1949
93. c. Qh'llUhe'l, 9'l.
State Auditor

s~
St4te4 ~Ut411dat 'P~e 1949
Complying with the request of Governor Herman Talmadge, Lieutenant Governor and President of the Senate S. Marvin Griffin and Speaker of the House of Representatives Fred Hand for a complete summary picture of the State's finances, the following is being submitted.
It is understood that the purpose of this is to obtain a complete picture including various proposals for additional appropriations which have been discussed so that members of the General Assembly who will participate in the 1949 session will have the information for study prior to the meeting of the General Assembly so that some course of action can be formulated to accomplish whatever results are deemed necessary to finance the needs of the various agencies of the State within what is believed to be the financial ability of the taxpayers of Georgia.
It is a pleasure for your State Auditor to be of any assistance possible and it is hoped that the following information will, to some extent, aid in the formation of plans for the future deveJopment of the State.
STATE INCOME
The State income for the last fiscal year ended June 30, 1948 amounted to $108,299,859.94 and the question as to whether or not this is a stable figure on which to base appropriations is discussed as follows:
It is necessary to face the fact that the State income available to pay appropriations for the year ended June 30, 1942 was $58,893,568.09, for June 30, 1943 $58,183,496.83, for the year ended June 30, 1944 $61,772,210.04 and for the year ended June 30, 1945 $63,193,875.80 or an average of $60,500,000.00 per annum for the four-year period.
The only increase in the method of taxation after 1945 which tended to increase the State income was the Liquor Warehouse Charge which was added and produced $8,035,436.21 for the year ended June 30,1948.
If this increased taxation for Liquor Warehouse Charge is added to the average revenue for the four-year period above mentioned, you would have State income each year of $68,500,000.00. Therefore, it can only be
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said that the difference between this normal income of $68,500,000.00 and the present high income of $108,299,000.00 is attributed to improved economic conditions in Georgia and to inflation.
Let us assume that the permanent economic improvement in the State has been 20% since 1945, in which case you would have an additional $12,000,000.00 to add to the $68,500,000.00. This would mean that the State's income that could be counted on in the future would be $80,500,000.00 and the difference of $28,000,000.00 between this figure and the present high income, is due strictly to inflation and is highly dangerous to be anticipated as a permanent income for the State on which to base appropriations to carryon a program in future years.
It is my definite opinion that this type of inflated income should be utilized in such non-recurring items such as building improvements, additional road construction, rural hospital construction and other such items which could be curtailed if the need should arise, rather than using the funds to increase fixed continuing items such as schools, old age benefits and other like services which could not be curtailed without causing serious effect on those particular services.
I wish for the benefit of the members of the General Assembly that we had sufficient insight as to what the future holds to enable us to accurately predict the future economic conditions of Georgia, but since we cannot, we must face the realities as to the past experiences.
It appears that based on past experiences as above cited, any definite fixed appropriations in excess of $80,500,000.00 a year will be predicated entirely on the continuance of the present State inflated income.
For your information, there is submitted as follows a summary of appropriations which are being discussed for 1949 together with the comparison of the budget for the year ended June 30, 1942 which is for a period when the income of the State was normal and when the State agencies were operating on a fairly effective basis and which was also before inflation took effect:
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SUMMARY

APPROPRIATIONS WITHIN REVENUE . REALIZED

BUDGET 194142

THIS BUDGET

'State Prison

$ 319,429.59

Common School Education

15,678,241.47

Teacher Retirement

System

00

University System

1,907,993.52

Highway Department 14,%1,800.50

Highway-Counties

4,374,247.96

Public Health

Department

599,999.99

T B Sanatorium

388,227.54

Rural Hospitals

Public Welfare Benefits and County Adminis.

3,940,171.28

State Institutions

2,029,395.29

All Other State Agencies 5,140,150.04

$ 950,000.00
41,500,000.00*
2,600,000.00 * 5,178,000.00* 22,125,913.00 4,817,013.03
2,100,000.00 2,050,000.00 3,000,000.00
8,180,000.00 5,950,000.00 9,848,100.00

Total

$ 49,339,657.18 $108,299,026.03

ADDITIONAL APPROPRIATIONS BEING DISCUSSED Common School Education Pupil Transportation School Buildings University System
Building and Equipment Fund Teacher Retirement System Highway-Rural Roads Public Health
Department T B Sanatorium Public Welfare-Benefits Agriculture Dept.-Farmers Markets Forestry Fire Protection
Total

17,464,520.00* 6,000,000.00* 4,687,200.00*
4,822,000.00* 1,150,000.00* 4,126,000.00
900,000.00 1,500,000.00 1,500,000.00
150,000.00 250,000.00
$ 42,549,720.00

GRAND TOTAL $ 49,339,657.18 $150,848,746.03

It is to be noted from the above tabulation that all of the increases since 1942 have gone to schools, State institutions, highways, public health and welfare with the exception of the $4,707,949.96 increase in all other .agencies of the State other than those mentioned. I $2,506,285.74 of the $4,707,949.96 increases can be
"The combination of these items make up the total of $83.401,720.00 per annum as advocated in the Minimum Foundation Program for Education which is being discussed.
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attributed directly to legislative action in establishing additional services between 1942 and the present time and these items are: $171,001.43 for the Judicial Branch of the State Government, $5,000.00 for the establishment of the Judicial Council, $80,000.00 for the establishment of the Agricultural and Industrial Development Board, $168,493.48 because of the establishment of the Building Safety Council and the Insurance Rate Division of the Comptroller General's Office, $65,000.00 because of the enactment of the provisions of law pertaining to Employment Security Agency, $120,000.00 for the establishment of the Pardons and Parole Board, $100,000.00 because of the reorganization of the Supervisor of Purchases, $150,000.00 because of the creation of the Veterans Educational Council, $508,530.79 because of the reorganization of the Veterans Service Office, $39,682.01 for the enactment of the Pure Seed Law and $29,376.77 for the activation of the Weights and Measures Division, both of the latter being in the Agriculture Department, $250,000.00 for Farmers Market development, $269,201.26 for the Game and Fish Commission because of the law specifying that all funds collected from this source shall be covered by appropriation of approximately the same amount in a fixed sum so that the State could participate in Federal funds for this purpose and the $550,000.00 for the General Assembly which did not appear in 1942 since there was no session.
The balance of $2,201,664.22 shown as increase in all other agencies of the State can be very easily attributed to inflated cost which is necessary to meet if the same service as rendered in 1941-42 is to be rendered today.
Checking the agencies which have carried on the same functions and have only had increases to meet the inflated cost, it develops that 58% increase is the amount required today over 1941-42. It is believed that this percentage of inflated cost is lower than the percentage that would apply to us as individuals and most other businesses. 58% applied to all the other State agencies would account for an increase of $2,981,000.00 whereas the actual increase was only $2,201,000.00 or $780,000.00 less than the amount that would have been required had the average inflation percentage been applied.
We are confronted with the cold fact that if every one of the governmental agencies, legislative, judicial and executive, other than the schools, public health, highways, institutions and public welfare are completely abolished only $9,548,100.00 would be gained. This brings concretely to our minds that we cannot finance $42,500,000.00 additional services for schools, highways, health and public welfare by adjustment in the funds of the general agencies of the State.
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Discussing the items that absorbed approximately 90% of the 1941-42 budget and are today absorbing approximately 90% of the appropriations shown as being within the revenue for the past year and which total $108,299,026.03, you will be given the salient facts in summary form which will give you some insight as to the reasons for the appropriations.
The item of $950,000.00 for the State Prison which compares to $319,429.59 for the 1941-42 year is controlled in the most part by the population of the Prison.
It is reported to us by the Prison Officials that in 1942 there were 650 inmates housed at the Prison and at the present time there are 1,499. A great amount of this increase in population can be attributed to the action in recent years of abolishing a great number of convict camps.
This increase in population is on the basis of 130% increase and when the 58% inflation in the cost of labor, materials and supplies is applied, the present proposed appropriation is very close in line with previous years.
The item of $41,500,000.00 for common school education is for the purpose of paying teachers' salaries, county administrative funds, free text-books, Vocational Education, Vocational Rehabilitation, School for the Deaf, Academy for the Blind, other administrative costs of the State Board of Education and to make provisions for an adjustment in the compensation of School bus drivers.
This figure for common school education represents a gradual rise from approximately $16,000,000.00 in 1942 up to $18,000,000.00 in 1944 with an acceleration of the increases through the remaining years up to the present appropriation.
Records of the State Department of Education show that the average daily attendance of the common schools was 582,654 in 1941 with 21,888 State paid teachers and in the 1947-48 year, the average daily attendance was 582,255 with 20,317 State paid teachers. The increases in these school funds have been for the purpose of expanding the services of the Vocational Education and Vocational Rehabilitation Divisions and to adjust the compensation of the teachers as well as adjustment in the administrative expense allowed to the various counties which is under the present law, 75% of funds for teachers' salaries and 25% of funds for administration.
There is shown in the summary of additional appropriations being discussed items totalling $28,151,720.00 that will build up the funds for common schools to meet the minimum Foundation Program which calls for $69,651,720.00 per year for common school education as
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compared to the $41,500,000.00 provided as being within present revenue.
There is no doubt but that the officials of the educational groups will furnish you with a complete analysis as to the aims and results of this proposal for increased funds. Therefore, I will forego any lengthy discussion of the matter.
The item of $2,600,000.00 for the State's contribution to the Teacher Retirement System is a new item that was not in existence in the 1941-42 year and is based entirely on 6.83% of the amount of the teachers' salaries paid by the State and of course, this item will increase if any adjustment is to be made in teachers' salaries, making it necessary to include in the proposal for appropriations, an additional $1,150,000.00 for this purpose to stay in balance with the proposed additional teachers' salaries. This too is in line with the Minimum Foundation Program of Education which is being advocated.
The amount of $5,178,000.00 provided for the University System as being within present revenue compares with $1,907,993.52 for the year 1941-42. As to whether or not this is justified we must take into consideration that the student enrollment of the University system in 1942 was 12,845 and at the present time is 25,033.
Not only has the student enrollment approximately doubled, but there has been considerable expansion made in the various courses offered by the University System, the outstanding one being the School of Veterinary Medicine and again too there must be taken into consideration the general increase necessitated by the general inflation of cost throughout the country.
The additional appropriation being discussed for the University System is $4,822,000.00 for buildings and equipment and this amount together with the regular appropriation lays before you the $10,000,000.00 annually for the University System as advocated in the Minimum Foundation Program.
You have undoubtedly noted in the press that Acting Governor M. E. Thompson allotted $700,000.00 additional funds to the State Board of Education for the purpose of giving the teachers a 10% raise in salary for the months of November and December and also allotted an additional $250,000.00 to the Board of Regents to provide funds to meet their expenditures for one quarter. These funds were allotted by Acting Governor Thompson on November 1, 1948 from funds that would have normally been allotted for highway construction had not an injunction stopping the use of funds for highway construction been in effect thereby inadvertently
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placing under the exclusive jurisdiction of the Acting Governor the allotment of these funds. Such moves as this are highly questionable as to their benefit to the citizens of the State.
The continuance of these allotments on an annual basis has not been taken into consideration in the fixed annual budget being discussed herein since the inclusion of such items would mean an annual increase of approximately $4,200,000.00 to common schools and $1,000,000.00 to the University System and would raise the fixed appropriations to $113,499,000.00 each year or $5,200,000.00 above the actual revenue for the last fiscal year.
The next item is $22,125,913.00 provided for highways which is approximately $7,164,000.00 in excess of the amount provided in 1941-42.
This increase is in face of the fact that the cost of grading and double-surface treating a mile of road on . competitive bids in 1942 was $11,347.00 as compared to. the present cost of the same type of road on a competitive basis of $18,039.00, or a 58% increase.
We must also take into consideration that the Federal apportionment to Georgia for roads will amount to $10,300,000.00 each year, which to be utilized will have to be matched by a like amount of State funds. This compares to an annual apportionment of approximately $4,000,000.00 in the year 1942. It requires $6,300,000.00 additional State funds each year under the present basis to match the Federal road funds.
Thus in meeting the requirement of additional funds for Federal Aid participation and increased maintenance cost, there is very little that is provided in this item of appropriation for strictly State construction of rural roads, therefore $4,126,000.00 in additional funds have been discussed so that more effort can be made in clearing the serious condition of the rural roads.
The amount of $4,817,013.03 is provided for counties for the maintenance of secondary roads and this is the amount that is specifically provided for distribution to the counties in recent Act of the General Assembly and only represents a proportionately small increase over the 1941-42 figure.
The item provided for public health work of $2,100,000.00 is a considerable increase over the $600,000.00 provided in 1941-42 but is not above the present basis of their operations.
These funds were provided in order to assist the Department of Public Health in establishing public health
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services in all the counties of the State in an effort to make these facilities available to as many citizens as possible.
In order to continue to work towards a State-wide system of public health it has been recommended that an additional $900,000.00 be provided if the money can be found.
There is, as you will note, $2,050,000.00 provided for the operation of the Tuberculosis Sanatorium at Rome, Georgia, which is the present basis of operations. This compares to $388,227.54 provided for the Sanatorium at Alto in 1942.
By the State taking over Battey General Hospital, the State was allowed to considerably expand the hospital facilities for this type of treatment. In 1942 the average daily population of the T. B. hospital was 561 and today it is 1,195 and there is still sufficient room to make additional beds available.
The hospital treatment for tuberculosis is higher than the other institutions, the per capita cost being $1,529.35 per year.
It is for the purpose of more nearly utilizing the full capacity of the institution that $1,500,000.00 additional funds have been proposed, which is contingent on additional revenue being provided. This should provide for 1,000 additional beds which will be the full capacity of the institution.
Provision has been made, as you will note, for $3,000,000.00 each year for the Rural Hospital program which contemplates $3,000,000.00 Federal funds and $3,000,000.00 local funds being expended for this purpose. This is a new item and is included so that the State can take advantage of the provisions of the Hill-Burton Act of Congress.
There is $8,180,000.00 provided for public welfare benefits and county administration which is in line with the present program that is now in effect. This reflects an increase from the $3,940,000.00 provided in 1942.
The number of individuals receiving benefits from these funds in June 1942 was 91,413 and this has increased to 108,034 at June 30,1948.
The average amount of assistance paid per person monthly in 1942 was $8.85 to the aged, $11.58 to the blind and $9.22 to the dependent children.
In the year 1948 in June the amount paid monthly to each individual was $19.12 to the aged, $22.65 to the blind, $14.31 to the dependent children.
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If this program is to be continued and the natural increase of the rolls taken care of for the next two years, it will require an additional amount of $1,500,000.00, which would be in addition to the appropriation which is within the actual revenue for last year.
The next item in the budget is $4,950,000.00 for the operation of the institutions of the Public Welfare Department which are the Milledgeville State Hospital, the Training School for Boys, the Training School for Girls, the Training School for Colored Girls, the School for Mental Defectives and the Confederate Soldiers Home and also the Training School for Colored Boys which is under construction at Augusta.
This appropriation compares with $2,029,395.29 for the year 1941-42 during which time the population of the institutions was 8,858.
Today the population of the above institutions is 10,172 and the Public Welfare officials estimate that there will be an increase of 200 per year at Milledgeville State Hospital, 60 at the Training School for Boys because of new facilities being constructed and 200 per year in the School for Mental Defectives because of additional facilities being constructed and also there will be the inmates of the Training School for Colored Boys when this institution is completed.
We also must take into consideration the average increase in State expenditures because of inflated cost which runs around 58% since 1942.
It is quite apparent that the largest institution, the Milledgeville State Hospital, which has 9,152 patients, has done very little in the years between 1942 to date other than meet the inflated cost since the per capita cost in 1942 was $235.56 per year as against $369.56 per year at present.
It is quite apparent that the $369.56 per year for the hospitalization of a citizen at Milledgeville State Hospital is not sufficient to afford the medical treatment and other care to which he should be entitled.
There is included $1,000,000.00 for annual Institutions Building Fund which has been carried on for the last several years and which has enabled the institutions to partly eliminate some of the hazardous housing situations. However, it will require the continuance of this fund for several years to come for the job to be completed.
The other items which seem to represent justifiable needs are $150,000.00 for expansion of Farmers' Markets and $250,000.00 for the expansion of the Forestry Fire Protection program.
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The $108,299,026.03, as appropnations within the total actual revenue for the last fiscal year, set out is $28,000,000.00 in excess of what we conscientiously believe will be the stable income of the State in future years based on the present revenue laws, yet we are confronted with the fact that the allotments to education, health and welfare have been increased to the present basis from the inflated income and is the basis of their operations at the present time. These cannot be curtailed without serious detriment to their functions, therefore, consideration must be given to the fact that if the inflated income should begin to drop that this would be a $28,000,000.00 gap that would have to be filled even before any of the additional appropriations proposed as needed could be fulfilled.
The items which are being submitted for your study which are in excess of the $108,299,859.94 actual receipts of the State this past fiscal year total $42,549,720.00 of which $34,123,720.00 is the amount required to put in the Minimum Educational Foundation Program which is being advocated and the remainder is for provision for rural roads, public health, public welfare benefits, and development of farmers' markets and forestry fire protection, which are in the most part a carryover from the proposals submitted to the 1947 session of the General Assembly.
If the entire program discussed is enacted it will require an unprecedented amount of tax funds of $150,848,746.03 per year, which is $70,348,746.03 above what appears to be the normal income of the State plus a 20% allowance for improved economic conditions of the State, or the amount of $42,548,886.09 in excess of the full inflated income of the State of $108,299,859.94 on the basis of receipts for the year ended June 30, 1948.
It would not be necessary to continue to call attention to the average income of the State based on previous experiences if it were not for the fact that if appropriations are made on the inflated income basis for fixed items such as schools, welfare and health benefits and should a reduction of income be realized, it would force a reduction of the appropriations or the use of any additional taxes levied to catch up this slack, making it absolutely essential that this contingency be given proper considera tion.
You, as a capable member of the 1949 General Assembly, representing the wishes of the people of your community are really in a better position to check on the trend of the economic conditions locally. When studying this financial picture if you will inquire of your local business people, in lines other than your own as to the trend of business, you can determine in your own mind
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whether or not it is safe to predicate appropriations for the future on the inflated condition that exists today.
The time given by the Honorable James S. Peters, Chairman of the Democratic Executive Committee of Georgia in reviewing the contents of this document is gratefully acknowledged and appreciated.
To the best of my knowledge the information requested and submitted herein is for the purpose of determining what course of action to follow in the next session of the General Assembly and does not in any way at the present time constitute the program that will be advocated by the Governor, the Lieutenant Governor and President of the Senate, or the Speaker of the House of Representatives, and it does not constitute a program advocated by the undersigned State Auditor, since such action is not within his province unless requested by the General Assembly.
You may be assured, however, that when the members of the General Assembly determine what course of action to follow in setting up the future program of services and finances for the State, that your State Auditor will do everything within his power to be of assistance. In the meantime if additional information is required to aid you in formulating a program I stand ready and willing to be of service.
93. c. gh'lashe'l, /}'1.
State Auditor
FLASH!! We have just completed checking the net State
Treasury receipts for the first four months and ten days af this fiscal year and the income is $29,741,361.15, this reflects that there has been an approximate 2/3 of
1% fluctuation downward from the $29,913,866.43
received in the same period last fiscal year. This would indicate that there is a leveling off in State revenue with the amount received last fiscal year of $108,299,859.94.
B. E. T., Jr.
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