While the delta variant brought a spike in COVID-19 cases and hospitalizations in August, one key state indicator suggested the economy continued to grow.
The state Department of Revenue announced Wednesday that tax collections were up 12.7% in August over the same period last year.
The continued gains have Gov. Brian Kemp and lawmakers looking to 2022, when they are up for reelection and the state may have a record amount of money to spend.
It’s no given: Budget writers have warned that inflation, worker shortages and supply problems could slow the Georgia economy. The latest surge of bad COVID-19 cases in a state with a relatively low vaccination rate probably doesn’t help.
New confirmed and probable COVID-19 infections in Georgia increased to levels very close to the January surge, which left hospitals across the state flooded with seriously ill patients. The seven-day rolling average in new confirmed and probable cases tripled during August, from 3,021 at the beginning of the month to more than 9,500 at its end.
Still, the state saw strong revenue growth. Income tax collections were up 13.9%, and the gross sales tax take finished 15.9% over August 2020.
The two taxes are the state’s largest sources of revenue and are generally seen as a barometer for the economy.
Longtime House Appropriations Chairman Terry England, R-Auburn, who studies Georgia’s economy closely, has been surprised by the continued strength of state revenue growth.
“Everything in modern economics you might as well throw out the window at this point because nothing is making sense,” he said.
The taxes the state collects help 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 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.
State leaders will have some big decisions to make about how to spend the money flowing in as the economy continues to expand. And they’ll be making those choices in an election year when the General Assembly reconvenes in January.
When the books are fully closed on fiscal 2021, which ended June 30, the state is expected to have a huge surplus for the year. The state lottery, which raises money for HOPE college scholarships and pre-kindergarten programs, also had a banner fiscal year.
In addition, Kemp is expected to announce in January grants for high-speed internet, road and bridge improvements, and economic impact programs as part of a $4.8 billion federally funded COVID-19 relief plan.
With the governor facing voters in 2022, having extra money could be a major advantage.
Increasing the pay of Georgia’s more than 100,000 educators is politically popular and something Kemp promised to do when he initially ran for governor in 2018. Kemp said then that he wanted to raise teacher pay by $5,000, and he got $3,000 of that in his first year in office.
Then the pandemic hit and plans to raise teacher pay the additional $2,000 vanished because state officials expected a recession.
Keeping that promise will be a major priority for the governor in 2022. Doing so will cost about $360 million a year.
Kemp may also consider raising the scholarship awards given to HOPE students — money that would come from lottery sales — and exempting retirement income from state taxes for ex-military and former first responders, such as paramedics, firefighters and police officers.
The state already exempts some retirement income — such as money from pensions — for Georgians starting at age 62.
Republican lawmakers will also likely push for tax cuts. Democrats, meanwhile, will continue to back expanding Medicaid to get more Georgians on the public health care program for the poor and disabled, and they will call for increased education spending.
GEORGIA REVENUE SURGES
Georgia’s revenue was up 12.7% in August over August 2020, an increase of $239 million.
Here’s a breakdown of tax collections for August:
Income tax — +13.9%
Gross sales tax — +15.9%
Liquor tax — -3.7%
Tobacco tax — +4.1%
Hotel/motel tax — +53.6%
Motor fuel tax — +12.6%
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