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Friday, September 22, 2017

NOTES FROM THE SENATE, SEPTEMBER 22, 2017

LESSONS TO BE LEARNED FROM IRMA

For many in the 4th Senate district, hurricane Irma knocked out power, created damage and destruction from downed trees and other debris, and left evacuees traveling across the state. While those impacted feel the cost from major natural disasters in the household budget, these natural disasters can also stress state budgets.

GOVERNOR MAKES EMERGENCY FUND TRANSFER

An executive order on September 13, 2017 transferred $3 million from the Governor's Emergency Fund (GEF) to the Georgia Emergency Management and Homeland Security Agency (GEMHSA) to cover costs associated with Hurricane Irma. In his order, the Governor stated "the disaster necessitated the coordination and delivery of state resources to assist local and state units of government to respond to the severe storms." The full order is available here:

https://gov.georgia.gov/sites/gov.georgia.gov/files/related_files/document/09.13.17.01.pdf

The Governor's Emergency Fund contains appropriations for this purpose; to be able to respond to circumstances where resources are necessary and costs will be incurred but there is not an existing appropriation. Eleven million was appropriated to the GEF in HB44 (2017 Session).

GEORGIA'S RESERVE - STRONGEST IN TEN YEARS

Following the recession, Governor Deal with the assistance of the House and Senate, began to restore the state's Revenue Shortfall Reserve (RSR) or "rainy day" fund to the present FY2017 preliminary figure of $2.4 billion. The newly released figure, posted in the State of Georgia Revenues and Reserves Report for the fiscal year ended June 30, 2017, shows an addition of nearly $370 million from the final 2016 RSR balance. The reserve is now up to 10.33% as a percentage of state general fund receipts (net revenue collections), which would provide around 34 days of operating funds in an emergency.

FEMA DISASTER FUNDS DEDUCTBLES

This week an article in U.S. News and World Report (https://www.usnews.com/news/us/articles/2017-09-18/costs-from-major-natural-disasters-can-stress-state-budgets) highlighted the strain many states experience as a result of natural disaster events. With rainy day funds low or depleted from meeting budget projections and revenue losses, several states are now challenged when confronted with natural disaster response and recovery costs. The $11 million currently appropriated in the Governor's Emergency Fund is a great start, but if Georgia experienced losses of $1 billion, the state match of 25% for Federal Emergency Management Agency (FEMA) funding would equate to $250 million. In Texas, where Hurricane Harvey caused substantial damage, the losses could be significantly more for the state. Officials there are determining if and how much of the rainy day fund to utilize as part of the state's recovery.

A PROPOSAL - FEMA MATCH FUND

I see the Revenue Shortfall Reserve (RSR) as a reserve to continue state operations in the short term, when revenues are interrupted and drop suddenly as in the last recession. The RSR should tide the state over until appropriations decisions can be made in the amended or general budget to line up with the revenue estimate.

Matching funds by the state to draw down federal emergency appropriations seem to be an entirely different requirement and separate from the operational RSR and may be a requirement down the road. In fact, the process has already started. In April, FEMA completed public comment on a proposal that would necessitate states having the deductible match in hand when applying for disaster assistance.

Maybe this session we should look at Legislation creating a separate FEMA match reserve.

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