Deal: With deep freeze over, Georgia’s economy warms

Governor proposes more than half a billion dollars in k-12 education investment

Lt. Governor Cagle, Speaker Ralston, President Pro Tem Shafer, Speaker Pro Tem Jones, members of the General Assembly, constitutional officers, members of the consular corps, members of the judiciary, my fellow Georgians:

In January 2011 when I addressed this body in my first State of the State address, this Capitol building and much of our state was engulfed in the worst snow and ice storm in several decades. In hindsight it was analogous to the deep freeze that had descended on the economies of the United States and Georgia, which is sometimes referred to as the Great Recession. While the economic calamity did not manifest itself overnight, as did our winter freeze, nonetheless it caught our nation as unprepared as any icy city without snow plows.

Although the sunny January days in Georgia melted the effects of our surprise storm within a week, no such relief was forthcoming for the economy. Businesses closed, buildings became vacant, and the newspapers that served as the legal organs of their counties were filled with foreclosure notices as families lost their homes. Congress applied historical amounts of financial salt and sand, known as the stimulus, on the ice laden roads of commerce, but traffic still could not move. State governments, like that in Georgia, that could not print money nor operate on unbalanced budgets, were required to reduce spending and consume their cash reserves. Even while parts of our budget were frozen or shrinking, other parts were not shrinking at all; these were the entitlements and enrollment-based programs. In Fiscal Years 2008 and 2009 Georgia dipped into its Rainy Day Fund for $1.4B. Some states that were unwilling to face the realities of the moment even raised taxes on their citizens, but not Georgia! 

I will not recount further the disastrous effects of the Great Recession on our citizens, some of which have left permanent scars. Instead, I want to tell you how the parts of our state government, working together like buddies in a war zone foxhole, have not only survived, but have reformed our operations in order to better serve our citizens. So now, let me proudly say as is normally stated on the opening lines of a State of the State address: “The State of our State is Excellent and it is a Great Day in Georgia.”

But this day did not arrive without a lot of hard work and sacrifice. So, to the members of the General Assembly, to the teachers and administrators, to the state employees, to the business owners large and small, and to the workers and families of Georgia, I say thank you!

My approach as governor has been to do in the hard times, what is almost impossible for government to do in the good times; that is, make state government programs leaner and more efficient and concentrate scarce resources on those areas that will produce the best and most long lasting results. To that end, we have eliminated certain programs and consolidated others in order to achieve greater efficiency in the use of taxpayer dollars. While fighting to hold the line on k-12 education, we have reduced the number of state employees by 12,750 from 5 years ago, which is a drop of 16.5 percent.

My basic focus has been on creating private-sector jobs for Georgians. With your help and the involvement of our business community, we have done some great things. We have implemented real tax reform, such as eliminating sales tax on energy for manufacturing; we have essentially removed the marriage tax penalty on working Georgia couples; and we have abolished the annual birthday tax on vehicles. And each of these are part of a mosaic that led Site Selection Magazine to declare Georgia to be the number one state in the nation in which to do business.

According to Tax Foundation, Georgia has the lowest tax burden on its citizens of any state in the nation. I don’t know about you but I see that as a good thing, and I will fight to keep it that way!

Now I realize that there are some who frown on our low tax policies. I feel certain that in this election year some will propose that we change our policies—and they may even have protestors to back them up. Their solutions may sound appealing on the surface, but will ultimately require us to raise taxes on all Georgians. We must resist those temptations. Just as individuals cannot borrow their way out of debt, governments cannot tax their way out of a recession. There is no such thing as free money, particularly when it comes from Washington and has costly strings attached. Washington wants to mandate to Georgia how we spend our dollars. Let me tell you, in Georgia, we know a lot more about how to balance a budget than Washington does.  And don’t be deceived by the argument that “it’s our money—the Federal Government is just giving some of it back.”  Yes, it is our money, but if the Federal Government doesn’t need it for federal purposes, they should stop taking it in the first place!

As an example, the Affordable Care Act is anything but affordable and is costing our state $327 million dollars this year. You should be aware that, even without expanding, currently Medicaid and PeachCare cost every Georgian through federal and state taxes nearly $1,000 each year. Expansion would add 620,000 people to our taxpayer funded health plan, costing us even more. Now, the executive branch in Washington is trying to do what the courts deemed unconstitutional for Congress to do, but we will not allow ourselves to be coerced into expansion. Be assured, I am prepared to fight any intrusion into our rights as a state.  

My focus on job creation is paying off. According to the federal department of labor, in the three years since I became governor, there have been approximately 217,000 new jobs added in our state, and major job announcements are almost a weekly occurrence. As a result, our state unemployment rate is the lowest it’s been in 5 years!

There are many ingredients in the recipe for job growth. I have already mentioned the importance of favorable tax policies. In addition it requires adequate infrastructure so that people, as well as raw materials and finished products, can move freely within our state. This general assembly has already made changes to funding formulas so that interstate projects and freight corridors will be prioritized. In the budget I am submitting to you, I have included $35M for the deepening of the Port of Savannah. If approved, we will have $266M, which will represent Georgia’s share of this important project. I intend for us to start dredging the project this year! This was first authorized by Congress in 1999. Approximately 50 percent of the cost of this project will be devoted to environmental mitigation. In addition, the project has been approved by four separate federal agencies. We have studied and planned long enough. It’s time to start moving dirt!

Another important element of job growth is the availability of a trained and reliable workforce. We are fortunate that our workforce is ranked number one by CNBC, that our technical college system and its quick start program are regarded as the best in the country and that our colleges and universities, both public and private, provide excellent graduates. Even so, we have applied the same scrutiny to these institutions that hard times dictate.  We have asked them to examine themselves through the prism of the work readiness of their graduates.

This has resulted in priority being given to those areas of study where job placement is high. Last year we identified three areas of study in our technical colleges where jobs already existed.  Those were commercial driving, practical nursing and early childhood education. For students who pursued those areas, we have paid 100 percent of their tuition through the HOPE Grant. This year I am asking you to expand that to an additional 4 areas of training—welding, health care technology, diesel mechanics and information technology.

In order to fill the needs of a growing economy, we need more of our citizens to acquire education and skills beyond high school. To encourage this, I am asking you to create a new Zell Miller HOPE Grant for students in our technical college system. This grant will cover 100 percent of tuition for those who maintain a 3.5 grade point average.

In addition, my budget will include $10M for a 1 percent interest loan program devoted solely to students attending our technical colleges. This will allow students who have a financial need to cover the funding gap in tuition, books and fees. I am also recommending that the Hope Scholarship and the HOPE Grant be awarded at 103 percent of the amount last year.

In accordance with our trend of putting our education where our economy is, I am happy to announce the creation of the Governor’s High Demand Career Initiative. We will bring together the heads of Economic Development, the University System of Georgia, our technical colleges and schools, along with key leaders in some of our important private-sector industries. This initiative will allow us to hear directly from the employers of our state about what they expect their future needs will be, and it will give our institutions of education the chance to get ahead of the curve in preparing tomorrow’s workforce.

While these are important changes to our post high school education programs, it is equally important that our pre-k through high school programs continue to improve the quality of our students. We must work to avoid the necessity of costly remediation. If we hope for the greatest results, we must get it right the first time! This means making sure they’re reading on grade level by the end of third grade and then following through as they continue their education journey. 

Let me take this opportunity to thank my wife, the First Lady, who visited every school district in the state to read to Georgia’s children in order to emphasize the importance of their learning to read.  

Because of the progress we have made and Georgia’s existing 20-year investment in what is now recognized as one of the best Pre-K programs in the country, we have been awarded an Early Learning Challenge Grant of over $50M. This money will be used to accelerate the reforms that we implemented last year.

In the Great Recession, state revenues dropped 19 percent [FY 2007 to FY 2010], meaning I came into my term during hard times when much of the savings of low-hanging fruit had already been plucked.

Since spending on Education has always been the largest part of our state budget, representing over half of all spending, it was to be expected that it would be reduced during these hard times. However, during my administration, funding for education has increased by over $930M. That does not include capital spending for education, which represents 76% of our entire state bond package. $239M of this year’s capital investments went to the Department of Education for use on K-12 programs. Since FY 2012, nearly 50 cents of every dollar of new revenues has been dedicated to education. In the budget I am sending you for FY 2015 almost 82 percent of new revenue receipts are dedicated to education, with 68 percent of those new revenues going to k-12 alone.

Total state funding for K-12 education has increased each year I have been governor. Funding for Quality Basic Education, the outdated formula that allocates revenue to the local school districts, has increased roughly 13 percent since FY 2011.

My amended 2014 budget will also call for bringing current the Forestland Protection Act Grants to help those local governments and school systems whose ad valorem tax digests are negatively impacted by this law. The total 2014 amount is almost $40M, of which $22.6M will go to school districts and the remaining amount to municipal and county governments.

As these numbers indicate, we will spend almost $8 billion in next year’s budget on k-12 education. My proposal represents the largest single year increase in k-12 funding in 7 years. That’s an addition of $547M, an increase of over half a billion dollars in one year for our local school systems! It will enable us, in partnership with local school districts to restore instructional days, eliminate teacher furloughs and increase teacher salaries. These funds will provide our local school systems with the resources and flexibility to address the most critical needs of their students and teachers.

As we search for more effective ways to deliver quality education to our students, I have included $44.8M in the budgets to better connect every classroom in Georgia, including those in rural areas, to the internet and digital resources students need to thrive. This is part of the recommendations of the Digital Learning Task Force. It is also compatible with the Innovation in Teaching competition I initiated last year, whereby Georgia Public Broadcasting is videotaping some of the best teachers in our state and making them available to other schools. It is my goal that every child in any classroom in our state will have access to the best instruction possible, and this can be done by expanding the availability of our on-line learning.

Over the past two years, we have found ways to reduce the need to build new prison beds, whereby we will save taxpayers hundreds of millions of dollars and keep Georgians safer—in 2012 with our Criminal Justice Reform and again in 2013 with our Juvenile Justice Reform, both of which passed unanimously in this General Assembly! 

These reforms gave us a blueprint on how to use rehabilitation to reduce recidivism. Already we have seen relief for taxpayer dollars by dropping jail backlogs by nearly 90% of what they were when I came into office.

The novelist Victor Hugo said that if you open a school door, you close a prison. Perhaps this is true considering 7 out of every 10 Department of Corrections inmates do not even hold a high school diploma or GED. That means we have 38,000 Georgians who walked out of our school doors and into our prisons. That must stop. This is why improving our high school graduation rate is so important.  High school dropouts with no marketable skills become the feedstock for our prisons. 

While individuals are in our system, we must do a better job of raising their education and skills to an adequate level so that when they are released they will be better prepared to meet our workforce needs, rather than reenter the revolving door of the past.

This year, we intend to roll out our third leg of our criminal justice reforms, the one that will sustain our previous efforts.  If an offender has been equipped to enter the workforce upon release, that person will stand a greater chance of avoiding relapse.  If our reentry and reform efforts reduce our recidivism rate by 25 percent, we would see around 1,400 fewer crimes each year, with at least 1,100 fewer victims!  This is a goal we should be able to achieve or exceed.

These Criminal Justice reforms will allow non-violent offenders to break their addictions, reclaim their lives and keep taxpayers from spending $18,000 per inmate for each year they are in prison. These reforms will also increase the safety of our society.

Over the past three years, at my direction and in accordance with the legislation subsequently passed by the General Assembly, we have reviewed 40 percent of all budgetary programs through a Zero-Based Budgeting analysis. As a result, we have consolidated programs and agencies where duplication existed and eliminated others. My budget this year will continue this pattern.

When I took office, we had a depleted emergency fund.  Now, with your help, we have grown our Rainy Day Fund by 518 percent.

When I took office, Georgia had a AAA bond rating from all three major agencies. With your help, we are one of only ten states that still maintain that advantage, a rating that even the federal government doesn’t have.

When I took office, we still had revenue numbers that made across-the-board budget cuts a necessity. Now, with your help, we have grown our year-over-year revenues for each quarter that I have been governor without raising taxes!

While it is appropriate to celebrate these accomplishments, their true significance is that they are part of the plan to create more jobs for our citizens. It is my firm belief that if people have good jobs they can provide for themselves and their families and will have less need to ask government to do things for them. Achieving that goal has been my primary focus.

Well today, more Georgians have jobs than at any other time since October 2008. We are getting people in our state back to work at a faster rate than the national average. For those 217,000 or so Georgians who now have jobs, they know what the sting of the frozen economy feels like. They lived through it. But for them, the freeze has ended.

This is what we’ve done in three years … imagine what we will do in the next five.

And since Georgia has now been recognized as the No. 1 state in the nation in which to do business, we can rightfully expect many more jobs to come our way.

Yes, we began this journey three years ago in the midst of an ice storm and a recession. With your help on a bi-partisan basis, we have turned what might have otherwise been a long cold “Winter of Despair” into a time of preparation. And now our efforts are being rewarded. The early rays of recovery are cresting the skyline. I believe the warm sunshine of prosperity is once again shining on Georgia. May God continue to bless us all!