Gov. Brian Kemp has directed state agencies to prepare for tight budgets as Georgia braces for the impact of federal spending cuts.
The governor’s budget office has directed agencies to prepare amended fiscal year 2026 and fiscal year 2027 budgets with no spending increases, except for enrollment-based programs such as schools and health care. If the agencies lose federal money, they’re instructed to deduct that money from their budgets rather than ask the state to make up the difference, according to the instructions.
“While the governor remains committed to meeting the needs of our growing state, conservative fiscal management means prioritizing spending to live within our means and keeping more tax dollars in the pocketbooks of our citizens,” Kemp’s budget office wrote to agencies in a July 11 memo.
The instructions come as states brace for the fallout from President Donald Trump’s “Big Beautiful Bill,” which passed Congress earlier this month. That bill is expected to have a dramatic impact on state budgets as the federal government shifts the costs of the Supplemental Nutrition Assistance Program — also known as food stamps — to the states and cuts spending on Medicaid health insurance for the poor.
The Medicaid cuts alone could cost Georgia about $10 billion over the next decade, according to the health research organization KFF. But the biggest cuts won’t come until after next year’s midterm election, and many details of the impact on Georgia’s budget remain unclear.
Key Georgia lawmakers do not believe they will need to convene a special session this year to address the federal budget cuts. They say the state’s ample reserve funds and other factors mean they can wait until the General Assembly convenes in January to decide how to address federal cuts.
House Appropriations Committee Chairman Matt Hatchett, R-Dublin, said lawmakers will have to plan carefully for the next couple of budgets.
“There’s just no way we can backfill all the federal funds that may ... get cut down the line,” Hatchett said. “But we’ll do what we can.”
Kemp’s instructions suggest the state is bracing for tough decisions.
The memo asks state agency heads to prepare for contingencies “as we continue to monitor economic trends and policy changes at the national level.”
The agencies will submit their proposed budgets to Kemp in September. The governor will unveil his own budget proposals when legislators convene in January.
Kemp’s office has said his conservative fiscal policies have allowed Georgia to increase spending in key areas, to pay for capital projects with cash, and to return money to taxpayers through refunds and tax cuts.
As evidence of the state’s financial health, Kemp this week cited recent credit rating agency reports, which give Georgia high marks. Last week, Moody’s affirmed its Aaa rating for Georgia debt, citing the state’s large and diverse economy, strong population and employment growth, robust reserves, and other assets.
But credit ratings agencies have said federal policies could hurt state finances.
“This new (federal) policy will certainly impact Georgia’s budget, and I think it’s fair to say that it will impact our budget negatively,” said state Rep. Scott Holcomb, D-Atlanta. “The state will likely have to spend more money or will have to make difficult policy choices to leave needs unaddressed.”
Staff writer Michelle Baruchman contributed to this report
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