With a strong Georgia economy, Kemp gives green light for more state spending

Gov. Brian Kemp has told state agencies they can request up to 3% worth of enhancements to their budgets in the coming year. (Natrice Miller/ Natrice.miller@ajc.com)

Credit: Natrice Miller/AJC

Credit: Natrice Miller/AJC

Gov. Brian Kemp has told state agencies they can request up to 3% worth of enhancements to their budgets in the coming year. (Natrice Miller/ Natrice.miller@ajc.com)

Another massive budget surplus and a growing economy has Gov. Brian Kemp telling state agencies they can request up to 3% worth of enhancements to their budgets in the coming year.

That’s a break from what has become a tradition of very conservative budget instructions to state agencies in which governors tell them not to ask for anything new.

In Kemp’s annual instructions to agency leaders, the governor’s budget director, Richard Dunn, said the state’s economy continues to grow, which typically means more tax money flowing into state coffers.

“Georgia’s economy has continued to exceed expectations as businesses flock to the Peach State to take advantage of our strategic location, robust transportation infrastructure, world class workforce and business friendly environment,” Dunn wrote in his message to agencies.

“For state government,” he wrote, “this has meant stronger than anticipated revenues, enabling the state to make strategic economic and infrastructure investments to support future growth over the last two years while still providing more than $3 billion in tax relief.”

State agencies will now draw up and submit budget plans to the governor. Kemp will then use agency plans to build the budget proposal he will present to the General Assembly in January.

In the past, the only exceptions to the no-growth edicts were 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 them.

Those costs will rise again in the coming year, but Dunn’s instructions also give other state agencies, which traditionally haven’t been allowed to ask for more, the chance to suggest up to 3% worth of spending hikes. They also were told they could ask for one-time investments — such as new facilities or operating systems. That would almost certainly take the increase in state spending over $1 billion.

In addition, Dunn told agencies they should look for savings and submit proposals to streamline their budgets.

Last year’s budget instructions called for zero growth, despite the fact that the state had a surplus of more than $6 billion. In the end, the fiscal 2024 budget that lawmakers approved and Kemp signed into law increased spending by more than $2 billion.

Kemp cut more than $240 million worth of spending in this year’s budget after warning that the national economic picture was uncertain and telling lawmakers there were unbalanced areas in the budget they approved. The state constitution requires a balanced budget.

The state has also seen tax revenue growth slow in recent months. And the initial phase of a cut in the state income tax rate that lawmakers passed in 2022 is kicking in, which could reduce the income tax take in the coming year.

Still, Kemp and his team sound bullish on the state’s economy and its ability to withstand any downturn.

Kemp’s approach comes on the heels of announcing the state will have a third consecutive big surplus for the fiscal year that ended June 30. The governor will likely propose again giving a chunk of that surplus back to Georgians in the form of tax rebates.

The $33 billion in 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. Besides paying salaries, it helps make sure that hundreds of thousands of former teachers, university staffers and state employees receive pensions and health care.