Georgia’s new economist says there is “about a 50-50 chance of a mild recession” next year amid uncertainty about the state’s revenue projections and Gov. Brian Kemp’s call for cuts to state agencies.
Members of the House and Senate appropriations committees heard economic outlooks from Jeffrey Dorfman and other presenters during two days of hearings in Atlanta this week.
Dorfman said that he is currently compiling revenue projections for the next fiscal year by looking at things like income tax, corporate tax, sales tax and motor fuel taxes. From there, he assigns weighted averages and probabilities that different scenarios happen. He stressed his belief in being conservative with any sort of revenue forecast.
“If more revenue shows up than expected, lawmakers such as yourselves can happily allocate that money in an amended budget or legislate its return to taxpayers,” he said to a packed hearing room. “But if revenue collected falls short of predictions, then budget cuts become necessary, which often carry with them considerable disruption to both state agencies and to taxpayers who rely on the affected government services.”
The governor sent a missive to state agencies earlier this summer asking for proposals to cut 6% from their budgets next fiscal year and expect 4% less in funding for the rest of this fiscal year.
A review of those proposals found that the record $27.5 billion spending plan would increase next July, even if the cuts from most state agencies were accepted.
Some of those proposals included furloughs or cutting positions, something OPB Director Kelly Farr said should not be the primary focus of agency cuts.
“We’re focusing on personal services, travel and technology expenditures,” he said. “We’re looking at positions that have been held vacant for long periods of time that should have reduced the need for human capital or expensive redundant processes.”
Farr said those were the types of administrative or operational things agencies should look at before targeting jobs.
He reminded lawmakers that it is early into the budget process, and there are still plenty of questions to be asked and variables that could be in play.
One wrinkle is a quarter-percent income tax cut the legislature could pass in 2020 that would lower available revenue by about $500 million over a calendar year. Another is what state economist Dorfman called “disappointing” revenue collections so far this fiscal year that could make it difficult to meet the fiscal year’s estimate.
Dorfman said that Georgia’s economy would need to grow by 2.5% for state revenue collection to stay even with last year.
Lawmakers also heard from experts highlighting different areas of growth – and potential problems – with the state’s economy, ranging from the Atlanta Convention and Visitors Bureau, the Center for Agribusiness and Economic Development and Georgia Southern University.
The budgetary process is always a year-round affair, but Senate Appropriations chair Jack Hill (R-Reidsville) said the early meetings were an important opportunity for lawmakers to “get our head[s] around our state’s economy and where it’s headed.”
The state budget is the only legislation lawmakers are required to pass during a legislative session, so expect that debate to take up most of the time when officials return in January.