Georgia budget gap passes $850 million as revenues again lag

With a month left in the current budget year, Georgia’s shortfall widened to more than $850 million in May.

Figures released Monday showed less of a decrease for May collections than in April, when revenues fell by more than $1 billion because the income tax deadline was postponed to July. But revenue still fell sharply, showing a state economy where people and companies are earning less. People bought less stuff in May than a year ago, including less gasoline and fewer cars, and stayed in fewer hotel rooms.

Overall revenue collections were down 10% for the month. The biggest single source of state revenue, sales tax, was down 13%. Personal income taxes dipped only 3%, reflecting in part that more than 700,000 Georgians are getting income from unemployment. But corporate income taxes were down 41%, motor fuel taxes were down 26%, taxes on new vehicle registrations were down 58% and hotel taxes were down 64%.

With only weeks before the budget year ends on June 30, Georgia officials have signaled that they will tap the state’s $2.7 billion rainy day fund to make up this year’s gap. That means the shortfall is having little effect on government services now.

A drop in June equivalent to May means Georgia would spend more than $1 billion from its piggy bank to balance the current year’s books, as is legally required. State leaders hope to get some of the money back by July 15, when personal and corporate income taxes are due.

Danny Kanso, a budget analyst with the liberal-leaning Georgia Budget and Policy Institute, said corporate income tax weakness could linger.

“The corporate income tax is probably the most economically sensitive part of our tax code,” Kanso said.

He also said he’s worried about personal income tax collections if unemployment remains elevated, as a $600-a-week federal stipend expires in the summer and as people exhaust their six months of state jobless benefits in the fall.

The 10% decrease is close to the 11% revenue cut that Gov. Brian Kemp announced last week that he is forecasting for the 2021 year beginning July 1. The only good news is that it’s not quite as bad as the original 14% decrease agencies were told to prepare for, but even 11% is likely to mean layoffs and unpaid furloughs for thousands of state employees and public school teachers, as well as fewer state troopers on the road, decreased aid to care for mentally disabled people in their homes and less money to train physicians.

Lawmakers return Monday with their main focus on crafting spending plans by June 30. Senators continued budget hearings Monday, with University System of Georgia Chancellor Steve Wrigley saying that plans to cut more than 2,000 current workers and vacant positions were designed to be strategic, protecting students and in-demand programs

“I’m confident we can manage through it, but I don’t want to pretend the cuts won’t be difficult to manage,” Wrigley told a subcommittee of the Senate Appropriations Committee.

Technical College System of Georgia Commissioner Greg Dozier told senators that cuts would mean a reduction in the 470 sites where the system now teaches adult education classes to people seeking a high school equivalency diploma, less spending on contractors to train new hires for industries, about 90 layoffs, and furloughs at the system’s 22 colleges.

Dozier said furloughs would be different from college to college depending on whether enrollment is rising or declining.

Georgia’s tax numbers line up with Monday’s declaration that the economy slipped into recession in February after nearly 11 years of expansion. Georgia’s April jobless rate was 11.9%