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Georgia Avoided Fiscal Maneuvers to Close State Budget Gap, But Needs Improvement in Planning, New Study Shows

Georgia’s government, unlike others around the country, has succeeded in avoiding one-time fiscal maneuvers to close gaps in its state budget without moving special funds into general funds to pay for current expenditures.

But as found in a new study conducted by the Volcker Alliance in partnership with the Center for State and Local Finance (CSLF) at Georgia State University, the state needs to improve in budget forecasting and to adequately fund post-employment benefits for public workers, such as retiree healthcare.

CSLF researchers graded Georgia — along with four other Southeastern states — in five categories: budget forecasting, budget maneuvers, legacy costs, reserve funds and transparency, as part of the Volcker Alliance report, “Truth and Integrity in State Budgeting: What Is the Reality?” The study spanned fiscal 2015 through October 2017 and graded states based on best practices deemed necessary for accurate, sustainable and transparent budgeting.

“By pursuing this investigation, the Volcker Alliance hopes that drawing attention to prevailing practices — and identifying the strongest and weakest among them — will encourage new efforts to raise standards for all states,” said chair Paul A. Volcker.

Georgia received its highest average score of “A” over the three years in the area of budget maneuvers. According to the study, the state was among 15 in 2017 that substantially avoided practices such as using proceeds of borrowing to pay for recurring expenditures or making transfers into the general fund from special funds to pay for current expenditures. This ranked above the national average of “B.”

The state received a score of “B” in reserve funds and transparency, aligned with national trends. In transparency, the report noted that Georgia keeps “voluminous data” about the cost of tax expenditures and abatements as part of the reports prepared by the Fiscal Research Center at Georgia State’s Andrew Young School of Policy Studies.

But Georgia did not fare as well in the areas of budget forecasting and legacy costs, where it received a “C” in both categories. Researchers found the state’s budget revenue estimate “is accompanied by little discussion of the assumptions and methodology used to produce it.” And, that it does not meet the actuarial funding levels for other post-employment benefits, such as retiree healthcare, despite meeting levels for public employee pensions.

CSLF and the Volcker Alliance shared their findings during a one-day conference hosted by S&P Global Ratings earlier in December at Georgia State’s College of Law. The event highlighted the fiscal challenges and opportunities facing state and local governments in the Southeast. Topics included updates on the state and local credit rating environment, the demographic shifts of an aging population and its role on pensions and government cybersecurity.

In addition to the Center for State and Local Finance, panel discussions featured experts from several other Georgia State research centers, including the Andrew Young School of Policy Studies’ Fiscal Research Center, Georgia Health Policy Center and the Urban Studies Institute, and the Center for Health Services Research at the J. Mack Robinson College of Business.

You can download presentations from the event by visiting the Center for State and Local Finance website at http://cslf.gsu.edu/2017/11/07/recap-and-presentations-sp-global-ratings-conference-state-of-the-southeast/.


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