Gov. Sonny Perdue last week warned that the state is facing an even worse budget gap after he leaves office at the end of this year.

Testifying before a joint legislative appropriations committee on Tuesday, Perdue projected a $2.6 billion budget gap for the fiscal year that will begin July 2011. That’s largely because federal stimulus dollars will dry up. Additionally, the state is expecting increased demand for services, like Medicaid.

Perdue unveiled a pair of budget proposals on Friday. For the fiscal year that ends June 30, Perdue has hacked $1.2 billion from the $18.6 billion spending blueprint. For the next fiscal year Perdue is projecting modest growth and has budgeted $18.2 billion.

LETTER ADDRESSES STATE TAX LAXITY

WXIA-TV reported last week that Georgia Revenue Commissioner Bart Graham mailed letters to lawmakers last Friday who failed to pay their state income taxes.

Under a new ethics law passed on the final day of last year’s General Assembly, the lawmakers have 30 days to respond to Graham’s letter.

After that deadline Graham will give the names to the House and Senate Ethics Committees for possible disciplinary action and the names will be released if formal charges are brought.

The station reports a new constitutional amendment will bar delinquent lawmakers from holding their seats.

Last year a Department of Revenue report showed 22 lawmakers from both chambers  — about 10 percent of state legislators  — were delinquent on their tax bills.

NEW SPEAKER BANKS ON SMALL BUSINESS

Speaker David Ralston (R-Blue Ridge) is forming a new standing committee in the House on small business development and job creation.

Ralston said he believes small business growth will lead the way back to a strong and vibrant economy in this state by creating jobs. Georgia’s unemployment rate is 10.2 percent.

State Rep. John Lunsford (R-McDonough) will serve as the committee’s chairman.

ATTRITION CITED IN PRISON JOB LOSSES

Georgia’s prison system has shed more than 1,500 jobs over the past two years.

State Department of Corrections Commissioner Brian Owens said Wednesday that the bulk of those jobs have been eliminated through attrition.

Owens told a joint legislative appropriations committee hearing that after decades of skyrocketing growth, the state’s prison population has been leveling out. Owens said about 60,000 inmates are currently behind bars.

The state is shutting down three more prisons this year. It shuttered Scott State Prison in Milledgeville last August. Those four prisons combined had 3,500 beds.

The state is transferring those prisoners to private prisons and so-called fast-track expansions at existing prisons.

MORE STATE WORKERS MAY BE FURLOUGHED

Even more furloughs could be on the way for state employees.

While Gov. Sonny Perdue has said his budget for the next fiscal year doesn’t include more unpaid days for state employees, at least one agency head said she may need to again use furloughs to balance her budget.

State Human Services Commissioner B.J. Walker told a joint legislative appropriations panel that she must use either furloughs or layoffs to bring down staff costs in the fiscal year that begins July 1.

Employees in Walker’s department  — which handles child welfare and services for the elderly  — have already been hit with 12 furlough days for the current fiscal year.

Perdue is ordering three more furlough days for state employees before the June 30 end of the fiscal year.

QUICK APPEAL CLEARED ON WATER-WAR RULING

By Greg Bluestein / AP

A federal appeals panel has cleared the way for Georgia to quickly appeal a federal judge’s ruling that could leave metro Atlanta with a drastically reduced water supply if a long-running regional water squabble with Alabama and Florida isn’t settled by 2012.

The Wednesday ruling by the 11th Circuit Court of Appeals clears the way for Georgia’s attorneys to challenge the July decision by U.S. District Judge Paul Magnuson. That momentous decision concluded Georgia had little legal right to the drinking water from Lake Lanier, the massive federal reservoir that supplies more than 3 million of the city’s residents.

The appeals panel found the judge’s decision was a “final judgment,’’ which means that the ruling can be immediately appealed. If Georgia had lost the argument, the state may have been forced to wait years to challenge the case, said Todd Silliman, a McKenna, Long & Aldridge attorney who represents Georgia.

“It was important to Georgia that we be able to appeal as soon as possible,’’ Silliman said. “Judge Magnuson’s order has an immediate effect on Georgia and we did not want to defer for several years.’’

Attorneys representing Florida and Alabama could not immediately be reached for comment.

Magnuson’s ruling gave Georgia, Alabama and Florida  — states that have fought over water rights since the 1990s  — three years to reach an agreement. If not, metro Atlanta‘s access to its main water source could be reduced to the level it was at in the 1970s, when the city’s population was just a fraction of what it is now.

Georgia’s best option is likely jump-starting negotiations between the three leaders of the three states, who emerged from a private meeting in Alabama in December sounding optimistic that they will broker a solution. The states have said in court filings that at least five meetings have been scheduled since then.

But Georgia also is pressing a legislative and legal battle to preserve the state’s rights to rely on Lanier. To that end, Georgia Gov. Sonny Perdue has hired a former U.S. Solicitor General to lead the high-stakes legal battle and urged Georgia’s federal delegation to unite behind a proposal that solves the state’s quandary.

Perdue spokesman Bert Brantley said that the three-judge panel’s unanimous ruling was a positive sign, but that the state will continue pressing forward with its other strategies.

“Our hope is that negotiations work and we get to something all three states agree with rather than this being decided in the courtroom,’’ he said. “But we have to keep moving forward on all fronts.’’

DEAL, OXENDINE SECURE ‘UNSEEMLY’ CREDIT LINES

By Shannon McCaffrey / AP

Two leading Republican candidates for governor in Georgia have already turned to hefty lines of bank credit to help pump up their campaign finances months before the primary in July.

State Insurance Commissioner John Oxendine and U.S. Rep. Nathan Deal have each secured $250,000 lines of credit from local banks whose officials have ties to the candidates. The two candidates are among the top fundraisers in the GOP race to succeed Gov. Sonny Perdue, who cannot seek a third term.

Officials with the banks extending the credit are generous campaign contributors who have poured thousands of dollars into the campaigns, an Associated Press review of campaign documents showed.

The Brand Banking Co., which Oxendine tapped for cash, was until six months ago regulated by Oxendine’s office because it offered insurance products. Brand Banking Chief Executive Officer Bartow Morgan donated $12,500 to Oxendine in June 2009 while the bank was apparently still in the insurance business.

A public watchdog said the Oxendine loan raised concerns because he turned to a bank that his office once oversaw.

“It’s unseemly,’’ Bill Bozarth, head of Common Cause Georgia, said.

“Clearly, they wouldn’t be investing that kind of money if they weren’t convinced they would get something should John Oxendine be elected governor.’’

Officials at Brand did not return phone calls seeking comment, and Oxendine’s campaign said there was no wrongdoing.

Oxendine’s campaign said the insurance commissioner put up his Duluth home as collateral for the line of credit.

“Commissioner John Oxendine is committed to this race and is willing to invest his own house and his own personal assets in order to get his message out across Georgia,’’ Oxendine campaign manager Tim Echols told The AP.

Oxendine has led fundraising among Republican candidates. He has taken in about $2.7 million in the race without the loan and has $2.2 million cash on hand. Still, Echols said the line of credit, which Oxendine took on Dec. 23, 2009, would help with cash flow to make sure the campaign has the money when it’s needed.

The insurance arm of Lawrenceville-based Brand Banking Co. merged with Britt Insurance Agency in Snellville in 2003. Brand Britt Insurance began offering “a wide variety of comprehensive insurance products,’’ according to the company’s Web site.

Oxendine’s office said the bank is no longer involved in insurance and provided a letter from David Britt which said he purchased Brand Britt Insurance Co. on June 30, 2009.

Oxendine earns about $117,000 a year. On his financial disclosure form, Oxendine puts the value of his Gwinnett County property at more than $200,000. Echols said the home is paid off in full.

Deal, meanwhile, was provided a line of credit from the Chattahoochee Bank of Georgia. The chairman of the bank’s board is Jim Walters, a contributor to Deal and to Deal’s son. Walters also leases space to the elder Deal’s campaign in Gainesville. Walters and one of his companies have contributed $24,400 to Deal’s gubernatorial campaign and another $1,000 to the campaign of Deal’s son, Jason, for Superior Court.

Deal campaign spokesman Harris Blackwood said the line of credit was taken by Deal’s campaign  — not the congressman. Blackwood declined to say what specifically had been used to secure the line, saying only that the campaign had provided the bank with a look at its financial statements and the bank agreed to provide the money.

Bozarth said that raises a red flag because the campaign would appear to have few real assets.

“It’s like saying you’re getting a loan because you’re Nathan Deal,’’ he said.

Blackwood said the loan was needed for startup expenses and so that the campaign would have steady access to cash to pay the bills.

“There is nothing improper,’’ Blackwood said.

The Deal campaign has paid Walters Management  — owned by the bank chairman  — about $3,761 a month in rent for campaign space since July, campaign records show. Walters said that was fair market rent for the space.

He said the loan was “made in the ordinary course of business’’ and called Deal “a straight shooter.’’

Deal earns $174,000 a year as a member of Congress. Without the bank credit, he’s raised about $1.6 million since entering the race last May. He has a little over $940,000 left in the bank.

Political experts said loans like the ones Deal and Oxendine obtained can be more about strategy than real need.

Larry Noble, former general counsel for the Federal Election Commission, said money equals viability.

“The more money you have, the stronger you look as a candidate and then the more money you can raise. And that increases the likelihood that the bank will be repaid,’’ Noble said.

Rick Thompson, former chairman of the state Ethics Commission, said he agreed.

“The economy has made fundraising harder. But this is also partly a strategy, so they can say to constituents, ‘Hey, I’m not only asking you for money but I am putting mine in as well,’’’ Thompson said.