The state of Georgia took in slightly less tax money in the fiscal year that ended June 30, but officials are still expecting a massive surplus because the results were better than anticipated.
The state reported collections were 6.5% higher in June than in June 2023, a switch from much of the past year, when the tax take consistently lagged. For the full fiscal year, collections were down $182 million, or 0.5%.
However, Gov. Brian Kemp assumed revenue would drop closer to 7%, which limited how much lawmakers could appropriate during the 2024 session and will leave the state with billions of dollars in surplus funds.
Lawmakers at the state Capitol, like colleagues in almost every other state, are required to pass a budget every year that balances. That means they can’t spend more on services — from salaries for teachers, prison guards, state patrolmen, judges and park rangers to road paving, driver’s licenses and economic grants — than the state collects in revenue.
Most state revenue comes in from taxes collected by the Georgia Department of Revenue.
Legally, lawmakers can only appropriate what the governor estimates each January that the state will take in during the coming year. If he estimates, for instance, $30 billion will be raised from income, sales and other taxes, that is what lawmakers can appropriate to spend. If $35 billion comes in? Instant surplus.
That has been the case for the past three consecutive fiscal years, and it will be again for fiscal 2024.
At the beginning of the year, the state had $16 billion in rainy day and “undesignated reserves,” enough to run state government for nearly half a year without any other money. Georgia isn’t alone. The huge federal windfall sent to Americans and local governments, combined with the economic boost that came after the brief COVID-19 shutdown, produced fat state coffers across the country.
A Pew Charitable Trusts report in June said for the first time since 2000, no state had less than a month’s worth of operating funds in reserve.
That doesn’t even include the tens of billions states received in so-called COVID-19 relief funds, which also helped to stimulate the economy. Under Georgia law, Kemp had sole discretion over how to the spend that money, although he set up committees to make recommendations.
In 2022 — the year he ran for reelection — Kemp held a series of news conferences and issued news releases as he allocated most of the $4.8 billion in COVID-19 money for water and sewer projects, rural high-speed internet services, police bonuses, debit cards for low-income Georgians and other priorities.
The state spent about $26.6 billion — excluding federal funding — in fiscal 2020, the last budget plan approved before the COVID-19 pandemic hit. Last year, it was more than $32 billion, and the recent midyear budget — which ran through June 30 — was almost $38 billion.
For the upcoming year, Kemp is projecting a 1.7% rate of growth — much lower than the state, on average, sees.
Part of the reason is the state lowered the income tax rate — a much celebrated decision that will mean a smaller tax bill for many and possibly less money for the government. Income taxes are the single largest source of revenue for the state.
Rick Dunn, head of Kemp’s Office of Planning and Budget, told agencies this week to submit budget requests for the coming year without spending increases. Although enrollment-based programs, such as K-12 schools, colleges and public health care programs, will be able to seek increases.
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