ATLANTA, GEORGIA – The Georgia Budget and Policy Institute (GBPI) has conducted a comprehensive analysis of Governor Brian P. Kemp’s Fiscal Year (FY) 2025 budget proposals, revealing a landscape of record surpluses, strategic investments, and potential opportunities for Georgia’s future.
Over the past three years, Georgia has witnessed unprecedented budget surpluses, leading to substantial additions to its reserve accounts annually. Governor Kemp’s FY 2025 budget proposal of $36.1 billion marks a positive shift, with per-person spending surpassing pre-pandemic levels. However, the incremental increase reflects a real growth rate of just 1.5% per year, prompting discussions on the state’s fiscal direction.
Key Findings from GBPI’s Analysis:
- Budget Surpluses and Reserve Growth:
- Georgia has consistently generated record surpluses, resulting in an annual addition of 15-23% of total General Fund expenditures to reserve accounts.
- Governor Kemp’s budget proposals are expected to maintain Georgia’s unprecedented $11 billion in undesignated reserves.
- Budget Priorities and Investments:
- Appropriations in AFY 2024 are 15% higher ($5.1 billion), and FY 2025 sees an 11.3% increase ($3.7 billion) above the original 2024 budget.
- Notable additions include investments in K-12 education, rising Medicaid costs, infrastructure, and capital improvements.
- Positive Additions in Budget Proposals:
- Cost-of-living salary adjustments for state employees and certified teachers.
- Enhanced funding for student transportation, reductions in Pre-K classroom sizes, and adjustments to maintain the solvency of Georgia’s Employees’ Retirement System (ERS) and State Health Benefit Plan (SHBP).
- Challenges and Opportunities:
- Addressing critical needs, such as the state employee turnover rate and staffing levels drop since FY 2019.
- Opportunities to leverage surplus funds for one-time investments that generate equitable returns.
- Revenue Estimates and Tax Changes:
- Governor Kemp forecasts a decrease in net revenue collections for AFY 2024 and FY 2025, with a focus on flat revenue estimates.
- Acceleration of the flat tax plan raises questions about its impact on most Georgians.
- Surplus Utilization and Future Investments:
- GBPI emphasizes the need for responsible allocation of the $11 billion undesignated reserves to make generational investments in areas like child care and school bus fleet modernization.
- Calls for prioritizing one-time investments for long-term benefits and equitable returns.
Statement from GBPI Fiscal Analyst Danny Kanso:
“As Georgia stands at the crossroads of unprecedented surpluses and unallocated resources, it’s important to recognize both the progress made and the need for the state to do more.
Governor Kemp’s budget proposals offer a starting point for the appropriations process, and our hope is that leaders in the General Assembly seize this historic opportunity to address long-standing deficiencies, foster equitable prosperity, and enact forward-looking investments in Georgia’s future.”
The full analysis report, including detailed insights and recommendations, is available on the GBPI website.
