published Wednesday, January 20th, 2010

Economist predicts slow recovery, growth

By Ashley Speagle

Correspondent

ATLANTA -- Despite signs of economic growth, Georgia revenue and employment numbers will climb only gradually, state officials said Tuesday.

Gov. Sonny Perdue, speaking during a joint legislative appropriations committee meeting, predicted a $2.6 billion hole in the budget for the fiscal year that begins in July 2011, partly because the federal stimulus is coming to an end.

And Dr. Kenneth Heaghney, the state's economist, told state lawmakers that although the economy is stabilizing, revenue growth won't reach its 2007 peak again until fiscal 2014.

Current indicators of the recession's end include gross domestic product growth, an upturn in the housing market and an increase in consumer spending, he said.

"Fear that gripped consumers last year is out," he said.

However, sustained growth in the labor market, which the state has yet to see, will be a key factor in whether the state is out of the recession, he said.

"The labor market is healing but has not seen sustainable growth," Heaghney said. "We expect a slow recovery."

Gov. Perdue said revenue growth from the healing economy will be offset by the end of federal stimulus funds.

Dr. Heaghney reviewed financial estimates for the coming fiscal year that begins July 1.

He estimated tax revenue would grow 4.4 percent, money that could bolster the 2012 budget but won't help Gov. Perdue's $18.2 billion budget for 2011.

GEORGIA BUDGETS

$21.2 billion: FY 2009

$17.4 billion: FY 2010 budget

$18.2 billion: FY 2011 budget

Source: Georgia Legislature

Increased taxes and fees, already seen in Gov. Perdue's 2011 budget, also will be a major factor in state revenue growth, Dr. Heaghney said.

He also anticipates considerable revenue from the motor fuel tax, which will be reset and likely increased in July.

And he said the state will reap rewards from new "superspeeder" fines, which tack on an additional $200 to any speeding ticket that exceeds 85 mph on multilane highways and 75 mph on two-lane roads.

Dr. Heaghney also said job growth in the state isn't expected until the end of June this year. The state's current unemployment rate of 10.2 percent remains above the national rate, which 10 percent.

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