State sales and income taxes were way up during the recently completed fiscal year, providing a hopeful sign to an economy that is still struggling on the jobs and housing fronts.
That is welcome news to elected officials, economists and anyone who draws a paycheck from the state. After years of bad reports, collections rose every month in the fiscal year that ended June 30.
But for state government, it's not time to party like it's 2007.
Collections remain more than $2 billion below what they were before the Great Recession. So the government won't expand, and 200,000 teachers and state employees shouldn't expect big pay raises next year. Lawmakers won't be able to replace what they've cut the past three years.
And state officials and economists say Georgia's economy isn't necessarily out of the woods yet.
"It's hard to feel like we are riding any great crest of economic recovery," said Senate Appropriations Chairman Jack Hill, R-Reidsville.
Hill said there are positive signs, such as the strong showing of Georgia's ports and the Kia plant in West Point, and tourism numbers have improved in some areas of the state.
After the tax collection numbers were released Wednesday, Gov. Nathan Deal said, "What these numbers show in Georgia is slow and steady growth."
Total collections rose 7.8 percent, or $1.1 billion, during fiscal 2011. Income and sales taxes improved 9.1 percent and 6.7 percent, respectively, over the previous year, the Department of Revenue announced Wednesday. Collections rose every month during fiscal 2011 after coming off the worst year since the post-Sept. 11 recession of the early 2000s.
Still, Hill was among those who cautioned against expecting much in the way of increased government spending, other than possibly replacing some of the money cut from schools in recent years.
"It would be hard to support pay raises when we've still got so many people out of work," he said. "If you look around you and you say, ‘I don't see the recovery going gangbusters,' that should be an indication you should go slow."
State government has been going slow ever since the recession began. As Georgians lost jobs and homes, spending and income fell. Corporate income taxes in particular plummeted. State government -- which funds education for 2 million students and helps provide health care to 1.5 million Georgians -- began cutting back.
Cuts to local school systems brought layoffs, teacher furloughs and higher property taxes in some communities. Cuts to colleges meant higher tuition and fees for students.
The current growth in tax collections will help fill reserves, which were depleted during the recession. But some economists and budget analysts argue that the state remains in a "structural deficit." It will take years of growth, they say, to make up for previous spending cuts and to be able to pay for the increasing costs of education and health care in a growing state.
Georgians affected by previous cuts are worried things won't get better anytime soon.
Kaitlin Miller, vice president of the student government association at the University of Georgia, said students already have fewer course sections to choose from, that the classes they can get into are crowded and that they have less access to professors and school facilities.
“What’s frustrating for students is that we’re paying more and getting less,” Miller said. “We know there is a looming threat that things are going to get worse, and there’s nothing we can do about it.”
Dana Camp, a Fayette County educator, said teachers are keeping a close eye on the local budget to see whether they will have to take more cuts in their pay or benefits. Camp doesn't want to see the system cut the number of days children are in school, something that's been tried across the state to ease budget shortfalls.
"Teachers do not want instructional days decreased, as decreased days will affect students," Camp said.
While there remain concerns, state economists and state officials see some bright signs in the tax numbers.
Corporate income taxes were down in fiscal 2011, but Mercer University economist Roger Tutterow said that's partly due to companies writing off losses from previous years. The improvement in individual income and sales taxes are good news for the economy.
"It is good we are doing as well as we are doing considering the tough labor market," Tutterow said. "The state is still going sideways."
The state's unemployment rate was 9.8 percent in May, slightly lower than in May 2010.
Ken Heaghney, the state's fiscal economist, said improving sales tax collections show both individuals and businesses continue to spend money.
"We seemed to have achieved some measure of growth, maybe better than what we see in the labor market statistics," he said.
"The revenue data says we're getting ahead. The labor market was flat. ... But other things seem to suggest we are still growing, just not as rapidly as we would like and not enough to really bring down unemployment."
Staff writer Laura Diamond contributed to this article.
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