What’s The Deal With Georgia’s Proposed Budget Cuts?

Sep 20, 2019

While Gov. Brian Kemp has asked state agencies to find ways to cut their budgets in the next fiscal year, the initial proposals submitted amount to an overall increase in state spending.

 

According to documents shared online by the governor’s Office of Planning and Budget, the state’s amended budget for the rest of the fiscal year (running July 1, 2019, to June 30, 2020) would decrease by about $50 million, or two-tenths of a percent. 

However, the record-setting $27.5 billion budget would increase by 1%, or close to $300 million, for FY 2021 – even with cuts offered by many state agencies. Add to the mix recent news about record jobs growth, a booming economy and Georgia being the “number one state to do business” and many are left wondering what the cuts are all about. 

In early August, Kemp’s office sent out a budget guideline letter to state agency heads instructing them to trim 4% from their budget for the rest of fiscal year 2020 and 6% for the new fiscal year 2021 beginning July 1, 2020.

The letter from OPB Director Kelly Farr said that Georgia ended FY 2019 with revenues exceeding estimates and echoed Kemp’s view that the economy is strong.

“Yet, even while state revenues grow, agencies should be continuously looking for ways to carry out their responsibility,” Farr wrote. “Growing revenues does not mean growing the size of government.” 

The bulk of the state’s budget, covering k-12 education and Medicaid, is exempt from the reductions. In fact, according to the budget proposals agencies that represent about 75% of the state’s budget would add spending next fiscal year.

The Georgia Department of Transportation’s request includes an additional $50 million in FY 2021 for construction and maintenance projects, the Court of Appeals budget proposal would add more than 10% to account for the creation of a new statewide business court and the Georgia Student Finance Commission is asking for close to $80 million to cover increased need for dual enrollment and the HOPE scholarships.

Meanwhile, many of the proposed cuts are in direct conflict with recent legislative funding priorities. 

The secretary of state’s office submitted a blanket 6% reduction as it works to roll out a new expensive voting system, the Georgia Bureau of Investigation proposed cutting lab technicians and other staff that have worked to clear backlogs of rape kits and the Department of Community Health offered cuts to its program assisting doctors who operate in rural areas.

The House and Senate appropriations committees are meeting earlier than normal to assess the governor’s plans, including a look at how Georgia has been doing financially.

One change they will have to evaluate is the impact of a recent cut to federal and state taxes. While revenues have been growing, not all of them have grown at the rate the state projected. 

Last fiscal year, Georgia’s individual income tax collection came in about $127 million lower than projected.

The legislature is considering another tax cut next year, and that’s something Danny Kanso with the left-leaning Georgia Budget and Policy Institute said would not benefit state agencies or Georgia taxpayers. 

“Most folks would see an average change of about $5 a month in their paycheck if this cut would go into effect,” he said. “But it would cost the state about $600 million over a fiscal year, which is 2% of the state budget.”

Coincidentally, that’s the cost of a $3,000 pay raise for all Georgia teachers, one of Kemp’s top priorities.

If the state decreases the amount of income tax it collects, that could make it more difficult to cover existing spending priorities, let alone new things lawmakers and the governor want to do, like stimulating the economy in rural Georgia and expanding law enforcement cooperation to target gangs.

Does that mean lawmakers will be looking at ways to expand revenue sources for the state?

On a recent morning before the state House Rural Development Council meeting in Moultrie, House appropriations chair Terry England (R-Auburn) said that the short answer is no. 

“The long answer, probably more complicated, is updating the tax code,” he said. “I do think we need to look at how we treat some of the online sales and services you receive electronically today.”

England said that it’s important for lawmakers to strike a continuous balance to keep taxes low and make sure that Georgians get the services they need.

“It will be very hard to make some cuts in some specific areas,” he said. “One of those is public safety, another one is mental health, another one is [Division of Family and Child Services] caseworkers.”

The state budget is the only thing Georgia lawmakers are required to pass, and, in the end, England said it’s not a bad idea to take stock of state spending and find areas that can be cut back.

“And this exercise might show those,” he said. “But I think those will be few and far between because I still feel we have watched the house pretty well.”

England and his colleagues will hold appropriations hearings next week, while OPB works through evaluating agency proposals.

Editor’s note: GPB is a state agency funded in part by the State of Georgia and submitted a 6% budget cut proposal as well.