With tax collections flagging, Kemp administration officials were concerned in May that the state might not raise enough to fund the state’s $27 billion budget as the end of the fiscal year neared.
On Friday, Gov. Brian Kemp vowed to rein in state spending, cutting back to meet his priorities, such as another teacher pay raise on top of the $3,000 most educators received this year.
Even with a growing economy, state officials face potential revenue headwinds, in part because of the decision lawmakers made last year to cut the state income tax rate.
Kemp said he is exploring a proposal to limit state spending and “start reeling things back,” though it will fall short of his campaign promise to implement a cap on spending to limit growth in the budget.
The governor said he has no timetable for when he would unveil a cap, one of his key campaign promises. But he said the state would soon have to tighten spending “with an economy that’s not expanding as much as it could.”
“We’ve got to get ahead of the curve,” Kemp said at Resurgent Gathering, a grassroots conservative event. “That’s some of the direction that we’re giving — to use technology so that as the state grows, we don’t have to grow government with it.”
This year’s state budget included a $3,000 pay hike for educators, and the governor has promised an additional $2,000 increase during his first term, which ends in January 2023.
In remarks after his speech, the governor said his administration will likely give directives to state agencies to increase the use of technology and limit new hires, but he offered few specifics. He also said his staff would review state spending to shift focus from some programs.
“What are we doing that’s maybe not a priority of ours, so we can pay for things that are a priority, like school safety and teacher pay raises? We’re going to take a real hard look at that,” he said.
“It’s not only what I campaigned on, but in the economy we’re facing, there’s a lot of uncertainty,” Kemp said. “We want to continue to be structurally sound.”
Kemp administration officials were concerned enough about meeting the budget for fiscal 2019, which ended June 30, that it decided in May to allow state agencies and school districts to skip a monthly payment into the State Health Benefit Plan, which provides health coverage to more than 600,000 teachers, university and state workers, retirees and their dependents.
The move saved state agencies and districts $235 million, but it riled teachers and state workers, who said the state’s decision to raid the fund during the Great Recession led to higher insurance premiums and reductions in benefits.
Georgia made deep cuts in spending during the Great Recession, and only in recent years has the budget approached the level of pre-recession years, when population growth and inflation are factored in.
Kemp’s predecessor, Gov. Nathan Deal, annually instructed state agencies not to ask for any increase in spending, besides what was dictated by growing enrollment, such as in k-12 schools, colleges and Medicaid, the health care program for the poor and disabled.
The General Assembly considered a cap on state spending in the mid-2000s, but the idea never went far. Such measures, called TABORs, have had mixed reviews.
Critics in Colorado said inflexible limits on spending there forced deep cuts in funding for schools and health care, and in 2005 voters there approved a ballot measure to loosen restrictions. It remains a controversial law, but about two dozen states now have some kind of spending restrictions.
Georgia House Appropriations Chairman Terry England, R-Auburn, is not a big fan, and, like his counterpart in the Senate, Jack Hill, R-Reidsville, said the state has done a good job of holding down spending without a cap.
“It’s something we have been doing out of necessity,” England said. “Every agency realized they had to do more with less, and most of them have. We have been very slow and cautious about adding positions.”
England said most state spending goes to k-12 schools, the University System of Georgia, technical colleges and Medicaid, all of which receive money based on how many people use the programs.
Hill said governors can already control spending in Georgia because they set the revenue estimate for the upcoming year. Lawmakers can’t spend more money than the governor predicts will be collected, so a conservative estimate limits spending.
“I don’t know that I would agree we have a spending problem at all,” Hill said. “I think we have been pretty conservative about holding back.”
But Hill said he shares some of the governor’s concerns about possibly slower revenue growth in the coming year. Monthly tax collections were down this year, then up, then stagnant in May, and Kemp administration officials were looking at ways to cut spending ahead of the June 30 end to the fiscal year. The state wound up raising enough to pay for what it spent.
The state’s revenue numbers are feeling the impact of the decision lawmakers made last year to cut the top income tax rate from 6% to 5.75%. Lawmakers will vote next year on whether to drop it again to 5.5%. One estimate had the loss of revenue — and savings for taxpayers — at about $400 million a year.
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