Following last week’s virtual meeting to hear presentations from Georgia’s State Fiscal Economist and Director of the Governor’s Office of Planning and Budget, the Joint Appropriations Committee met again today for those experts to answer questions submitted by House and Senate committee members. State Fiscal Economist Jeffrey Dorfman and OPB Director Kelly Farr addressed a litany of written questions from legislators, which are detailed in today’s special edition of the #GoldDomeReport.

Georgia’s Economy

• Are there indicators which show the economy improving if so what?
  Dr. Dorfman: There is no leading indicator. A Georgia-specific survey is being launched by the University of Georgia. There is also a new national poll which inquires how “safe” a person feels; people were initially indicating they would feel safe in June and now it is July.
• Do you expect to see the State returning to “normal” in the third or fourth quarter of the calendar year?
  Dr. Dorfman: The third quarter is likely to be “pretty bad”, but a return to normal may come in the fourth quarter of 2020 as the economy starts to reopen.
• How do you expect local property taxes to be affected by the slowing economy?
  Dr. Dorfman: No local tax reduction or housing market collapse is expected. Appraisals of property were done prior to the shut down; next year, there will just be little growth in the tax digests. With federal aid, housing prices should hold steady.

State Revenues & Reserves

• What is your best estimate for what amount will need to be withdrawn from the Revenue Shortfall Reserve to close out the FY20 budget?
  Dr. Dorfman: It is uncertain at this time, but the income tax deadline deferral may require a withdrawal of between $1-1.5B to close out FY20.
• Of the $100 million allocated from the Revenue Shortfall Reserve, how much of that has been spent and by which agency(s)?
  Director Farr: The Office of Planning and Budget shared an accounting with the Committees and only GEMA has received funds.
• How much income tax can Georgia expect to receive later due to the shift in the income tax filing deadline?
  Dr. Dorfman: About $1.35B in tax payments has been delayed and we would expect to collect $1 -$1.5B.
• Is there a plan to use bonding authority to stimulate the economy?
  Director Farr: OPB is “anxious” to see the bond package proposed by the General Assembly but will be cautious as the State does not want to negatively impact the AAA bond rating.
• What are the expected revenue impacts on tobacco, vaping, alcohol, and other “sin taxes”?
  Dr. Dorfman: This would depend on rates of tax and increases applied.
• What is the condition of the Lottery Reserves, and might the State need to draw upon the Reserves to meet budget needs?
  Director Farr: Not aware of a need at this time; sales seem to be “holding up well.”
• Will the shift in work to digital platforms be a boost for revenues long term, and will there be changes to the tax code to incentivize reopening of businesses?
  Director Farr: These are great policy questions for legislative debate.

Federal COVID Response

• Is OPB and the Governor’s Office seeking flexibility from the federal government to use federal COVID-19 response funds for other purposes, like revenue replacement?
  Director Farr: The Governor has had conversations with the federal government to permit more flexibility, and legislators are encouraged to have those conversations with federal officials, too.
• How will local CARES Act funds be distributed? 
  Director Farr: ACCG and GMA have discussed this issue with the Governor and Office of Planning and Budget and an initial plan will be released “very soon”.
• Is there a plan for public access to a website for CARES Act funds received?
  Director Farr: Yes, there is a plan to have a public accessible website.

State Agency Budgets & Operations

• As the state is reopening, why were agencies requested to take 14 percent reductions as the economy could normalize in FY21? 
  Director Farr: The 14 percent reduction was requested to get agencies prepared for the potential of a substantial cut. Once the Governor revises the revenue estimate around June 1, the legislature can decide the actual level of cuts necessary.
• Why are agencies being asked such steep reductions now rather than reassessing at the mid-year budget stage?
  Director Farr: A steep reduction at mid-year would be difficult as it would more costly, disruptive, and harder for agencies to respond.
• Is there an estimate of unspent funds, by agency, prepared?
  Director Farr: Not yet; the state is trying to capture those amounts now.
• Is there a plan in place to incrementally reopen state agencies and plans to protect employees and the public?
  Director Farr: Yes, there are efforts to ramp up in a few months, following the Department of Public Health guidelines.
• Will the permission to permit remote operations of agencies be made permanent?
  Director Farr: The Governor has encouraged the embracing of technology and has made that desire known.
• Is the strategic hiring process in place for agencies, and is the Office of Planning and Budget still overseeing that process? 
  Director Farr: Yes, except that the Department of Public Health is exempt from this during the declared public health emergency.
• With the drop in travel and motor fuel revenues, how will DOT maintain infrastructure investments?
  Director Farr: DOT expends its dollars from prior year revenues and will have the ability to smooth out expenditures over time.

Chairman England made some additional comments around the CARES Act funds for local governments as the State retains responsibility for the funding uses which will be audited. Thus, the State could be required to pay back funds if they are not appropriately used as outlined in the federal law.  Director Farr explained that was the feedback he had received; ACCG and GMA have taken “ownership” of this issue and submitted a proposed plan to the Governor.  Director Farr did note that the State needed “guardrails.”

Chairman Tillery told members of the Committees that they will route information on funds received from the federal government impacting local governments, including funding for local education agencies, higher education institutions, and local hospitals. These  documents may address some local district issues for legislators.

There will be another joint meeting next week of the Committees with federal guests to outline more about efforts being undertaken by Congress.