65,000 a year is not furloughed.
University of North Georgia assistant English professor Matthew Boedy, the conference president of Georgia’s chapter of the American Association of University Professors, called Thursday’s decision by the Board of Regents “the least painful option in these perilous times.”
“I appreciate the chancellor softening the blow as much as he could for the large majority of USG employees, those he noted make under $99,000,” Boedy said.
