This article first appeared in Political Peach News

My family’s budget is a plan to match our expenses with our income. The money going out can be divided into two buckets: what we must spend on essential necessities like food, shelter, and clothing, and discretionary spending, be it a vacation or a bigger television. Our discretionary spending is a statement of our values, what we deem important in life. Our state’s budget is similar: we have certain necessities we must spend money on, such as federally mandated expenses and others required by our state constitution and laws. Our state’s discretionary spending, like my family’s budget, is a statement of what we collectively decide is important. It should be a reflection of our values as a society.

To build a state budget, the governor and state legislature work together each year to produce a budget for the fiscal year, which runs from July to June of the next year. Currently, the state government is operating under Fiscal Year (FY) 2023 budget. And the legislature is developing the state’s FY2024 budget that will become effective for 12 months beginning July 1, 2023.

Georgia’s governor has the sole authority to set revenue projections for the upcoming year. The legislature then decides how that money will be allocated among governmental agencies. The governor has a line-item veto over the budget expenditures, but the state, unlike the federal government, must operate under a balanced budget. 

The majority of the revenue for the state comes from our personal income tax payments. In FY23, this source provided around half of our state revenue. The other half comes from corporate tax, sales tax, and other smaller sources. 

Gov. Brian P. Kemp, with the advice of the state’s fiscal economist Jeffery Dorfman, is projecting total revenue of $32.5 billion for FY24. He also anticipates a sharp drop in overall tax collections for the rest of 2023 that will continue in 2024. Personal income tax revenue will increase slightly, but revenue from capital gains taxes will decrease significantly because of slim profits in the stock market. 

A report by the Georgia Budget and Policy Institute (GBPI) shows that state spending remains at pre-2008 recession levels. Despite a population increase of around 1.3 million, state spending per person has dropped below pre-recession levels.  Danny Kanso, Director of Legislative Strategy and Senior Fiscal Analyst at GPBI, notes that flat revenue projections can be used to limit state spending. “It may be a policy choice rather than a best-effort judgment.”

Provocative GOP strategist Grover Norquist, an advocate of low taxes, has often been quoted saying that his goal is to shrink government so small that it could drown in a bathtub. Governor Kemp may not want to take spending cuts to the level Norquist recommends, but he certainly touts lower taxes and only bare-bone spending on government functions. 

“The revenue estimate for the current FY2023,” Kanso says, “is far, far below what we collected in FY 2020. But, this is a tool…that’s being used by the governor to limit state spending and to keep spending on a very conservative trajectory, particularly if we look back over the last five years.” Kanso adds that the governor’s proposed $32.5 billion budget for FY 2024 “offers a muted response to deep deficits in the capacity of state government to meet Georgians’ needs.”

In spite of flat revenue projections permitting only small spending increases, the governor has found money to give a one-time $1 billion property tax rebate this year, which will primarily benefit the middle and higher-income Georgians who pay property taxes, and a one-time $1 billion personal income tax rebate. The governor has often said that he wants to put money back in the pockets of “hard-working Georgians.” But the governor has certainly not been miserly when handing out various tax credits, incentives, and outright spending to lure big corporations, mostly from out of state. 

Despite the progressive nature of the personal income tax (i.e., taxing higher-income filers more than lower-income), reducing or eliminating this tax has long been a dream and campaign talking point for Georgia Republicans. Last year the legislature passed flat tax legislation that would gradually reduce the tax rate if certain revenue benchmarks are met. According to GPBI, the legislation alters the state’s current range of graduated income tax brackets (from 1 percent to 5.75 percent) to a flat tax of 5.49 percent in 2024 for all individual taxpayers. The legislation further lowers that rate to 4.99 percent by 2030 while simultaneously increasing the state’s personal exemption from $18,500 in 2024 to $24,000 in 2030. The increased exemption would somewhat offset the tax burden on lower-income filers. But the current low projections for future state revenue could threaten delays in the measure’s seven-year implementation schedule because the legislation has built-in revenue increase benchmarks to allow this reduction. 

Georgia is already a low-tax state, ranked as the 8th lowest state by the Tax Foundation. We have low per capita spending in areas such as schools, health care, and other significant quality-of-life government services. The total of $2 billion that the governor is proposing to give away in tax credits and refunds could be better spent filling gaps in funding such discretionary services.

In addition to lower spending for state services, flat revenue projections have resulted in a dire situation for state employees. Kanso says that more than a decade of flat budgets has caused hiring freezes, eliminations of vacant positions, and low wages.“This makes it very difficult to keep the kind of institutional knowledge and just operational know-how that you need to operate a state agency serving millions of people.” 

Across the board, in 2022, the turnover rate was over 25% of Georgia state employees, and the number of applicants was at an all-time low. This staffing problem has become apparent to average Georgians. One of many recent examples occurred when the Department of Labor had much difficulty administering covid relief funds. Another is the high caseloads for counselors in the Department of Children and Families. Over the past 15 years, the state has reduced its full-time workforce by nearly 30%, from 83,000 to less than 60,000 employees. Understaffing is hampering the effective and efficient delivery of services.

Flat revenue projections may reflect the possibility of slowing population growth. Dorfman pointed out that in the 80s and 90s, half of the fastest-growing counties in the United States were in Georgia. Our population grew a lot faster, which made it easier to grow jobs and fill jobs and grow the economy. But Dorfman believes that to maintain economic growth and increase state tax revenue, more workers need to move into Georgia. Governor Kemp and the Republican-controlled legislature need to understand that it might be hard to attract newcomers to a state that underfunds schools, healthcare, and general government services.

A good family budget includes building a reserve fund for emergencies, and state budgeting requires this also. At the close of 2022, Georgia’s Revenue Shortfall Reserve, commonly called the rainy day fund, had $5.3 billion, which is the maximum this fund can hold because it is limited to 15% of the prior year’s total state revenue. 

As a result of low spending over the past several years, Georgia has increased its saving even more. We currently have an additional $7 billion in an unrestricted surplus account. According to a report from GPBI, “Even after accounting for a potential economic recession and the effects of tapering federal spending, it appears that consecutive years of conservative revenue estimates have compounded such that Georgia could raise significantly more than it currently plans to spend in the upcoming year.” In other words, this unrestricted surplus will likely increase even more. 

But after building up a reasonable reserve, states are supposed to collect taxes and then spend revenue. At the beginning of the Covid crisis, the legislature approved a 10% spending cut across the board rather than using surplus. A report from the federal Center on Budget and Policy Priorities highlights the problem with this approach. “In Georgia, policymakers initially approved a 10 percent spending cut for 2021. While many of these cuts were reversed when revenues improved and federal aid arrived, their impact lingered.”

Instead of maintaining a bare-bones state government that is underfunded and understaffed, Governor Kemp and the legislature need to use some of the rainy day fund and the additional $7 billion surplus to improve the everyday lives of citizens. The GPBI report linked above outlines some key funding priorities and also discusses additional and important aspects of the current budget not discussed here. 

Kemp is proud that the state has been named the “best state in which to do business.” However, this is not the only role of a state government. A well-run government must not only keep us safe, maintain order, and resolve conflicts, but it should also provide services that individuals usually cannot provide for themselves, such as clean water. How our state budget is set and how our money is spent plays a pivotal role in making our state a good place not only to do business but to live, raise a family and thrive. We all need to keep a close eye on how our budget is prepared and money allocated to ensure that the process is fair and transparent and creates the type of state we want. 

Krista Brewer

Krista Brewer is a native Atlantan who has a professional background in writing, reporting and editing. For several decades she has closely followed Georgia politics, focusing on topics such as healthcare, voting and immigrant rights, and budget and environmental issues. She is active on Twitter and invites readers to follow her @KristaRBrewer.