The 20-Year View
Before the Great Recession, adjusting for inflation, Georgia spent about $3,080 per person in FY 2006. Under the 2025 budget, the state will spend about $142 more per person, $1.6 billion more than if spending had kept pace with population and inflation growth. It represents a real growth rate of 0.2% per year over two decades. For 20 years, GBPI has worked to help ensure that the state has enough funds to meet the needs of its residents. This per capita spending increase is small but meaningful progress in that direction and reflects GBPI’s work to defend against funding decreases.
Georgia’s Revenue System Shaped by History of Racist Policies
Georgia’s modern revenue system, which determines how much money the state can use to fund Georgia’s budget, was built during the turbulent decades of the 1930s through 1960s. At the time, segregationists governing the state resisted federal assistance from the New Deal and faced challenges in funding essential state government programs and services.
At the beginning of the 20th century, Georgia predominantly relied on a state property tax for its revenue. Over time, this tax was used to systematically disenfranchise, intimidate, and economically harm Black Georgians. The state also implemented a poll tax that it kept in place until 1945. Property tax assessors had broad discretion to assess value, unfairly favoring white landowners and pushing Black businesses and landowners into poverty, often resulting in property seizures. In 1929, the state introduced corporate and individual income taxes. In 1937, it established an individual income tax bracket structure. The state also implemented a sales and use tax of 3% in 1951, which was later raised to its current level of 4% in 1989.
Revenues from income and sales taxes increased, and the state repealed the property tax in 2016; local property taxes remain. In 2024, Georgia shifted from its decades-old, graduated income tax system to a more regressive flat income tax with personal and corporate rates set at 5.39%. Historic injustices and policies have resulted in disparities in income across race and ethnicity. Regressive tax policies widen those disparities by asking those making the lowest incomes to pay the largest share of what they earn in taxes.
Where Does Georgia’s Money Come From?
Georgia’s fiscal health hangs on the state’s capacity to raise money reliably from diverse sources. Like most states, Georgia collects revenue from personal and corporate income taxes, sales taxes, gas and vehicle taxes and other levies and fees. Income taxes are the cornerstone of Georgia’s revenue system, accounting for half of state funds. Sales taxes are the second largest revenue source, slightly less than a quarter of annual collections. A reliable revenue system requires both types of taxes.
Income taxes help balance the regressive effects of sales taxes and fees. They allow the state to collect a proportionate share of revenue from the wealthiest earners and most profitable corporations. A healthy income tax can better withstand economic trends and provide a dependable baseline for state revenues.
Sales taxes provide a less stable source of revenue and are more likely to affect middle-class families and people with lower incomes. Georgia also offers exemptions from sales taxes for most services. However, sales taxes remain a key funding source that allows the state to raise revenue from consumption and economic inputs that would otherwise be tax-exempt.
Lawmakers have enacted measures to ensure that online marketplaces and digital downloads are taxed. However, the state’s sales tax is not imposed on most services and sectors of Georgia’s economy, such as health and personal care, financial or legal services. Some sales tax exemptions were intentionally created to avoid taxing products families rely on, such as groceries. Most services are not taxed since lawmakers have not updated the tax code to include them.
Appropriations Categories
General Funds –The state-funded portions of education, Medicaid and other traditional state services are paid for through the $32.4 billion General Fund. This category includes money raised through income taxes, sales taxes and other taxes and fees.
Motor Fuel Funds – The $2.1 billion includes funds collected from the motor fuel tax that is designated explicitly for infrastructure.
Agency and Research Funds – The $5.9 billion in revenue includes tuition and fees from colleges and university system research funds, in addition to regulatory fees and revenue raised directly by individual state agencies.
Lottery Funds – The $1.6 billion in revenue is dedicated to pre-kindergarten programs and higher education scholarships.
Federal Funds – $19 billion in federal funds pay for a share of Georgia’s overall spending on health care, K-12 education, transportation and other services.
Tobacco Settlement Funds – This yearly payment of $149 million in FY 2025, resulting from a legal settlement with the country’s four largest tobacco companies over health care costs, can be allocated for any purpose in the budget.
Intrastate Transfers – The $5.8 billion of intrastate transfers include payments from the health benefit plan for state employees.
General Funds
$32.4 Billion (48% of Georgia’s Budget)
Georgia’s General Fund largely comes from taxes on personal and corporate income as well as from taxes on consumer transactions. The state also taxes motor fuel and assesses provider fees on hospitals and nursing homes. Over 96 cents of every state-appropriated dollar pays for nine core priorities:
- Pre-K-12 Education (38 cents of every dollar spent)
- Health Care (20 cents)
- Higher Education (14 cents)
- Infrastructure and Transportation (9 cents)
- Corrections, Legal System, and Re-entry (9 cents)
- Debt Service (3 cents)
- Department of Human Services (3 cents)
The remaining General Fund spending is for state agencies, boards and commissions dedicated to activities such as economic development, agriculture and forestry and grant programs. The General Fund also covers the costs of operating the state’s legislative, judicial and executive branches. Not included in Georgia’s General Fund are taxes and fees that are collected into several other funds. Lottery proceeds are also not included and account for about 5% of total state funds or $1.6 billion.
Motor Fuel Funds
$2.1 Billion (3% of Georgia’s Budget)
Georgia’s Constitution mandates that revenue from state motor fuel taxes must be spent on roads and bridges. The money is dedicated to new construction, maintenance of existing infrastructure and debt service on past investments. Georgia’s 2024 motor fuel rates are 31.2 cents per gallon of gas and 35 cents per gallon of diesel, an uptick from last year. While the state taxes aviation gasoline at one cent per gallon, there is a tax exemption on jet fuel, which will cost the state an estimated $101 million in FY 2025. The state’s budget includes $2.1 billion in motor fuel revenue.
Agency Funds
$5.9 Billion (9% of Georgia’s Budget)
Agency funds include $2.5 billion in tuition and fees collected by the University System of Georgia and the Technical College System of Georgia. The University System of Georgia alone accounts for $4.5 billion in Agency and Research funds. Each school retains the money collected from tuition.
Federal Funds
$19 Billion (28% of Georgia’s Budget)
Georgia spends most of its federal money on:
- $10.9 billion for Medicaid, PeachCare and other health care programs
- $2.8 billion for Pre-K-12 education, which includes school nutrition programs, services for students from families with low incomes and support for students with disabilities
- $2.1 billion to support Georgia’s Universities and Technical Colleges
- $1.6 billion for the Georgia Department of Transportation
- $1.2 billion for human services, Temporary Assistance for Needy Families (TANF or cash assistance) and child welfare programs
Federal rules require the state to match federal funding for Medicaid and other investments that benefit Georgians. As a result, changes in federal funding are often reflected in state funding.
Intrastate Transfers
Intrastate transfers are typically payments from the State Health Benefit Plan (SHBP), which insures nearly 665,000 school system employees, state employees, retirees and their families. Last year, the employer cost of health coverage through SHBP, which is paid by the state and public schools, spiked by 67%. There is a two-year phase-in for K-12 schools, but the increase was effective immediately for most state employees. The required employer contribution increased by $7,200 per year for each employee, or by $635 per member, per month from $945 to $1,580. This increase was driven by an aging member population, the COVID-19 pandemic, stagnant subscriber levels and state policymakers’ decisions, such as a 2019 employer contribution holiday and a 2020 decrease in the employer contribution rate for state employees. Gov. Kemp’s FY 2025 budget proposal plans for another increase in premiums for non-certified school employees (bus drivers, cafeteria workers, and others) to take effect on January 1, 2027.
2025 Tobacco Settlement Fund Budget
Georgia receives yearly payments from a 1998 settlement signed with four of the nation’s largest tobacco companies, known as the Tobacco Master Settlement Agreement. Georgia is not required to dedicate these payments for specific purposes. The use of tobacco settlement money may vary from year to year, though most of the funds go to health care.
