Georgia ends COVID-19 fiscal year with $1 billion revenue drop

A report out late Friday made clear the toll the COVID-19 recession is having on state finances: Georgia’s tax collections dropped just over $1 billion in the fiscal year that ended last week, forcing officials to use “rainy day” reserves to balance the books.

Gov. Brian Kemp and his staff were projecting a slight uptick in revenue when the year began, although they were worried about a possible mild recession.

That all changed in March when businesses started shutting down as the pandemic gained steam, sending a record number of Georgians to the unemployment line. The state gets most of the money for its $26 billion annual budget from income and sales taxes, and both took a hit from the shutdown and recession.

But when the pandemic hit, the state couldn’t just stop spending leading up to June 30, the end of fiscal 2020. And, unlike the federal government, it can’t run a deficit.

It was still responsible for helping to

educate 2 million children; provide health care to more than 2 million Georgians; build roads and bridges; manage parks; investigate crimes and incarcerate criminals; and regulate insurance firms and utilities, along with dozens of professions. It helps pay for nursing home care for the elderly, and more than 200,000 teachers, state workers and university staffers are paid through the state budget.

For June, the final month of the fiscal year, collections were off 8.8% from June 2019.

Liquor taxes remained up, continuing a trend during the pandemic. Motor fuels taxes were down almost 15%, hotel/ motel fees off 51% with fewer visitors seeking lodging.

For the full fiscal year, income taxes were down 3.9% and sales taxes 1.4%.

Part of the decline in collections was by design. The state decided to follow the federal government’s lead and move the final income tax filing deadline from April 15 to July 15.

That moved it from fiscal 2020 to fiscal 2021, which started July 1.

So state coffers will get a big boost in income tax collections in July, aiding the just-started fiscal year.

That doesn’t, however, mean the state will be floating in rivers of tax money this year.

Gov. Brian Kemp on June 30 signed a 2021 budget that included $2.2 billion in spending cuts, including about $950 million for K-12 education.

Agencies took about a 10% budget cut. It could have been worse: In May, budget writers were expecting agencies to cut 14%, or $3.3 billion.

During the June legislative session reboot, Kemp came back with the lower 10% number and said he would allocate $250 million in reserves as well.

Kemp began the year with about $2.8 billion in the state’s “rainy day” reserve.

However, he allocated $100 million to fight the pandemic in March. With what was used to fill holes in state spending during the final three months of fiscal 2020 and the allocation for fiscal 2021, nearly half of the reserve could be gone by this time next year.