Even with record surplus, Kemp tells state agencies to hold the line

Credit: Christina Matacotta for the AJC

Credit: Christina Matacotta for the AJC

Despite a record surplus, billions of dollars in federal aid and a growing economy, Gov. Brian Kemp is telling most state agencies not to request any extra money to spend in the upcoming year.

In his annual instructions to agency leaders, Kemp’s budget director, Kelly Farr, said the state’s economy gained ground last year after fears of a major downturn during the early months of the COVID-19 pandemic.

“As we continue to see increasing economic activity, strong consumer demand and continued unemployment declines, we expect our economy to see solid growth through the current fiscal year and into fiscal year 2023 (which starts July 1),” he wrote state agency directors.

“As our economy and our state grows, so too do demands of state government as we strive to meet the health, safety and education needs of our citizens,” Farr said.

The good news, Farr said, is there won’t be any budget cuts. The bad news for agencies that might be needing more money is that he instructed them to submit budget proposals for the upcoming year without any spending increases.

The exception will be for education and health care programs that receive funding based on enrollment in schools or programs. For instance, if there are more students in a college than the previous year, it receives extra state money to educate those extra students.

The governor will use agency plans to build the budget proposal he will present to the General Assembly in January.

Kemp’s approach may come as a surprise since the state is coming off a record fiscal year — which ended June 30 — in which tax collections increased $3.2 billion, providing a hefty surplus. The state is also just now starting to figure out how to spend the first chunk of what will be $4.8 billion in federal COVID-19 relief money it expects to receive.

The nearly $27 billion in taxes the state collected last fiscal year helps it educate 2 million children, provide health care to more than 2 million Georgians, manage and improve parks, investigate crimes and incarcerate criminals, and regulate insurance firms, utilities and dozens of professions.

The state issues driver’s licenses and helps pay for nursing home care for the elderly.

The state is a major provider of treatment for mental health and drug addiction, and it helps fund public health programs that are fighting the pandemic. Besides paying salaries, it helps make sure that hundreds of thousands of former teachers, university staffers and state employees receive pensions and health care.

Kemp’s message to state agencies to hold the line on spending is identical to what his predecessor, Gov. Nathan Deal, usually requested every year as Georgia recovered from the Great Recession.

Kemp is also taking a conservative approach with the budget knowing he heads into his reelection year in 2022 needing money for some of his priorities, including a $2,000 pay raise for teachers.

When he first ran in 2018, the governor promised teachers a $5,000 pay raise.

He got $3,000 for teachers in 2019, during his first session after being elected. He tried to get the remaining $2,000 in 2020, but the COVID-19 pandemic and short recession that followed the outbreak killed that proposal. So the governor will want to deliver on his promise in 2022. That would cost the state more than $350 million a year in revenue.

Using federal COVID money, the state was able to give teachers and many state employees one-time $1,000 bonuses this year.

The governor also will be fielding requests from lawmakers on both sides of the political aisle, from Democrats who want to increase school funding and expand Medicaid to more Georgians, to Republican demanding election-year tax cuts and more law enforcement funding.

Democrats point out that state budget cuts approved in June 2020 — during the heart of the pandemic — remain. The General Assembly backfilled about 60% of those school cuts earlier this year.

Georgia Senate Minority Leader Gloria Butler, D-Stone Mountain, said recently that Democrats want education to be a top funding priority if the state has extra money.

“While the governor has partially restored pre-pandemic budget levels, Georgia still falls short in educational investment,” Butler said. “The jobs of tomorrow are built on the education opportunities of today.”

However, budget writers say schools aren’t hurting for money because they have received billions of dollars in federal aid during the pandemic.

Besides the likely push for tax cuts, Republicans in the General Assembly are proposing more spending in 2022 on law enforcement. House Speaker David Ralston, R-Blue Ridge, recently announced a $75 million plan to plow more money into state police, crime lab staffers and mental health. It would also give $1,000 bonuses to local law enforcement officers.

Not to be outdone, Lt. Gov. Geoff Duncan, the president of the Georgia Senate, announced that he wanted the state to spend $250 million a year on tax credits to Georgians and companies that donate money directly to local police departments and sheriff’s offices.


GEORGIA REVENUE SURGES

Georgia’s revenue grew by 13.5% in fiscal 2021, an increase of $3.2 billion in tax collections over the previous year.

Here’s a breakdown of tax collections the fiscal year that ended June 30:

Income tax — +14.6%

Sales tax — +12.7%

Liquor tax — +9.7%

Tobacco tax — +7.7%

Hotel/motel tax — -8.8%

Motor fuel tax — -4.9%