Such growth is well below the 8.2 percent average of the 13 non-recession years between 1993 and 2007. The difference between 4.8 percent growth and 8.2 percent growth is $623 million. Georgia could accomplish a lot of good things with $623 million. It could reverse ongoing cuts to education. It could improve access to health care. The state could start fixing its broken transportation system.
The reality is revenue growth remained sluggish over the past three years, averaging only five percent from 2012 to 2014. The new fiscal year kicked off in July at a tepid 5.5 percent growth rate, hinting we are in for more of the same. The historically-weak revenue growth is due to both a still struggling state economy and a 20-year erosion of the state tax base following round after round of tax cuts.
The 2014 budget was created last year with the expectation of 3.4 percent revenue growth., The actual 4.8 percent revenue growth will deliver a revenue surplus of about $250 million. Georgia’s State Auditor typically identifies an expenditure surplus between $100 million and $200 million each year, which would amount to a range from $350 million to $450 million.
- About $190 million will be available for the Mid-Year Adjustment Reserve to be appropriated in the the2015 Amended Budget proposed in January.
- About $160 to $260 million will be placed in the Revenue Shortfall Reserve, increasing the rainy day fund to a range from $900 million to $1 billion. That covers about 18 days of state spending.
Reserves are well above the 2009 low of $104 million, which covered just two days of spending, but are still well below the pre-recession level of $1.5 billion, or enough for 30 days of state spending. A fully-funded reserve fund should hold $2.9 billion to cover 54 days of spending. To get Georgia’s reserves to the pre-recession comfort level that covered 30 days of state spending, they need to reach $1.6 billion.
Several years of revenue growth close to the 8 percent norm is needed to fully fund education, meet the state’s health care and retirement obligations to teachers and other state employees and assure that all Georgians have access to quality health care. Then Georgia will still need to meet the state’s transportation and communication infrastructure needs, assure the state’s public safety and regulatory functions are met, assure a strong safety net including child and adult protective services and, last but not least, rebuild its reserves to adequate levels.
Georgia’s tax and budget policies need to be better linked to assure adequate revenues are available for the investments most important for job creation in a strong 21st century state economy.