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Georgia likely to once again run multibillion budget surplus

Georgia Budget
Posted at 4:38 PM, Jul 08, 2022
and last updated 2022-07-08 16:45:40-04

ATLANTA, Ga. (AP) — Georgia could have more than $5 billion in surplus revenue after the just-concluded budget year, following another big month for tax collections in June.

The state Revenue Department announced Friday that it collected more than $33 billion in taxes in the year ended June 30, up 23% from about $27 billion the year before.

Georgia planned to spend more than $54 billion in the just-ended budget year, including federal money, lottery proceeds, and other fees and taxes that state agencies collect. Lawmakers boosted that number by $4.5 billion during a midyear budget revision that included bonus payments and pay raises for state employees and teachers, but will still substantially undershoot total revenue for the year.

Final numbers won't be clear until the state closes it books on the budget year, which usually happens around Labor Day.

The bulging bank account could allow the state to further cut taxes or expand services. Republican Gov. Brian Kemp has already extended a temporary waiver on gas taxes through the middle of August, and Democratic gubernatorial candidate Stacey Abrams has been calling on Kemp to extend the gas tax holiday through the end of the year. Kemp can make that move as long as lawmakers later ratify it.

That state must transfer roughly $150 million from savings to maintain roadbuilding efforts for every month of the gas tax holiday.

Georgia ran a $3.7 billion surplus in the 2021 budget, filling its rainy day fund to the legal limit and leaving $2.3 billion in additional undesignated surplus that Kemp has used to give income tax refunds worth $1.1 billion, in addition to paying for the gas tax holiday.

This year, a few hundred million in extra money will top off the state rainy day fund, which by law contains up to 15% of tax collections from the previous year. Most will end up as undesignated surplus — cash Kemp and lawmakers can spend as they please.

Abrams' top priority is expanding the Medicaid health insurance program to uninsured adults. She has said that the state's revenue position is strong and she's willing to spend part of the surplus to pay for Medicaid, further teacher pay raises and other priorities.

"And so the question is not 'Do we have the resources?'" Abrams said last month in a call with reporters. "The question is what are we willing to do with the resources we have?"

But Republicans could be cautious because they passed a big income tax cut that begins Jan. 1, 2024. Changing Georgia's income tax from a system with a top rate of 5.75% and lower brackets below to a flat tax of 5.49% could forgo $450 million in tax revenue the first year. The measure calls for the tax rate to then fall one-tenth of 1% each following year, reaching 4.99% as early as 2029, unless overall revenue stalls. That could be an overall tax cut of $2 billion.

Kemp tweeted Friday that "budgeting conservatively" means "Georgians benefit from an efficient government and we were able to return surplus taxpayers' money where it belongs — in their pockets!"

Georgia's budget pays to educate 1.7 million K-12 students and 435,000 college students, house 47,000 state prisoners, pave 18,000 miles (29,000 kilometers) of highways and care for more than 200,000 people who are mentally ill, developmentally disabled or addicted to drugs or alcohol.

Danny Kanso, who studies taxes and budgets for the liberal-leaning Georgia Budget & Policy Institute, said lawmakers cut spending during uncertain times at the beginning of the COVID-19 pandemic, saw revenues shoot up "and then we essentially didn't adjust."

"The governor has stuck to very conservative revenue estimates, persistently, across three years now," Kanso said last month. Georgia lawmakers can only spend up to the amount of revenue that a governor estimates.

Kanso argued that Georgia budget writers should discard the austerity mindset that has governed state spending since the Great Recession.

"We have this opportunity to make an adjustment to what is a very baseline budget," he said.

Kanso said the days-old 2023 budget, which projects collecting $30 billion in state funds, is also likely to produce another big surplus unless there is an unprecedented drop in tax revenues. Even if revenues stay level, Georgia could reap another surplus of more than $4 billion next year.