Georgia’s budget reserves swell to record $2.05 billion

Budget reserves

The state’s reserves, officially called the “revenue shortfall reserve,” is what the state has in the bank to help it run state government — from schools to prisons — when the economy tanks as it did during the Great Recession. Below is the annual end-of-the-fiscal year reserve for the past decade. The state fiscal year ends June 30.

2007: $1.54 billion

2008: $566 million

2009: $103 million

2010: $116 million

2011: $328 million

2012: $378 million

2013: $717 million

2014: $863 million

2015: $1.43 billion

*2016: $2.05 billion


Source: Office of Planning and Budget

Gov. Nathan Deal’s goal of leaving his successor flush with $2 billion in the state’s savings account is way ahead of schedule, thanks to a strong economy and relatively tight spending plans.

A fiscal 2016 end-of-the-year report shows the state’s preliminary shortfall reserves at a record $2.05 billion. That’s up about 43 percent from the end of 2015.

The fiscal year ended June 30.

Reserves will drop a bit early next year when the state doles out money to fund increases in k-12 school enrollment, but it still marks a milestone for a governor determined to leave the state in much better financial shape when he retires in 2019 than it was when he took office after the Great Recession.

“It’s not politically very exciting,” said Kelly McCutchen, the president of the conservative Georgia Public Policy Foundation. “It’s like maintenance. If any Republican is in a tight race this fall, they are not going to run ads on the fact that there is a $2 billion state reserve. But it’s good fiscal management.”

Senate Appropriations Chairman Jack Hill, R-Reidsville, said while he'd like to see the state savings account continue to grow because the money can go quickly in an emergency, the current size of the reserves has some significance.

“You have to give the governor a lot of credit because there is always pressure to spend money and give pay raises,” Hill said, “but he has always been steadfast about building the reserves.”

State reserves are important for many reasons. High on the list is the fact that they help fund the essentials of state government — paying thousands of teachers, prison guards and state patrolmen, for instance — during recessions.

State reserves fell to $51 million in 2004 when Georgia’s government was going through a fiscal recession, climbed to $1.54 billion in 2007, then dropped back down to $103 million during the Great Recession.

That may sound like a lot of money, but it costs about $91 million a day to run state government. So during the Great Recession, the state had about a day’s worth of money in the bank.

Big reserves also are important in helping the state keep its AAA bond rating, which allows the government to borrow money at low interest rates. That saves the state millions of dollars a year in interest payments.

The good bond rating is particularly important because the state is in the midst of a spree of road-building and other construction projects. Lawmakers approved a record construction budget during the 2016 session.

The skyrocketing reserves are due largely to Deal and his staff making purposefully conservative estimates about how much tax money will be collected. Legislators can only budget to spend what the governor estimates the state will take in. The state collected a record amount of taxes in the past fiscal year, far above what the government spent.

Even with the record tax take, Deal's budget director, Teresa MacCartney, sent out a memo to state agencies telling officials not to ask for an increase in their budgets next year.

Some extra spending is guaranteed. Schools will get a boost. The state Medicaid agency has already said it needs an extra $300 million. Deal announced Thursday plans to give state law enforcement officers a 20 percent raise.

In addition, the governor wants to change the formula for funding k-12 schools, which could cost money, and he wants to build an expensive state courts building down the street from the Capitol.

There will be other calls to increase spending as well, particularly after budgets were deeply cut during the Great Recession. The Atlanta Journal-Constitution reported in June that many state agencies still spend less per capita today than they did before the recession when inflation and population growth are taken into account.

And Hill expects continued calls to “give money back to taxpayers” by cutting taxes.

Deal’s ability to meet his goal of socking away $2 billion in the state’s savings account two years before he leaves office may only make those voices louder.

“Now that it’s been hit, we’re back to the usual tug and pull of tax cuts or spending increases,” McCutchen said.

McCutchen has been among those calling for reducing the state's income tax rates. When asked whether the $2 billion state reserves will be used as part of his argument during the 2017 General Assembly session, he responded, "We're constantly looking for opportunities to reform the tax code."