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Lawmakers break budget logjam

ATLANTA, Ga. -- Georgia legislators broke through a logjam over the state budget Wednesday, sweetening the pot for wavering lawmakers with new tax cuts for wealthy senior citizens and property owners.

The tax cuts would phase in over five years and gave GOP legislators cover to vote for dozens of fee hikes and a new tax on hospitals. The measures were cobbled together into one large bill on Wednesday that moved rapidly through both chambers.

The House passed the wide-ranging new bill 107-63. The state Senate followed suit about an hour later with a 39-12 vote.

It now moves to Gov. Sonny Perdue for his signature. The Republican governor signaled his support.

In a statement, Perdue spokesman Bert Brantley said the governor would have preferred to see the hospital tax pass on its own.

"However, when it became clear it wouldn't, the discussion centered around laying out policies that invest in Georgia's future," Brantley said. "These additions make good policy sense."

Perdue has pushed both tax cuts in past years without success. Together, they'll mean the loss of $387 million in revenue when they are fully phased in by 2016.

Lawmakers have been struggling to close a $785 million budget gap for the fiscal year that begins July 1. Fifteen months of plunging tax collections have forced state officials to take an ax to the budget.

Budget writers were counting on the revenue from the hospital tax and the fee hikes to help close that hole. But in the Senate, the plan to slap a new tax on hospital revenues ran into trouble, especially with GOP lawmakers who'd signed pledged not to raise taxes.

The impasse had thrown the brakes on the state budget and tossed this year's session into extra innings.

The deal Republican leaders rammed through on Wednesday salvages a tenuous budget agreement as the clock ticks down on the 40-day session.

"This will send a message to Georgians that over the next five years you're going to have a little more money in your pocket," said House Majority Leader Jerry Keen, a Republican from St. Simons Island.

The property tax cut approved would eliminate the state portion of property taxes. Perdue's office said savings would amount to roughly $31.50 a household.

Senior citizens would see the state tax on their retirement income phased out over five years. Seniors already have the first $35,000 in passive, retirement income exempt from state income taxes. The change would apply to those who have even more in their investment and retirement accounts. Seniors still in the work force earning wages would not see a tax break under the plan.

"Your Wal-Mart greeters will still pay an income tax under what we passed today," House Minority Leader DuBose Porter said.

State Rep. Larry O'Neal, chairman of the tax-writing House Ways and Means Committee, said the senior measure was designed to appeal to an "upper income group" that would spend money in the state without boosting health care costs.

Caught off guard by the tax cut proposals, Democrats protested Wednesday that it was illegal to lump the tax and fee measures together. But House Speaker David Ralston ruled against the minority party and pushed the measure through Senate Majority Leader Chip Rogers said the deal prevented a budget meltdown.

"We may have been looking at a special session," the Republican from Woodstock said.

As soon as the new tax bill passed the House took up the budget for the fiscal year 2011 budget. Adopting a spending plan is the one thing the Georgia constitution requires legislators to do.

The House OK'd the $17.8 billion spending plan 120-52 late Wednesday.

Republicans said despite deep cuts to spending, the budget protected education and public safety. Democrats argued that some damaging cuts could have been avoided had Republicans agreed to increase the tax on cigarettes.