Gov. Brian Kemp’s proposed budget would cut taxes for Georgians while spending hundreds of millions of dollars more on everything from hurricane relief to schools and prisons.
Kemp’s spending plan, unveiled Thursday, would reduce income taxes by $1 billion by cutting the tax rate for 2025. That’s on top of $1 billion in tax refunds the governor announced in October.
Meanwhile, Kemp’s revised, $40.6 billion fiscal 2025 spending plan includes $615 million for hurricane relief, $1.5 billion in cash for construction projects, another $1.7 billion for economic development projects and hundreds of millions more to pay for rising school, college, health care and other costs.
In his “State of the State” address Thursday to the General Assembly, Kemp attributed Georgia’s ability to spend more while offering tax relief to conservative budgeting practices.
“Because, at the end of the day, that’s your money — not the government’s, and here in Georgia we believe you should keep more of it,” he told legislators.
Democrats were not impressed with what they heard. Senate Minority Leader Harold Jones II, D-Augusta, said the state should be investing more in education, health insurance, child care and housing.
“What he calls conservative budgeting, we say we’re actually depriving people of needed resources for public projects,” Jones said.
The governor’s proposal comes amid shifting fiscal conditions for Georgia and other states. Tax collections boomed along with the economy for years following the COVID-19 lockdown. A massive federal funding binge and other factors also fattened Georgia’s reserves — which stand at $16.5 billion.
Credit: Jason Getz / Jason.Getz@ajc.com
Credit: Jason Getz / Jason.Getz@ajc.com
The boom has allowed Georgia to increase spending while offering tax relief through refunds and tax rate cuts. But there are signs that state revenue has found a new post-pandemic normal. Through the first six months of fiscal 2025, tax receipts are down about 1%.
Nonetheless, Kemp’s revised spending plan for 2025 and his $37.7 billion fiscal year 2026 (which begins in July) would continue spending more while cutting taxes.
The governor has proposed reducing the state income tax rate for personal and corporate filers from 5.39% to 5.19%, beginning in calendar 2025. The move would cost the state an estimated $149 million in revenue in the current fiscal year and $852 million in 2026.
That’s on top of the proposed tax refund Kemp and Republican legislative leaders announced in October. Under that proposal, Georgians would receive a maximum income refund of $250 for single residents, $375 for those filing as heads of households and $500 for married couples filing jointly based on their 2023 earnings. The refund would require lawmakers to approve separate legislation.
“We budget conservatively, fund our priorities, keep government efficient, cut taxes and then return your money back to you,” Kemp said Thursday.
Even as he proposes tax cuts, Kemp has proposed new spending. Among the governor’s proprieties:
- $615 million to address damage caused by Hurricane Helene, Hurricane Debby and other storms. That includes $200 million for the Georgia Department of Transportation to pay for debris removal, infrastructure repairs and other costs already incurred. It also includes $150 million to pay for required state and local matches for federal disaster relief and $99 million to make GDOT whole for a two-week motor fuel tax holiday during the storm.
- $1.5 billion in cash to pay for construction projects rather than borrowing the money, as the state typically does. The move is expected to save Georgia about $1.5 billion in financing costs over the next 20 years. Projects include are a new health sciences research building at Augusta University, a new medical examiner’s building near Macon and a new ferry for Sapelo Island.
- $1.7 billion for economic development projects — most of them transportation, water and sewer improvements.
- $350 million in 2025 and $1 billion in 2026 to pay for additional enrollment in school, college, health care and other programs.
The budget also includes proposals ranging from $47.2 million to remove QR codes from Georgia ballots and $50 million for school security to $500 million to shore up the state employee retirement system and more than $600 million in funding to address Georgia’s troubled prison system.
If lawmakers approve all the governor’s tax and spending priorities, the state’s reserves would be reduced by about $4 billion.
Kemp’s budget is the opening bid in a process that will likely take months to complete. Lawmakers will begin holding hearings on the governor’s proposals next week before putting their own stamp on the state budget.
Jones, the Senate minority leader, said the state can do better.
“There’s a difference between ‘conservative budgeting,’ which is what the governor talked about, and hoarding money,” Jones said.
“We’re sitting on $16 billion. The governor calls that ‘conservative budgeting,’” he said. “The fact of the matter is, we’re not funding properly our education system. We certainly have not expanded health insurance. We still are also woefully lacking as far as child care is concerned, and housing costs.”
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