Georgia’s economy is still growing, but state agencies will have to look for ways to cut their budgets under a directive the Kemp administration sent out Tuesday.
It is the first time budget cut proposals have been requested from agencies since the state was hammered by the after-effects of the Great Recession nearly a decade ago.
“The governor is asking agencies to find efficiencies in their organizations and submit budget reduction proposals for amended FY2020 (which ends June 30) of four percent and FY2021 of six percent,” the governor’s budget office instructions said.
State agencies were told to expect to get 4% less to spend in their monthly allocations as of Oct. 1.
“To secure an even brighter future for our state, we must continue to budget conservatively, spend wisely, and put Georgia taxpayers first,” Kemp said in a statement. “That’s why I have instructed all state government offices to reduce expenditures and streamline operations through proactive leadership. By reducing waste and ending duplication in government, we can keep Georgia the best place to live, work, and raise a family.”
Some enrollment-driven programs — such as k-12 schools, universities and Medicaid, the health care program for the poor and disabled — may be exempted from the cuts. If all state spending had been included in the 4% reduction, the cut would have been more than $1 billion.
Danny Kanso, a budget analyst for the Georgia Budget & Policy Institute, noted that the governor was calling for spending cuts at a time when the state is reducing the top income tax rate from 6% to 5.5%.
“Georgia does not have a spending problem and in fact ranks 50th in the growth of state spending since the recession,” he said. “These budget cuts are in stark contrast to the needs of a growing state, including improving rural broadband, expanding health care access and raising teacher pay. Georgia lawmakers can end this manufactured budget crisis by enacting smart reforms, such as including marketplace facilitators in the sales tax and eliminating low-return special-interest tax breaks.”
But Lt. Gov. Geoff Duncan said: “Governor Kemp is proving that he is someone who can actually walk the walk of being a strong, fiscal conservative. His actions to tighten up government spending should be applauded.”
Kemp hinted at what was to come last week, when he said in a speech that he wanted to "start reeling things back" in the $27.5 billion budget and tighten state spending. (The state's total budget is $53 billion when federal funds are added.)
The governor has also called for a cap on state spending that would put limits on budget growth in the future.
He said the state might need to cut spending so he can pay for some of his top priorities, including another big teacher pay hike. This year’s state budget included a $3,000 pay hike for educators, and the governor has promised an additional $2,000 increase during his first term, which ends in January 2023.
The budget instructions released Tuesday are used as a guide for state agencies when making their spending requests for the midyear fiscal 2020 and fiscal 2021 budgets, which will be taken up in the General Assembly session that begins in January. The plans are due in early September.
The Kemp administration's recommendations come only a few months after it cut spending by suspending for a month contributions into the State Health Benefit Plan, which provides health coverage for more than 600,000 teachers, state employees, retirees and their dependents. The one-month "holiday" saved state agencies and school districts about $235 million.
The move was made because administration officials wanted to make sure the state was able to make its budget for fiscal 2019, which ended June 30.
The state cut deeply into budgets for everything from k-12 schools and colleges to parks during the Great Recession. Kemp’s predecessor, Gov. Nathan Deal, who took office as the state was still dealing with those cutbacks, regularly asked agencies not to request higher spending. The exceptions were for the departments that run k-12 schools, universities and Medicaid. Those agencies could ask for more money based on the growth in enrollment.
In his final year in office, 2018, Deal allowed agencies to request a small increase.
But that was before inconsistent tax collections in the first half of 2019 made the Kemp administration leery of what may be coming over the next year. Kemp said its unclear what will happen to the economy during the next budget cycle.
Hiring was strong in Georgia in June and the number of new jobless claims was at a near-record low, according to the Georgia Department of Labor. But there have also been signs of a broader slowdown nationally and internationally, and Georgia saw a mix of good and bad months for tax collections in fiscal 2019.
Most of the money the state uses to fund its budget comes from sales and income taxes and federal allocations.
Kemp has a cushion against a downturn. Deal left the governor with $2.5 billion in the state's rainy day fund when he left office.
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