Unlike other states, Georgia remains fiscally solid

Sen. Ronnie Chance's picture

Bankruptcy for states?

Former U.S. House Speaker Newt Gingrich and Senator John Cornyn of Texas have stirred up controversy with a proposal to allow states facing severe financial problems to declare bankruptcy.

The intent is to provide an alternative to federal bailouts and allow states to re-negotiate their various debt obligations in a manner somewhat like a corporation or individual, in bankruptcy court. The proposal is being targeted at states like Illinois, which is currently expecting a projected 47 percent budget gap and an estimated pension funding level of 54 percent.

Is Georgia at risk of becoming insolvent?

No, Georgia is not at risk. Primarily because Georgia has a strong set of safeguards to help ensure responsibility in meeting the state’s fiscal obligations.

Perhaps the most significant of these is Georgia’s constitutional requirement of maintaining a balanced state budget. This prevents financing state government with debt by mandating that the total budget be less than or equal to the Governor’s revenue estimate.

With revenues taking a plunge over the past three years, Georgia has had to rely on the use of cuts, shortfall reserves, and some federal funds to close the gap.

Pensions, debt service, and bond issuance

Even with the difficulties of the past few years, Georgia has remained a “solid performer,” according to the Pew Center on the States (www.pewcenteronthestates.org) and is meeting pension obligations.

This status is given to states with an 80 percent or greater pension funding level, a threshold that Georgia has met and surpassed.

Currently, the Teachers Retirement System is 87.2 percent funded with $42 billion in assets, while the Employee Retirement System is 85.7 percent funded with $10.5 billion in assets.

Long-term pension obligations for state employees will decrease over time. Starting in 2009, newly hired state employees and those who opted to switch were partially converted from the traditional defined benefit plan to a new defined contribution plan that has a 401k or 457 type account. Governor Deal, in his FY12 budget, recommended an additional $21.2 million to meet required pension contributions.

Georgia has also managed to maintain an excellent “AAA” bond rating with all three credit rating agencies, and is one of only seven states to do so. This allows the state to borrow at lower interest rates and makes it a stable investment for bond holders.

Constitutionally, Georgia can sell bonds only to fund state-owned capital projects, and is limited to debt service that remains less than 10 percent of total revenue receipts. In comparison, some states, including California, have used bond sales to fund state operations.

If you would like additional information regarding a specific piece of legislation, you may access the Georgia General Assembly website at www.legis.ga.gov/

Thank you for your interest. Please contact me if I may be of assistance at ronnie.chance@senate.ga.gov.

[Sen. Ronnie Chance (R-Tyrone) represents Senate District 16, which includes parts of Fayette, Monroe and Spalding counties and all of Lamar and Pike counties.]

roundabout's picture
Joined: 01/01/2011
Chance :GA budget

Would you explain your, "some federal funds?"

Is that called "balancing the budget?"

Isn't the unemployment loans from Washington now about 4-500,000,000 dollars and growing?

"Off the books," accounting isn't it?

How about no reserves significant enough to "fix" our terrible Georgia infrastructure? What are you going to do with Atlanta and Fulton and Forsyth County? Do you care?

Georgia would also go broke were it not for Washington, D. C.

Gingrich would word the law in a way so that it would only apply to democratic states such as CA, NY, IL, etc.

Boy, do we need "thinkers" again in local government instead of those trying to make a living off the population!

PTC Observer
PTC Observer's picture
Joined: 04/23/2007
Senator Chance - It's the Constitution

that saved us from spendthrift politicans and everyone knows this.

The bragging rights to our solid fiscal house rests with the voters of Georgia, not you or the other polticians in the State House.

I for one would like to see you reduce taxes instead of thinking of new creative ways to tax us. You could start by introducing legislation to reduce the size and scope of state government.

Let's eliminate a whole department somewhere, then you will have some bragging rights!

(I'll research that last one)

GAltant's picture
Joined: 04/19/2009
Former U.S. House Speaker Newt Gingrich

Mr. Gingrich continues to show us that he is not qualified to be President of the United States.

This simplistic proposal to allow states to go bankrupt will completely shake the entire bond market in the United States. If a state were to go bankrupt, we would see the next major financial crisis in the United States most likely as big as the current one we are in. As with the mortgage back securities, you have insurance companies that back state bonds,plus millions of bond holders (not just individuals but pension funds, corporations, investment houses) who hold state bonds that are rated and insured.

His proposal solves nothing. However what does make sense is for voters to insist that states balance their budgets like Georgia and those in trouble should be allowed to enter into discussions to re-negoitate their pension and union obligations I suspect that's what Gingrich is thinking, but bankruptcy has much larger and broader issues that will totally rock the US financial world!

roundabout's picture
Joined: 01/01/2011

Georgia doesn't balance the budget!

They owe about a half billion to the US government for unemployment payments!

They balance it with SPLOSTS, Bonds, additional sales taxes etc.
They also ignore infrastructure almost completely!

PTC Observer
PTC Observer's picture
Joined: 04/23/2007
GAltant - Totally

dead on with this post. Politicans rarely solve anything, they have simple answers to complex questions. That's why they are re-elected. Sadly, that's why Mr. Gingrich will likely be running for President, the GOP's version of "hope and change".

Recent Comments