ATLANTA — Georgia Gov. Brian Kemp said Wednesday he was ready to ease the purse strings after years of huge budget surpluses, achieved in part by holding back spending despite strong government revenues.
In an annual memo kicking off the state budget process, Richard Dunn, director of the Office of Planning and Budget, told state agencies they can demand a 3% increase both if the current 2024 budget is changed and if lawmakers legislate next drafted the 2025 budget year. He also called on agencies to propose one-off ways to use the state’s unallocated surplus, which could exceed $10 billion after the fiscal year ended June 30.
All proposals “should target initiatives that can affect program outcomes, improve customer service, or drive future improvements in the way we do business or provide services as a state,” Dunn wrote.
One of Republican Kemp’s most powerful powers as governor is setting the revenue estimate, an amount that state legislatures cannot exceed when preparing the state spending plan. Critics of Kemp’s fiscal policies, including the liberal Georgia Budget & Policy Institute, say he starved government services by setting artificially low revenue estimates.
And while Kemp has drawn on surplus to provide more than $3 million in one-time income tax, property tax and fuel tax breaks, he has a broader discussion about how to spend, give back, or put into additional cash the remaining billions in this state to invest, clearly avoided The government has been doing banking for the past three years.
Most Georgia agencies implemented a 10% cut in the 2021 budget as government officials feared a sharp drop in revenue from the COVID-19 pandemic. Instead, federal stimulus programs and inflation led to higher income and sales tax receipts. In 2022 and 2023, agencies’ budgets were increased, but mostly only to increase staff salaries.
That means many programs never recovered from the 2021 cuts. The number of government employees has declined in part as a result of these cuts, raising questions about the authorities’ ability to adequately serve Georgia’s growing population. According to the Census Bureau, the state gained more than 1 million residents between 2010 and 2020, an increase of 10.6%.
Hinting that austerity measures may not be over for some agencies, Dunn said they should also propose budget numbers that cut spending by 1% and include new efficiency gains.
“Even in a positive fiscal climate, agencies should strive to find ways to do their business better, whether by embracing technological efficiencies, reducing unnecessary regulation, or curtailing underperforming or low-priority initiatives,” Dunn wrote.
Georgia plans to spend $32.5 billion in state revenue and $55.9 billion overall in the year that began July 1. The difference between the two numbers is mostly due to federal funding. Government revenue is expected to remain flat, but total spending is expected to decline from $61.5 billion last year.
Overall, tax revenues have declined in recent months, falling 0.4% in June compared to the same month in 2022. However, the state would have to face a catastrophic $5 billion drop in tax revenue this year to miss forecasts. That means Georgia is likely to record its fourth year in surplus unless Kemp and lawmakers significantly increase spending or cut taxes.
Georgia’s budget educates 1.7 million K-12 students and 435,000 college students; houses 49,000 state prisoners; pave 18,000 miles (29,000 kilometers) of freeways; and care for more than 200,000 people who are mentally ill, developmentally disabled or dependent on drugs or alcohol. Education is the largest government expense, followed by health care.
