Gov. Brian Kemp told lawmakers Tuesday that the state has cut tens of millions of dollars in spending by doing things such as consolidating services, cutting overtime and administration, and reducing real estate leases.
The budget Kemp proposed to lawmakers last week also eliminated about 1,200 vacant jobs.
“The budget before you shows reducing costs doesn’t require drastic cuts to other agency activities,” Kemp said at a joint meeting of the state House and Senate Appropriations committees.
Kemp’s address to the committees opened a week of hearings on his proposal to spend $28.1 billion in fiscal 2021, which begins July 1.
Much of what lawmakers will hear this week will be about how agencies are dealing with Kemp's call to cut spending by 4% this fiscal year and 6% in fiscal 2021. The aim is to save about $200 million this fiscal year, which ends June 30, and $300 million next year.
About three-fourths of state spending — on education, the public health care program Medicaid, and transportation — were exempt from Kemp’s cuts.
One of the governor’s aims Tuesday was to convince lawmakers that the budget cuts won’t damage basic services to Georgians.
Through the state’s budget, taxpayers help educate 2 million children, provide health care to more than 2 million Georgians, build roads and bridges, manage parks, investigate crimes and incarcerate criminals, and regulate insurance firms and utilities, along with dozens of professions. The state issues driver’s licenses and helps fund nursing home care for the elderly.
While Kemp said his reductions didn’t mean drastic cuts to agency services, some officials indicated they won’t be painless.
Public Service Commissioner Chuck Eaton, for instance, said his utility regulation agency would require staffers to take five furlough days.
Agriculture Commissioner Gary Black told lawmakers his agency would not be able to fill needed inspector and marketing positions. Under the budget Kemp proposed, he said, “There will be fewer food safety inspections, there will be fewer animal safety inspections.
“With a reduction in inspection staff you can’t cover that territory as much as we’d like.”
Rep. Carolyn Hugely, D-Columbus, asked whether the public should be concerned about the department doing fewer food safety inspections. "I am very concerned we are not taking care of our No. 1 industry," Hugley said.
Kemp's budget calls for a $2,000 teacher pay raise next year despite the budget cuts, which were brought on by slow tax collections in 2019.
Jeffrey Dorfman, the state’s fiscal economist and a University of Georgia professor, said several of the state’s top trading partners are in a recession or experiencing a slowing economy. He expects slow growth in the state this year. Unemployment is so low “we have essentially run out of workers,” so job growth has slowed, Dorfman said, and consumer confidence has dropped, slowing sales tax growth.
He said in September that there was a 50-50 chance of a mild recession, but Dorfman told lawmakers on Tuesday, “There is pretty much zero chance we are in a recession now and not close to one.”
Still, he told lawmakers Georgia’s economy is likely to grow slowly or shrink slightly over the next 9-12 months.
Dorfman said one of the main reasons the budget is tight “is because state government has returned to taxpayers and local governments a significant amount of revenue.”
“That does not mean that’s a bad thing,” he said. “Many of us are quite happy about citizens having their money rather than us having their money.”
A change in how the state divvy’s up car tax revenue is meaning more money sent to local governments and less for the state. And lawmakers made a decision to cut the state’s top income tax rate in 2018 in response to concerns that Georgia would reap a windfall from an earlier federal tax cut because many locals would be paying higher state taxes.
Lawmakers passed a measure in 2018 that cut the top income tax rate from 6% to 5.75% and doubled the state’s standard deduction. The legislation set up a second vote, this session, to lower the rate from 5.75% to 5.5%. Dorfman said the first move wiped out any potential federal windfall.
“We don’t need the additional quarter point cut to take care of it,” he said.
In his budget and revenue estimate for the coming year, Kemp didn't account for the $500 million to $550 million in additional revenue loss that would be brought about by a second vote to reduce the tax rate to 5.5%. If lawmakers do cut the rate again, they'll likely have to find further spending cuts or delay implementation of the cut.
A recent Atlanta Journal-Constitution poll found that 50% of respondents favored keeping the current tax rate, 38% wanted the rate lowered and 9% supported raising taxes.
Dorfman told lawmakers Georgia didn’t necessarily get a big economic boost from cutting state income taxes because for many workers, the reduction was eaten up by increased insurance premiums that kicked in around the same time, at the start of the year.
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