Georgia has a lot of extra money right now. If the state’s estimated $5 billion budget surplus were expressed in dollar bills, it would amount to just under 20 square miles, enough bills to carpet every square inch of the state’s five busiest airports, and enough singles left to purchase five Boeing 737 MAX 8 jets and park one on each tarmac.
And that $5 billion comes in addition to the other approximately $5 billion from the state’s Rainy Day Fund, as well as the remainder of the state’s share of the federal COVID-19 relief effort.
As Georgians continue to feel inflation, the economy remains a top issue among voters. In a July Gallup poll, 35% of Americans named one of several economic issues, including inflation and fuel prices, as the top issues facing the country today.
The two Georgians set to run the state next year, Republican Gov. Brian Kemp and Democrat Stacey Abrams, have wildly different ideas about what to do with the state’s surplus fund.
“The contrasting plans highlight the differences between Democratic and Republican sensibilities about what to spend and how to spend it,” said Andra Gillespie, a professor of political science at Emory University.
“Brian Kemp’s philosophy supports a smaller view of government, and so he’s not trying to create, enhance or prop up an expansionary government program or a new government program, he sees the opportunity in surplus and the opportunity to return money to taxpayers through taxes cuts,” she said.
On Thursday, Kemp unveiled a $1 billion income tax rebate reflecting state legislation passed this year and another $1 billion rebate on local property taxes. Kemp’s office said the former will pay back between $250 for single people and $500 for married couples, while the property tax refund will save homeowners an average of $500.
And despite having beaucoup dollars in the state coffers, Kelly Farr, director of the governor’s office of planning and budget, told state agencies Wednesday not to ask for more state money next year than they got this year.
“Although Georgia’s economy and government revenues remain strong, inflationary pressures will be a key driver in the coming fiscal cycle,” Farr wrote.
“Just as Georgians have to reevaluate their household spending on a day-to-day basis to meet the rising costs within their existing budget, Governor Kemp is urging government agencies to do the same.”
Kemp signed Georgia’s final budget in May and will fund the state through July of next year. At $30.2 billion, that’s an increase of $2.9 billion year-over-year, due in part to federal COVID-19 relief. The budget included a $5,000 raise for all state employees, including the most recent $2,000 raise in the pay rise he promised teachers during the 2018 campaign.
Abrams has also called for a $1 billion income tax refund similar to Kemp’s, but she has very different plans for the rest of the state’s money.
In a speech last week, Abrams pledged to create 25,000 to 45,000 new green energy jobs, expand Medicaid health coverage, further increase teachers’ salaries by an average of $11,000, invest $500 million in affordable housing, free tech Provide colleges and expand HOPE scholarships to students with a C average; and establish a small business capital growth fund to provide $10 million to help launch new businesses.
Abrams’ plan would include legalizing sports betting and casino gambling to fund her college expansion, and she promised none of her priorities would require tax increases.
“Hear me clear, we don’t need to raise taxes, we just need to raise our expectations of those who lead us,” she said.
There’s a case for austerity, said Kyle Wingfield, president and CEO of the conservative-leaning Georgia Public Policy Foundation.
“When you think about the budget surplus, it’s important to remember that it’s money you have right now. There’s no guarantee you’ll have the same amount of money for years to come,” he said. “So what we would hope is that anyone who is able to influence budget or government spending considers that you don’t want to make commitments for running costs because of one off monies so we would prefer to see spending, that are not will not become permanent obligations.”
One option would be to get an early start on the tax cuts that lawmakers passed this year and are scheduled to take effect in 2024, Wingfield said.
“While a one-time rebate is nice if people get it into their bank account, it doesn’t really affect behavior in the long term,” he said. “What influences the behavior of working more, investing more, saving more, which makes the economy grow, is knowing what your long-term incentives are. So if you could get to those better long-term incentives that the General Assembly created earlier this year, a year or two ahead of schedule, that would be a huge help to the state economy because you’d start getting that economical sooner rather than later increase.”
Exactly what counts as a surplus is largely up to the governor, said Danny Kanso, senior tax and budget policy analyst at the progressive Georgia Budget and Policy Institute.
Each year, the governor sets the state revenue estimate, the ceiling that determines how much the state can spend.
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“Georgia is unique in that the power to set our revenue estimate is a purely political decision that rests unilaterally with the governor,” Kanso said. “And so the governor, at his discretion, sets that revenue estimate with the advice of the state economist, but that’s the final decision. And it doesn’t necessarily have to be based on actual data or revenue.”
The state has a comfortable cushion in its rainy day fund, so there’s a good case for setting a higher revenue estimate and investing more in state services, Kanso said.
“It doesn’t make much sense to have such a massive discrepancy between our income and our expenses, because in order to get the highest and best benefit from the taxpayers’ money provided by Georgians, it’s best to spend those funds in an orderly and organized manner , rather than trying to figure out the post-fiscal one-time use of funds,” he said.
According to GBPI, in the current budget, Georgia will spend $121.32 less per person on average than in 2008, and the number of government employees fell by about 9% between 2018 and 2022, the fastest decline since the Great Recession.
“Across the board, government agencies are struggling to fulfill their mission of serving Georgians, we are seeing real gaps and gaps in public education, healthcare, the main functions of the state that receive most of the dollar spent by the state, about 75% of what government spends goes to either healthcare or education, and even though we have these massive deficits, it just doesn’t make much sense not to use the limited resources available to government for their highest and to take best advantage. ”
Abrams’ large-scale promotion of her economic plan could be viewed as an attempt to beat Kemp in an area where he is perceived to be strong. For months, the governor has been content to compare Georgia’s recovery from the pandemic with that of other states and point the finger at President Joe Biden over the country’s economic distress.
“Some of that message is a little bit of a foundational message and a mobilizing message to try and get Republican voters out, but I think it gives Abrams some headwind,” Gillespie said. “Abrams is not competing in open competition this time, in a national political environment where the opposing party is unpopular and runs the government.”
President Biden’s high disapproval rate — 55.2% according to FiveThirtyEight as of Monday — will be something Abrams will have to contend with, Gillespie said.
“I think a big question is whether their message of creating economic opportunity and their message of highlighting things that could be done to improve access to healthcare for low-income Georgians get enough traction and address the concerns of the overrides people that they have food prices and gas prices and other things that have really worried people this year?” she asked.
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