By Tom Baxter
For a vivid picture of how Georgia’s fiscal priorities get fixed, let’s compare the state’s refusal to join in the Medicaid expansion with its determination to move ahead with the deepening of the Savannah River channel to the Port of Savannah.
The Medicaid expansion issue, aka the ObamaCare issue, is very controversial, with advocacy groups lining up on both sides to turn up the heat in the lead-up to Oct. 1, when the uninsured can begin signing up for health care exchanges, and Jan. 1, when the expanded Medicaid program begins. As much as they disagree on everything else, neither side would argue that the economic consequences aren’t very high for the state. Tim Sweeney of the Georgia Budget and Policy Institute, an advocate for accepting the expansion, has estimated the cost for each month of delay to be between $240 million and $300 million.
The harbor dredging project also involves getting money from Washington, but in this case the lack of controversy is almost unsettling. When every important political leader in the state from Kasim Reed to Paul Broun is on board with something, you know it’s either a no-brainer, or nobody’s using any brains.
Unlike the federal Medicaid dollars he’s shunning, Gov. Nathan Deal wants Washington to pay for most of the (estimated) $662 million to deepen the Savannah shipping channel from 42 to 47 feet so it can accommodate the larger ships being built to take advantage of the widened Panama Canal in 2015. But he’s indicated the project is so important to the state that it will pay all the costs for the project if necessary.
When you have the president plugging the project on the Tonight Show, it’s questionable how wise it is to be talking about going it alone on a project of this magnitude. We should, in any case, try to get our arms around how much $662 million really is.
That’s a lot of money, but a drop in the bucket compared to Sweeney’s estimates of the cost of staying out of the Medicaid expansion. It’s in the same ballpark as the Medicaid shortfall was a few years ago when the legislature passed the bed tax. It’s also approaching as much bonded indebtedness as the state might take on in a lean year. So the state could swing such a deal, but with how certain a payback?
The state is already on the hook for $230 million of the total costs, and the $662 million estimate depends on the success of an system to pump oxygen back into the river through a series of 20-foot-tall “bubblers” which have never been tested on this scale. The bubblers are more than $72 million of the estimated cost, and a big chunk of the rest would go toward purchasing property along the river, much of it owned by large corporations.
The sizeable cost and the haste in spending it is justified, state leaders say, because Savannah can’t afford to get behind its East Coast rivals in the race to accommodate the new “Post Panamax” ships. Yet while there is agreement the supersized ships will cause big changes in the long run, the emerging consensus seems to be these changes will be “evolutionary rather than revolutionary,” as one analyst puts it in Forbes.
Nor is it clear yet just what these changes will be. Some in the industry foresee the evolution of a feeder system in which smaller ships offload cargo from the Post Panamax ships to gain the maximum efficiencies, and there’s speculation (see the Forbes piece) that a new form of triangular trade, with Asian, North America and South America as its points will emerge. So we may not yet know the best strategy for taking advantage of the new wave of world trade.
When you consider these uncertainties, the heated competition between Savannah and Charleston, the two cities Vice President Joe Biden visited Monday, begins to look less like a rational business competition and more like some kind of SEC-ACC rivalry thing. In the long run the project may be just as important as all the politicians say it is, but the return is nowhere near as immediate or as certain as the cost of refusing the Medicaid expansion, even if that’s a third or a quarter of Sweeney’s estimate. There’s urgency, and then there’s real urgency, and Georgia’s leadership shows very little of the latter.