Georgia leaders yet to spend $11 billion surplus

So far, Governor Brian Kemp has only offered small budget increases for many state institutions in wake of the surplus. His administration will likely take more action in the coming months. // Photo courtesy of Alex Slitz AP

For the third straight year, the State of Georgia recorded a sizable annual budgetary surplus. On Oct. 13, the State Accounting Office (SAO) released the Georgia Revenues and Reserves Report for the fiscal year ending June 30, 2023. The report detailed that Georgia’s “Unreserved, Undesignated (Surplus)” funds were to the tune of $10.7 billion, including a $5.3 billion year-on-year budget surplus. This comes despite the state spending nearly $33 billion in the recently completed fiscal year.

The whopping amount of surplus cash — equivalent to $1,000 for every resident of the state — was raked up by a combination of sales tax and corporate income tax collections. Besides this unallocated amount, Georgia also has a $5.4 billion rainy day fund — 15% of the previous budget year’s revenues — and a lottery reserve fund of about $2.1 billion. These amounts add up to more than half of the estimated spending in the current fiscal year. This surplus exists in spite of Georgia Gov. Brian Kemp having funded a $1.1 billion personal income tax break and rolled back state diesel and gasoline taxes for a large part of the year.

Despite the unprecedented surplus at the government’s disposal, leaders are wary of making large scale funding promises, relying more on gradually whittling away the surplus to reasonable bounds. In June 2023, Kemp attributed Georgia’s AAA credit rating — the highest credit rating awarded by the main credit rating agencies in the United States — to its “responsible and conservative” budgeting approach. Kemp was reelected to office last November on a mandate of providing a $1 billion income tax rebate and increasing state employee salaries — promises he looks to follow through upon.

However, a massive budget surplus may not necessarily be beneficial for the state. Often, as Kemp’s political opponents maintain, it could arise due to a stifling of state funding. Georgia’s state services have not received significant funding increases since a 10% cut in 2021 when the SAO feared a decline in revenue due to the pandemic. Kemp’s decision not to substantially increase budgetary allocations in this area, given the surplus, is a major point of parliamentary discussion. At the present moment, Kemp is considering allowing state services to request a mere 3% increase in funding in future budget amendments and drafts.

Even when funding towards a particular department is approved by the General Assembly, it may not be allocated if the governor utilizes a veto or “budget disregard.” The Georgia Budget and Policy Institute (GBPI), a nonpartisan organization, envisions $100 million in budget disregards that will affect crucial areas, such as the Department of Behavioral Health, the Department of Community Health and Medicaid. Kemp is also set to disregard $20 million of funding towards public education and a $25 million cost-of-living adjustment for retired city employees. This could deepen inequality in the state as income tax breaks hold greater significance for the urban elite, while the poor are disadvantaged by prevailing state and local sales taxes.

Kemp’s budget has also been harsh on university education in the state. The 2024 fiscal year budget — passed March 30, 2023 — includes a $66 million decrease in funding for state universities, of which Tech alone stands to lose $11 million from the previous budgetary allocation. Similar to the cut on state services, there was a 10% funding cut towards the University System of Georgia (USG) in the 2021 fiscal year due to COVID-19 — a steep reduction that has not been reversed. According to a USG communication on March 30, this additional reduction is most likely to impact teaching budgets, staff and students across the state.

Beyond universities, the education budget for the current fiscal year will hurt the public schooling system. According to a GBPI publication on June 27, 120 million dollars from the state budget will go towards private school vouchers. Although primary school and pre-kindergarten teacher salaries

have increased, they still lag behind the cost of living increase due to inflation. State funding for school student transportation and child care services are comparable to figures from 10 years ago, without adjusting for inflation.

Despite this backlash, Kemp’s government would hope that the fuel tax rebates, due to the surplus, strengthen public sentiment in its favor. As per U.S. Census Bureau data, 94.7% of households in Georgia have access to a vehicle, and 78.3% of workers in the state commute via private vehicle. Attempting to win support from middle-class families in Georgia, Kemp also extended the Georgia fuel tax suspension from its original one-month period to nearly

two months. It is now scheduled to end on Nov. 11, allowing residents to save over 30 cents per gallon on gasoline and diesel fuel.

Georgia’s bumper surplus matches a trend visible nationally — similar to what other states achieved in the fiscal year. Many of them are experiencing a similar boom due to an increase in economic activity after the pandemic. However, the surplus for the state is significantly larger than those of other southern states and is one of the nation’s largest. Kemp’s government must balance fiscal prudence with a concern for social welfare to ensure residents of the state — across economic classes — enjoy the benefits of their consistent contributions.