The State Accounting Office on Wednesday confirmed Georgia has plenty of money in the bank.
But with federal funding cuts on the horizon and some legislators determined to reduce or eliminate state’s income tax, what will state leaders do with all the extra cash?
Here’s what you need to know.
Money in the bank: Georgia has seen years of big budget surpluses, thanks to several factors.
Federal spending spiked during the COVID-19 pandemic. A postpandemic economic boom also helped. Inflation — which increased sales tax receipts, along with prices — also was a factor. And though Gov. Brian Kemp and the General Assembly increased spending, they didn’t spend nearly as much as they took in.
As a result, the state’s “rainy day” and undesignated reserves ballooned from about $2.5 billion in fiscal year 2020 to $16.5 billion last year.
The latest: On Tuesday the State Accounting Office reported that reserves stood at $14.6 billion as of the end of fiscal year 2025 in June. That includes $9 billion in undesignated budget reserves the state can spend in multiple ways, including tax refunds, and $5.6 billion set aside in a “rainy day” fund in case of revenue shortfalls that can happen if the economy cools. It doesn’t include $2.5 billion in lottery funds and other restricted reserves.
Though undesignated reserves are down from last year’s peak, they’re still high by historical standards. That gives lawmakers plenty of money to spend next year, if they choose.
Tax relief? In recent years, Kemp and lawmakers have taken advantage of the extra cash to reduce Georgia’s income tax rate and issue tax refunds. This year, tax cuts and refunds cost the state more than $2 billion — a big reason reserves are down.
More income tax rate cuts are likely to be on the agenda when the General Assembly convenes in January. Kemp has not announced plans for another round of tax refunds.
Lt. Gov. Burt Jones, who’s running for governor, wants to eliminate the income tax altogether. He’s launched a Senate committee to study ways to accomplish that goal.
But it’s unclear whether the General Assembly has an appetite for eliminating the state’s largest source of income. One measure of the difficulty: Spending all $14.6 billion in undesignated reserves on tax relief would not cover the loss of individual income tax revenue for one year.
Federal cuts: Georgia has no shortage of other budget priorities — including schools, health care and property tax relief. And lawmakers will be eager to please constituents in an election year.
But budget writers may want to set aside money to backfill impending federal spending cuts. One example: President Donald Trump’s “big beautiful bill” is expected to cut Medicaid health care spending in Georgia by about $10 billion over a decade, according to the health research organization KFF. The biggest cuts are scheduled after next year’s election, but some effects are already being felt.
What’s next: Kemp will unveil his proposed fiscal year 2027 budget in January. He may announce budget-related initiatives before then. With reserves having peaked and federal cuts in the future, next year’s budget debate could be more difficult than recent ones.
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