How the state budget process works

As opposed to the federal government, Georgia's Constitution mandates that the state budget cannot exceed expected revenues. There is also a limit on how much debt the state is allowed to issue. The State of Georgia FY 2003 Budget Report states that Georgia's Constitution “limits the highest aggregate annual debt service, including recommended debt, as a percentage of the net treasury receipts for the prior fiscal year. The maximum percentage allowed by the current state Constitution is 10%, effective in FY 1984. Prior to FY 1984 the maximum percentage allowed by the Constitution was 15%.”

The State of Georgia FY 2003 Budget Report states “the Governor, who is the Budget Director, is responsible for establishing the official revenue estimate. The Governor is assisted in this responsibility by a state economist under contract as a consultant with OPB, which serves as the budget staff for the Governor. The basis for making revenue projections is a computerized econometric model. From this model, a range of estimates is provided to the Governor by his economic advisor. In December, just prior to finalizing his budget recommendations to the General Assembly, the Governor adopts a final revenue estimate -- an action that, when added to surplus and reserve funds, determines the size of the forthcoming appropriations bill.”

Therefore, the state budget is limited by three factors: 1) the constitutional requirement of a balanced budget, 2) the constitutional limit on debt service, and 3) the Governor's ability to set the revenue estimate.

Reserves

Two reserves are established by the state on June 30, the end of the state's fiscal year, if funds are available -- the Midyear Adjustment Reserve and the Revenue Shortfall Reserve.

The Midyear Adjustment Reserve is established by the State Auditor on June 30 each year and represents 1% of net revenue collections for that fiscal year, to the extent surplus funds are available up to that total. The Reserve is set aside to be appropriated in an amended budget at the next session of the General Assembly. The Reserve is considered to be the primary fund source for the State Board of Education's “Midterm Adjustment.” This adjustment is appropriated in the upcoming amended budget each year to provide the state's share of the increased cost of new students enrolled in the fall.

The Revenue Shortfall Reserve is also established on June 30 after the Midyear Adjustment Reserve has been filled. It is equal to not less than 3% nor more than 5% of the fiscal year's net revenue collections, to the extent surplus funds are available. The Revenue Shortfall Reserve is often referred to the state's “rainy day” fund and is available to offset an unexpected shortage in revenues during the upcoming fiscal year.

Occasionally, other reserves can be available for appropriation. For instance, the Motor Fuel Reserve represents funds earmarked for expenditure by the Department of Transportation in years when motor fuel tax collections exceed the original budgeted estimate for motor fuel collections in the preceding fiscal year. All motor fuel tax collections are constitutionally allocated to the Department of Transportation whether appropriated or not, but are routinely included in the state's amended budgets.

How Budgets are Approved

Three kinds of budgets can be approved in Georgia -- an original budget, an amended budget, and a supplementary budget. An original budget is just what is says -- the first budget passed for a fiscal year. Generally, this budget remains in effect until the General Assembly convenes in January, at which time the budget is generally changed by adding appropriations, decreasing appropriations, or shifting expenditures between object classes.

An amended budget is one in which any type of change can be made -- additions, deletions, or transfers. A supplementary budget is one which includes only new spending. Generally, a supplementary bill is passed early in the session to provide appropriations needed before a more extensive amended bill can be passed. All of these budgets, at the end of the session, become one operating budget for the state, with no distinction made for the various appropriations acts that are passed.

The General Assembly can meet at any time in special session and amend the budget in effect. These occasions are rare, having occurred only twice in recent decades. Both were triggered by economic recessions in Georgia that required major budget cuts to avoid spending more money than was available for expenditure.

State law requires all state agencies to submit a request for appropriations for the next fiscal year to OPB no later than September 1 of each year. Most agencies start preliminary work on these requests in the spring for a fiscal year that is 14 to 15 months in the future. At the same time, agencies may request amendments for changes in the current fiscal year's budget.

In early September, the Governor begins a four-month period in which he studies the budget requests of each department and develops his recommendations to the General Assembly. During this interim, he meets with department heads and consults with OPB staff in finalizing his proposals.

Budget Announcements

The Governor normally appears before a joint meeting of the House and Senate Appropriations Committees during the first week in January to announce his recommendations for amending the current year's budget. The Governor announces the next year's budget recommendations during the annual Budget Message, which is delivered to a joint legislative session during the first week of the annual session. The Legislature convenes on the second Monday in January.

Legislative Action

By law, an appropriations bill is introduced in the House of Representatives and first goes to the House Appropriations Committee for consideration before being voted on by the entire House. The bill follows a similar path through the Senate. The House and Senate versions usually differ. While still working within the total revenue estimate established by the Governor, a conference committee is then appointed to reach a compromise on the two versions. The conference committee's version must be totally accepted or rejected by each house. A rejection results in appointment of a new conference committee.

The process is the same for amended and outyear appropriations bills. The only difference is the General Assembly generally takes actions on amended and supplementary bills before taking up the budget for the following year. That is done because changes in the current year's budget often impact the following year's budget.