Federal spending cuts will have a greater impact on the few Georgia counties with a greater military presence than they will statewide, according to a new Georgia State University report.
“Some federal funds have already stopped flowing into Georgia due to the federal government shutdown,” said Peter Bluestone, a senior research associate in the Fiscal Research Center at Georgia State and author of the report, “Geographic Dispersion of Federal Funds in Georgia and Its Major Urban Regions.”
“If the shutdown is lengthy, those areas with a higher reliance on federal funds may begin to feel the economic impact before the end of the year,” he said.
In fiscal year 2010, the state’s federal spending totaled $92.4 billion, which is equivalent to 22 percent of Georgia’s gross state product. Continued budgetary pressure on the federal government and the Budget Control Act of 2011 make it likely that federal spending will continue to decline in Georgia in the years to come, the report said.
Savannah had the highest ratio of federal spending to gross regional product (GRP) at 51 percent and Columbus was second with 44 percent, according to the study. Macon’s ratio was 29 percent, and Augusta was 34 percent. Atlanta had the lowest ratio, with federal spending representing only 14 percent of GRP.
“Federal spending was not uniformly distributed across the state geographically or in terms of population in 2010,” Bluestone said. “How the federal government decides to trim the budget could have disparate impacts across Georgia.”
The Budget Control Act, commonly referred to as the sequester, requires an estimated eight percent federal budget cut in non-defense programs and about a 10 percent cut in defense discretionary programs in fiscal year 2014. It also requires that defense discretionary programs account for about half of the required cuts.
A 10 percent across-the-board cut in federal funding would represent 2.2 percent of Georgia’s gross state product and just 1.4 percent of Atlanta’s large diversified regional economy, the study finds. With the Savannah and Columbus economies more dependent on Department of Defense spending, a 10 percent cut would represent more than twice the state average of relative impact: 5.1 percent and 4.4 percent. The impact on these and other defense-heavy regions will be even greater if the cuts are more concentrated in Department of Defense programs, including military wages.
“Georgia’s economy may be seriously affected if Congress cannot reach an agreement on military pay and other Department of Defense spending,” Bluestone said. “We find that Savannah and Columbus are the most vulnerable regions to funding problems in this area, as well as to long-term potential federal cuts.”
Download charts and the report at https://aysps.gsu.edu/frc/Bluestone_Geographic_Dispersion.
The Fiscal Research Center of the Andrew Young School of Policy Studies at Georgia State University provides nonpartisan research, technical assistance and education in the evaluation and design of state and local fiscal and economic policy.
Jennifer Giarratano, PR manager
Andrew Young School of Policy Studies