Huge surplus leaves Georgia with $6.6B in cash to spend
ATLANTA (AP) — Georgia ran a surplus of more than $6 billion in the budget year that ended June 30, meaning the state’s next governor and lawmakers could spend or give back billions.
The State Accounting Office, in a Friday report, said Georgia ran a $6.37 billion surplus even after spending $28.6 billion in state taxes and fees in the 2022 budget year. Total state general fund receipts rose a whopping 22%.
Even after filling its rainy day fund to the legal maximum, Georgia has $6.58 billion in “unreserved, undesignated” surplus — cash that leaders can spend however they want.
Some money is already spoken for, with the state likely to transfer more than $1 billion to pay for roads, bridges and other transportation projects. That would make up for the state’s decision in March to waive its gasoline tax of 29.1 cents per gallon and its diesel tax of 32.6 cents per gallon. Republican Gov. Brian Kemp has repeatedly extended the tax breaks since then, a move lawmakers must ratify when they return in January.
Kemp, running for reelection against Democrat Stacey Abrams, has designs on an additional $2 billion of the surplus, pledging to give another $1 billion in state income tax rebates, plus spending $1 billion to renew a long-dormant property tax break for homeowners.
“The governor will continue to leverage state resources to help families in our state fight through 40-year-high inflation caused by failed Democratic leadership in Washington,” said Kemp spokesperson Tate Mitchell.
Abrams also wants to give a $1 billion income tax rebate, although she would restrict it to households making less than $250,000 a year. She proposes spending $1.9 billion of the surplus over four years, financing a big boost in teacher pay and an expansion of the state-federal Medicaid program to provide health insurance for poorer adults.
Republicans resist spending surplus money on continuing programs, and Kemp has attacked Abrams’ spending proposals as unsustainable. He claims she wouldn’t be able to keep her promises without tax increases.
“The numbers don’t lie,” said Abrams campaign spokesperson Alex Floyd. “Thanks in part to federal legislation passed by Georgia Democrats, we have the money to make investments in education, health care and small businesses — all without raisings taxes.”
Republican leaders have held fast to pessimism about state revenue forged in the Great Recession, when steep revenue drops and an unwillingness to raise taxes led to painful cuts in state services. Kemp said at a campaign appearance on Sept. 12 that “unfortunately, growth has slowed two quarters in a row, and many are predicting even rougher times in 2023.”
Part of their concern is that a steep rise in interest rates to combat inflation could slow the economy or tip it into recession. There’s also a state income tax cut beginning Jan. 1, 2024. It will reduce Georgia’s current tax — with a top rate of 5.75% and lower brackets below — to a flat tax of 5.49%. That would cost about $450 million in the first year, and budget writers must begin accounting for it next year.
But revenue thus far shows few signs of slowing, running 5.5% ahead of plan through the first two months of the 2023 budget year. Both income and sales taxes are running more than 10% ahead of last year, buoyed in part by wage and price inflation, and Georgia would be even further ahead if it resumes collecting fuel taxes.
The state also has other money in reserve. The rainy day fund to cover budget shortfalls remained filled to its legal limit of 15% of tax receipts, rising from $4.29 billion to $5.24 billion.
And Georgia’s lottery continued to pile up a surplus as well. That could bolster calls to expand the college aid and preschool programs financed by lottery proceeds. The lottery is legally required to keep half of yearly $1.47 billion proceeds in reserve to cover possible decreases in gambling revenue. But that fund now holds an additional $1.1 billion above what’s required.
Follow Jeff Amy on Twitter at http://twitter.com/jeffamy.