Georgia on track to end the year with another budget surplus

Some of that is because of prudent planning, as Gov. Brian Kemp’s administration adjusted revenue estimates to account for the lower tax rates. But it’s also a byproduct of Georgia workers’ growing salaries and a reflection of the tremendous federal investment in state governments during the pandemic.

Still, there were subtle signs of a tightening economy. This record run of surpluses had left Georgia with $16.5 billion across its various savings accounts at the start of the year. State lawmakers have been dipping into those reserves to pay for a variety of one-time projects with cash instead of borrowing money. But the surpluses have always been large enough that the state still increased its reserves at the end of the year.

That’s likely to change this year, according to Danny Kanso, senior fiscal analyst at the nonpartisan Georgia Budget and Policy Institute. While Georgia is likely to have a yearly budget surplus, he said it probably won’t be large enough to cover the money lawmakers withdrew from the state reserves. Lawmakers agreed to pull $2.7 billion from the state’s reserves for various projects. They also agreed to give $1 billion back to taxpayers in the form of rebate checks of up to $500 per household.

That should leave the state with about $15 billion in reserves — still a large number capable of covering months of state expenses in a pinch. It also puts Georgia among the states with the largest surplus balances, including more than most of its neighbors, Kanso said.

“The runway has continued to shrink a little bit, but obviously it is still a little bit there above spending,” he said. “It points to a pretty healthy position.”

Georgia ended the fiscal year with net tax collections $197million higher compared to last year, or 0.6%. That’s after state officials compensated for a two-and-a-half month suspension of the state gas tax in the previous fiscal year.

The revenue growth came despite recent income tax cuts in Georgia. In 2022, lawmakers agreed to cut the state’s income tax rate to 4.99% by 2029. They’ve since voted twice to accelerate that schedule, now vowing to hit that mark by 2027.

“To continue to see that number grow in spite of those rate cuts is encouraging,” said Kyle Wingfield, president and CEO of the Georgia Public Policy Foundation. “I think it’s a good sign for a healthy economy.”