Report shows giant state revenue surplus in Georgia

As Gov. Brian Kemp prepares his spending plan for the next year, he'll be considering what to do with nearly $2.2 billon in surplus money. (Alyssa Pointer/Atlanta Journal Constitution)

Credit: Alyssa Pointer

Combined ShapeCaption
As Gov. Brian Kemp prepares his spending plan for the next year, he'll be considering what to do with nearly $2.2 billon in surplus money. (Alyssa Pointer/Atlanta Journal Constitution)

Credit: Alyssa Pointer

Battle begins over whether to save, spend it

Despite fighting the COVID-19 pandemic, the state this summer ended its fiscal year in such good shape it pumped an extra $1.6 billion into its reserve and had more than $2 billion left over.

That will bring a political fight between Republicans and Democrats about how to spend the surplus money, a battle that will take place in an election-year session that starts in January.

The Atlanta Journal-Constitution reported in July that state tax collections for fiscal 2021, which ended June 30, were up a record $3.2 billion.

That’s opposite of what state officials expected this time last year, when they were cutting spending because the pandemic had flattened Georgia’s economy.

The state saw revenue grow 13.5% in 2021 over 2020.

A new state report shows that the surplus for the year was even bigger — about $3.7 billon — once state agencies returned leftover money. The report says the state was able to increase its rainy day reserve from $2.7 billon to almost $4.3 billion — enough to run the state government for two months.

That left nearly $2.2 billon in surplus money that didn’t, by law, have to go into the reserve.

The surplus has already led to speculation at the Capitol about what the state should do with the money, and that will likely only intensify as Georgia heads into a heated 2022 election season.

Gov. Brian Kemp and his staff have already begun talking about some of his priorities for 2022, when he’s up for re-election.

“Thanks to the conservative leadership and fiscal responsibility of the governor and the General Assembly, Georgia is on strong financial footing,” Kemp press secretary Katie Byrd said. “By budgeting wisely — despite an unpredictable global pandemic — the state was able to fund its priorities of education, public safety and health care, and avoid draconian cuts or significant reductions in essential services.

“Looking ahead to the next legislative session, the governor looks forward to working with both the House and Senate on a number of their priorities — in addition to the governor’s previous commitments from the campaign trail to raise educator pay, exempt military and first responder retirement pay from state income tax, and make it more affordable for Georgia families to send their kids to college.”

Georgia isn’t the only state seeing rising tax collections. Governors across the country are trying to figure out what to do with hefty surpluses and federal COVID-19 relief largesse.

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 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.

For the fiscal year, the state’s two major revenue sources — income and sales taxes — were up 14.6% and 12.7%, respectively. Corporate income tax collections rose 42%. Tobacco and liquor tax collections improved 7.7% and 9.7%, respectively.

Besides the boon in state tax collections, Georgia is also receiving about $4.8 billion from the latest federal COVID-19 relief plan signed into law in March.

Democrats have pushed for the state to use the fiscal 2021 surplus to increase school spending and provide more Georgians with health care coverage.

Kemp will receive pressure from his fellow Republicans to use the money to cut taxes on Georgians. Kemp has also promised teachers a pay raise that will cost about $350 million a year.

However, because the surplus is a one-time windfall, some state officials are reluctant to back any ideas that have annual, year-after-year costs attached to them.

Among them is Kelly Farr, the governor’s budget director.

“This is just one-time money,” Farr said. “I understand people are excited.”

But he said state officials have to consider the ongoing costs if they try to spend it on things with long-term obligations, such as pay raises that have to be funded each year or income tax rate cuts or increased medical funding.

Senate Minority Leader Gloria Butler, D-Stone Mountain, said Democrats want all Georgians to benefit from the state’s revenue surplus.

“It is time to expand Medicaid,” she said. “More than a decade later, it’s time to fund our public schools, and it’s also time to put the brakes on any schemes that benefit only the top wage earners. Middle-class working families need to share in the success of our state.

“It is my hope that we take our time to determine what is in the best interest of Georgians, not someone’s political campaign.”


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%