By Ashley Speagle
Correspondent
ATLANTA -- Georgia Gov. Sonny Perdue on Thursday proposed slashing Medicaid reimbursements and canceling the annual sales tax holiday for back-to-school shoppers to help cope with the continued freefall in state revenues.
In a Capitol news conference, Gov. Perdue said he decreased the current fiscal 2010 budget by $342 million but replaced those state funds with federal stimulus money from fiscal 2011. That will mean $442 million less in the budget year that begins July 1, he said.
He ruled out a tax increase.
"The January and February revenues were not what we hoped for," Gov. Perdue said. "But Georgia will survive."
The governor's original budget estimates relied on 2010 revenues remaining stable, but that's not what happened. February revenues were down by $62 million from the prior year, the 15th straight month of falling numbers.
PDF: Perdue budget changes
However, the governor said there's "a little reason for optimism" and hope that the recession has bottomed out. He said income tax collections improved in February for the first time in 17 months.
In the next weeks, legislators will consider Gov. Perdue's proposed additional 3 percent reductions to state agencies, except for education, and 10.25 percent reductions in reimbursements to Medicaid providers.
Gov. Perdue said that, after strong opposition from hospitals, he dropped the idea of a 1.6 percent "bed tax" on hospital providers to help fund the state's Medicaid program.
"I still believe the provider fees are the right policy for Georgia and our hospitals," he said. "Hospitals would have seen a net impact of just around $55 million under the fee, and this alternative is going to cost them $274 million."
Gov. Perdue also proposed ending the annual tax-free holiday for school supplies, among other cuts.
"We're taking away a lot of things that were nice to do," said Gov. Perdue. "What we're undergoing, just like all states in this nation, is really a government reset."
He said that, even if numbers do not improve, he will not raise taxes. Instead, he recommended increasing fees for government services by $96 million, saving $130 million by removing sales tax exemptions on nonprofit hospitals and getting $18 million from the Georgia Technology Authority.
Rep. Barbara Massey Reece, D-Menlo, suggested that the Legislature pass laws to study and publish all state fees to see which ones actually bring in money.
"The governor should appoint a commission to study Georgia's taxes and fees to see which are not working and not providing a return to the state in the long run," she said.
The Georgia Budget and Policy Institute has said that repealing deductions on state income tax could bring in $450 million to mend the 2011 budget.
Only 15 percent of filers, those with incomes above $50,000, would be affected, Georgia Budget and Policy Institute Deputy Director Sarah Beth Gehl said.
Their average tax increase would be $85, she said.
The nonprofit institute, along with health and higher education groups, recommends raising taxes on cigarettes, but Gov. Perdue said the tax would be unfair to people.
He also said uncollected taxes, which some legislators said could be in the billions, are "fantasy revenue," and the Department of Revenue already goes after most tax cheaters.