Georgia officials are moving ahead with plans to increase spending and cut taxes even as the Trump administration and Congress consider substantial federal spending cuts that could undermine the state budget.
The House of Representatives on Tuesday approved a $37.7 billion 2026 spending plan that boosts funding for prisons, schools and other priorities. Last week, the House passed proposals to cut income tax rates and issue tax refunds, which would put money back in taxpayers’ pockets but cost the state more than $2 billion over the next 16 months.
Those moves come as Republicans in Congress consider a plan to cut $2 trillion in federal spending over the next decade — cuts that could leave Georgia legislators scrambling to backfill funding for Medicaid health insurance and other programs. They also come as the Trump administration is laying off or buying out tens of thousands of federal employees while Wall Street frets about the economic consequences of the president’s tariffs.
Gov. Brian Kemp and Republican legislative leaders acknowledge uncertainty about federal spending and the economy. But the Republicans and their supporters say Georgia is better positioned than many states to weather that uncertainty. They cite the state’s substantial reserves and conservative spending policies as bulwarks against a changing federal landscape.
“I think being pretty cautious on spending overall over the years, it just puts you in a position where you have smaller shocks to absorb and more capacity for absorbing them,” said Kyle Wingfield, president of the conservative Georgia Public Policy Foundation.
Critics wonder how resilient Georgia will be if things go badly in the months ahead.
“We can sustain an income tax cut,” said Danny Kanso, senior fiscal analyst at the liberal Georgia Budget and Policy Institute. “But can we sustain an income tax cut, federal budget cuts and an economic downturn?”
The House 2026 budget proposal approved Tuesday increases spending by about $1.6 billion — or 4.4% — over the original 2025 budget approved last year. Proposed spending is up about 23% over the last three years.
Much of that spending has been fueled by a post-COVID economic boom, big increases in federal spending and inflation, which raised sales tax revenue along with the cost of goods and services.
Those same factors contributed to Georgia accumulating $16.5 billion in budget reserves — a big financial cushion that has allowed the state to cut tax taxes even as spending increased.
But a change in presidential administrations has meant a change in federal spending priorities. President Donald Trump and congressional Republicans have sought to shrink the federal government through spending and staff cuts — moves that ultimately could affect Georgia’s own budget.
Georgia’s proposed 2026 budget anticipates $22.5 billion in federal funds — or nearly a third of all revenue the state expects to raise. The total budget — including state, federal and other funds — includes $73.1 billion for programs ranging from health care to highway construction.
It could be months before a clearer federal spending picture emerges. But Georgia legislators must finalize their 2026 budget in the next few weeks. Throw in worries about the economy and legislators are making billion-dollar decisions about funding schools, transportation, health care and other state priorities amid a fair amount of uncertainty.
House Appropriations Chairman Matt Hatchett, R-Dublin, said it is possible lawmakers might have to return for a special legislative session later this year to adjust the state’s budget.
“If something really drastic occurs, we can always come back and fine-tune the budget,” Hatchett said. “None of us really want to, but it’s been done before.”
Uncertainty also has sparked a debate about the proposed tax cuts. Kemp and Republicans have pushed a one-time income tax refund as well as a reduction in the tax rate.
Democrats support the refund but oppose the tax cut. They say it would primarily benefit the wealthy and leave Georgia without enough money to expand needed programs.
“At a time when the federal government is cutting much-needed services for our community, this assembly is failing to step up to the plate to help working Georgians,” Rep. Gabriel Sanchez, D-Smyrna, said during a debate on the tax cut last week.
As he signed an amended 2025 budget last week, Kemp said he plans to continue cutting taxes while restraining spending. He said the state’s financial practices — from shoring up the state employee retirement system to paying cash for capital projects, rather than borrowing the money — will “have this state in great shape long after I leave.”
Other Republicans echo the governor’s confidence.
“We’re in a strong position with cash flows and reserves to weather anything that happens,” said Sen. Blake Tillery, R-Vidalia, chairman of the Senate Appropriations Committee.
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