With the economy strong, state of Georgia headed for a record tax surplus

The state’s budget year ends June 30, and new tax collection figures suggest the government will run a surplus of more than $3 billion, possibly the largest in Georgia history.

That’s far better than what state officials expected this time last year, when they were cutting spending because the COVID-19 pandemic had flattened Georgia’s economy.

On Tuesday, Gov. Brian Kemp’s office announced the state had taken in $3.59 billion more in taxes — mostly from rising income and retail sales — during the first 11 months of the fiscal year than in the same period last year.

Those figures suggest continued strong growth in the economy since last summer as Georgia recovers from the pandemic economic slowdown.

Month-vs.-month revenue comparisons are tricky, since the economy this May was much stronger than in May 2020, when the state was coming out of the pandemic shutdown. Collections were way up this May on income, sales and motor fuel taxes, and total revenue was up 68% for the month over May 2020.

The figures show Kemp will have a huge surplus heading into his reelection year, 2022. That will give him money to spend on the teacher pay raises he promised when he first ran in 2018 and possibly fund the kind of tax cuts GOP candidates traditionally like to run on.

Besides the boon in state tax collections, Georgia is also receiving $4.7 billion or so from the latest federal COVID-19 relief plan.

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.

The General Assembly in June 2020 cut the budget by 10% because it feared tax collections would plummet. That didn’t happen, and Kemp last month signed a new state budget for fiscal 2022, which begins July 1, that backfills 60% of the cuts made to education and most state agencies, provides targeted raises and borrows more than $1 billion for construction projects.

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

In California, Gov. Gavin Newsom announced in May a second round of $600 state stimulus checks to hasten that state’s recovery. The plan to deliver $8 billion in cash payments to millions of Californians was part of a $100 billion proposal made possible in part by a budget that has a windfall of tax revenue, a surplus the governor put at $75.7 billion.