State lawmakers just completed a session in which they approved record spending, but Georgia’s tax collections continue to lag.
Such a decline generally means the state’s economy is slowing as well.
The state reported Friday that collections were off 12.6% in March from March 2023. One month isn’t a barometer, but collections have been flat or down for much of the past year. For the first nine months of fiscal 2024 — which ends June 30 — collections are down 0.5%, or about $115 million. If not for the fact that the state suspended the gas tax for much of fiscal 2023, the comparative spread would have been worse.
Most of the state’s revenue to help pay for K-12 schools, colleges, public health care, prisons, policing, business regulation, roads and other services comes from income and sales taxes.
Individual income tax collections in March were off 16.1%, corporate income taxes 28%. Net sales tax collections were down 4.5%.
The state income tax rate dropped in January under a 2022 measure passed by the General Assembly, and lawmakers approved another rate cut during the session.
The revenue numbers aren’t particularly surprising to Gov. Brian Kemp’s administration, which projected slow revenue growth for the next year and proposed a budget that accounted for lower projections.
Collections were also stagnant for most of 2023 after three years of skyrocketing growth fed a growing state budget.
In February, Kemp signed a record $37.9 billion midyear budget that runs through June 30. It includes $5 billion in new spending, including money for massive renovations on Capitol Hill, a new medical school at the University of Georgia, a new state prison, and miles and miles of roads.
Then in March, lawmakers approved a budget for the coming year of more than $36 billion — which will likely be added onto during the 2025 session — that includes raises of at least 4% for 300,000 teachers and state employees.
Stagnant or falling tax collections and higher spending normally wouldn’t go together in a state that is mandated to have a balanced budget.
But the state has $16 billion in “rainy day” and undesignated reserves due to the money taken in during the post-COVID-19 shutdown recovery and conservative budgeting. Kemp and lawmakers used $2 billion of those reserves this year to fund the record midyear budget.
