Georgia Lawmakers Weigh Deep Budget Cuts, Possible Second Tax Cut Against Key Priorities

Last month, Gov. Brian Kemp directed most Georgia agencies to cut state spending, marking the first call for mandatory budget cuts since the Great Recession. If the governor recommends all of the cuts proposed by agency leaders, lawmakers will be asked to consider $530 million in spending cuts while they also consider a reduction to the income tax rate that would cost the state an estimated $800 million over the same 18 month timespan.

Georgia already ranks last in growth of spending since the Great Recession and no. 48 in state expenditures per person. Agencies have little fat to cut. Proposals submitted to the governor’s office include deep cuts to essential programs, such as $13 million in reduced funding for child and adolescent mental health services, $1.4 million in cuts to school nutrition grants and millions in proposed cuts that would scale back resources for senior abuse investigations and layoff forensic scientists charged with eliminating the state’s untested rape kit backlog.

Overview

State government offices were told on Aug. 6 to prepare annual funding requests that include budget cuts of 4 percent for the current budget (fiscal year 2020, which began in July 2019 and ends in June 2020) and 6 percent for the 2021 budget. This equates to roughly $219 million for the current budget and $310 million for next year’s budget.

After Gov. Kemp requested proposals for budget cuts, the General Assembly announced plans to hold budget hearings at the end of September. The Kemp administration later expressed a desire for agency leaders to skip budget meetings, saying it wants to consider the proposals like it would any other budget plans, without legislative interference.

Budget hearings took place on Sept. 26-27. The 4 percent cuts to Georgia’s 2020 budget were set to take effect on Oct. 1. As we wait to hear where agency proposals stand, let’s examine what we currently now. 

Potential Effects of Tax Cut

Last year, lawmakers voted to lower the state’s top income tax rate for the first time since the personal income tax was established in 1937 – lowering the top rate from 6 to 5.75 percent through 2025. During the 2020 legislative session, the General Assembly is set to consider whether to lower the top income tax rate again. This would cost the state an estimated $550 million in lost revenue per year, while the average middle-income Georgia family would receive less than $5 in tax savings per month. You can read more about how this potential tax change came about in our recent analysis of the Tax Cuts and Jobs Act and Georgia’s related response.

These changes come just after personal income tax collections fell short of the state’s revenue estimate by about $130 million during Fiscal Year 2019, according to the Georgia Department of Revenue. Reducing the top income tax rate would drive the state’s largest source of funding down at a time when the state should instead be exploring options to compensate for declining revenues. Georgia could face serious long-term consequences with billions in lost state funding through 2025, when the tax changes would expire.

Through the first two months of the current fiscal year, the state’s revenue collections are flat, but Georgia’s revenue estimate calls for a 3.2 percent increase in taxes and fees over the previous fiscal year—the lowest rate of growth since the Great Recession. Although it is normal for collections to fluctuate from month to month, the state will need to make up for any shortfalls which already total in the hundreds of millions. With increasing economic uncertainty on the horizon, Georgia lawmakers are considering major changes to tax and budget policy that, if not carefully considered, could worsen a budget crisis.

The following documents include programs, services and positions included in budget cut proposals that state agencies have submitted to reduce spending:

Some of the largest proposed cuts include $23 million in reductions to adult mental health services, $12 million in cuts to child welfare services and $7.6 million in reduced grants to county public health departments.

While these are only agency proposals at this time, it is clear that hundreds of millions in proposed budget cuts would have major consequences statewide—and the state cannot afford to reduce top income tax rates at the expense of Georgia families.

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