Georgia tax revenue drops $1 billion in April as pandemic takes its toll

The coronavirus pandemic took a brutal toll on state finances in April, with tax collections off about $1 billion in a month when much of Georgia’s economy was shut down.

April’s 35.9% drop is expected to be only the first of several bad months for state government, which relies heavily on income and sales taxes to help pay teacher salaries, provide public health care, patrol highways, keep felons behind bars, protect the environment and inspect food.

The news — which wasn’t unexpected — came as the House and Senate Appropriations committees were preparing Thursday to hold a virtual meeting on the upcoming fiscal year’s budget, the first since the General Assembly shut down because of the pandemic in mid-March.

Senate Appropriations Chairman Blake Tillery, R-Vidalia, said he and House Appropriations Chairman Terry England, R-Auburn, and Gov. Brian Kemp’s budget staff have been keeping close tabs on the revenue numbers coming in.

“We were aware of where we were headed,” Tillery said, “which is why we are making some of the moves we have made.”

England, Tillery and Office of Planning and Budget Director Kelly Farr sent state agencies a memo Friday telling them to plan for 14% budget cuts in the upcoming fiscal year, which begins July 1.

But Wednesday's revenue announcement shows the state has a lot of work to do to get through this fiscal year and pay for its $27.5 billion budget.

Income tax collections were expected to be down because the state agreed to postpone tax day — when income taxes are due — from April 15 to July 15.

Income tax collections were off 46% from April 2019, corporate income taxes were down 70.6% and sales tax collections declined 14.3%. Much of the sales tax money was for sales in March, when the state was just beginning to shut down due to the pandemic.

Other areas of the monthly report showed the impact of the economic shutdown. Hotel taxes were off nearly 50%, and car title and tag fees fell 43%.

Meanwhile, alcohol and cigarette tax collections were up 13% and 37%, respectively.

For the first 10 months of fiscal 2020, overall revenue collections are down about $680 million, or 3.4%. The state’s budget is predicated on a slight increase in revenue.

Kemp has a $2.7 billion reserve fund, so at least some of that will be used to fill holes in the fiscal 2020 budget.

The Atlanta Journal-Constitution reported last week that since mid-March, nearly 1.4 million claims have been processed in the state – 28% of the workers in Georgia. While some businesses have been opening up over the past week or so, many remain either shuttered or only partially reopened.

The General Assembly will hold budget hearings in May but won’t return until June to pass a budget for fiscal 2021. Under the Georgia Constitution, lawmakers must pass a budget before adjourning for the year.

Before the session was suspended in March, the House backed a proposed budget that included pay raises for teachers and state employees. But that was before the reality of the pandemic and the impending recession sunk in. Now state agencies have a few weeks to come up with proposals to cut more than $3.5 billion in spending.

One group — the Georgia Budget and Policy Institute — estimated in April that the state may face a $4 billion shortfall over the next 15 months. Wednesday's news suggests that figure may be optimistic.