Ga. surplus likely as fiscal fears ease

Outlook implies solid growth in new budget year; appropriations chair warns inflation may slow it.

This time a year ago, state officials were considering how much spending they’d have to cut because the COVID-19 pandemic had flattened Georgia’s economy.

On Wednesday, Gov. Brian Kemp’s office announced the state had taken in $2.5 billion more in taxes — mostly from rising income and retail sales — during the first 10 months of the fiscal year than in the same period last year. That makes it likely the state will run a huge surplus in fiscal 2021, which ends June 30.

The figures also suggest continued strong growth in the economy since last summer, as Georgia recovers from the economic slowdown of the pandemic.

Month-by-month revenue comparisons are tricky, since the economy this April was much stronger than in April 2020, when the state was partially shut down for a time due to the pandemic. The state reported collections were up 52.4% in April of this year over

April 2020.

Overall, for the first 10 months of the fiscal year, collections have improved 13.1%, with revenue from individual income taxes up 15.8% and net sales taxes up 8.7%.

While the numbers will be affected by the final income tax filings this month, the figures so far suggest Kemp will have a large surplus heading into his reelection year, 2022. That will give him money to spend on the teacher pay raises he promised when he first ran in 2018, and possibly fund the kind of tax cuts GOP candidates traditionally like to run on.

Besides the boon in state tax collections, Georgia is also receiving $4.7 billion or so from the latest federal COVID-19 relief plan.

The taxes the state collects help it educate 2 million children, provide health care to more than 2 million Georgians, manage and improve parks, investigate crimes and incarcerate criminals, and regulate insurance firms, utilities and dozens of professions. The state also issues driver’s licenses and helps pay for nursing home care for the elderly.

The state is a major provider of treatment for mental health and drug addiction, and it helps fund public health programs that are fighting the pandemic. Besides paying salaries, it helps make sure that hundreds of thousands of former teachers, university staffers and state employees receive pensions and health care.

The General Assembly in June 2020 cut the budget by 10% because it feared tax collections would plummet. That didn’t happen, and Kemp this week signed a new state budget for fiscal 2022, which begins July 1, that backfills 60% of the cuts made to education and most state agencies, provides targeted raises and borrows more than $1 billion for construction projects.

Georgia Senate Minority Leader Gloria Butler, D-stone Mountain, said Democrats want education to be a top funding priority if the state has extra money.

“While the governor has partially restored pre-pandemic budget levels, Georgia still falls short in educational investment,” Butler said. “The jobs of tomorrow are built on the education opportunities of today.”

Butler also said the state should create rental and mortgage assistance programs. “Investing in our families and our rural communities is an investment in Georgia,” she said.

But House Appropriations Chairman Terry England, R-auburn, said the gains may be short-lived and that the state should be careful with any surplus.

England said the state will “be OK” this fiscal year, but, he added, “I think that’s when the headwinds end up settling on us. I think we are going to all of a sudden wake up one morning and realize that inflation has hit.”

He said rising costs for labor and materials for things such as road and home construction could force up prices and slow the state’s growth.

“I think we’ll slow,” England said. “I don’t know that it goes negative, but I think you will see the pace (of growth) fall off significantly.”

England said with the surplus and federal relief money, “there is going to be plenty of stuff to help people with.”

Georgia isn’t the only state seeing rising tax collections right now.

The Urban Institute’s Tax Policy Center reported Tuesday that state tax collections nationally showed solid growth in March, although some states are doing better than others. Collections are up over the past year in about two-thirds of the states, the center said.

Governors across the country are trying to figure out what to do with hefty surpluses and the federal relief largesse.

In California, Gov. Gavin Newsom proposed a second round of $600 state stimulus checks on Monday to hasten that state’s recovery. The plan to deliver $8 billion in cash payments to millions of Californians is part of a $100 billion proposal made possible in part by a budget that has a windfall of tax revenue, a surplus the governor put at $75.7 billion.

CHRISTINA MATACOTTA FOR THE AJC The implied surplus and the state’s financial fitness in the new fiscal year will likely help Gov. Brian Kemp fulfill one of his 2018 campaign promises, teacher pay raises, as well as help fund any potential tax cuts.