State tax collections climbed 9.4 percent during the recently completed fiscal year, and officials don’t see any signs of a major economic slowdown in Georgia.
Still, Gov. Nathan Deal expects to remain cautious as state agencies that fund everything from k-12 schools and colleges to public health care and prisons begin to prepare their budgets for the upcoming year.
As The Atlanta Journal-Constitution recently reported, funding for some state agencies remains below what it was before the Great Recession, and 200,000 teachers and employees only this month got their first substantial raises since the late 2000s.
State tax collections slowed in June, and the rate of growth will be lower during fiscal 2017 because the tax increase for transportation projects that went into effect last year will no longer inflate the year-over-year numbers.
And Deal already has plans for much of the new tax money that will come in if the economy continues to grow. He is expected to push for school funding changes that will likely increase spending on k-12 education. And he is determined to add at least an additional $600 million to state reserves before he leaves office in January 2019.
The state’s $23.7 billion budget, which took effect July 1, helps fund the education of about 2 million students and provides health and nursing care for more than 1.8 million Georgians. The state funds road improvements and prisons, economic development initiatives and cancer research, business and environmental regulation, parks and water projects. It creates thousands of private-sector jobs through construction projects.
Deal announced Monday that collections increased almost $1.8 billion in the recently completed fiscal 2016.
About $784 million of that, or 44 percent of last year’s gain, came from an increased take from gas and hotel taxes and fees. The General Assembly approved an increase in those taxes last year in an effort to fund more road and bridge projects.
The budget approved by the General Assembly this year included record spending on such projects.
Overall tax collections had been running at a near 10 percent increase for much of fiscal 2016, but June’s growth was slower, with small gains in income tax collections and a net decline in the sales tax take. Income and sales taxes are the two biggest ways the state raises money.
Kenneth Heaghney, the state’s fiscal economist and a Georgia State University professor, said while there has been a slowdown in corporate profits in some sectors, he’s not expecting a major hiccup in the state’s economy.
“The fundamentals around the Georgia economy are still really strong,” he said. “All in all, we are cautiously optimistic. We don’t see any signs of a recession or anything like that.”
While job growth may be slower, he said, wages are rising. For government budgets, that could mean higher income tax collections.
This year’s state spending plan is predicated on what Heaghney sees as a makeable 3.9 percent rate of revenue growth through next June 30. Typically, Georgia governors project revenue growth on the conservative side to avoid having to make drastic cuts. So they usually end the year with a little bit left over.
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