Georgia's Gov. Kemp proposes 1.7% uptick in spending for FY 2021

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Despite flagging revenue collections, Georgia Gov. Brian Kemp in his second budget is recommending a slight uptick in spending and continued borrowing for the state’s large capital program in fiscal 2021.

Kemp’s proposal calls for a general fund budget of $28.1 billion, an increase of about 2.5% from the current year’s adjusted $27.3 billion spending plan.

The total budget, including federal funds, is $54.15 billion, up slightly by 1.7% to $53.23 billion.

The governor also wants to continue the gilt-edged state’s long tradition of financing a broad array of capital projects by issuing $890 million of general obligation bonds. That’s down from $1 billion in the current budget.

“This past August, I challenged state agencies to identify opportunities to streamline operations, eliminate duplicative programs, and leverage technology to better serve our state’s citizens,” Kemp said in his budget letter to lawmakers. “This fiscal year 2021 budget aligns existing resources to accomplish those objectives and strengthen our efforts in sectors supporting economic development.”

Kemp, a Republican who took office a year ago, produced his budget proposal amid uneven monthly revenue collections during the first half of this fiscal year that led him to order state agencies to reduce spending by 4% in the current budget and by 6% in their requests for the fiscal 2021 budget.

Since fiscal 2020 began, the state has seen collections in July, September and December increase by a combined 6.8%, while collections over the other three months declined by a combined 5.6%, according to Department of Revenue figures.

Year-over-year, net tax collections have totaled $11.85 billion through December, an increase of $32.3 million or 0.3% compared to fiscal 2019.

The economic report included in Kemp’s budget says the state’s revenue performance isn’t just the result of economic conditions. It’s also “significantly” impacted by legislative changes that took effect in fiscal 2020, including a 4% reduction in the state income tax rate for individuals and corporations.

In addition, the state reallocated revenue from ad valorem taxes on car titles to local governments, reducing the state share of that tax by 22%, and enacted a series of targeted special tax reductions that weren’t identified in the report.

Combined, those legislative changes reduced projected fiscal 2020 state revenue collections by about $1 billion from the previous baseline.

“This means that Georgia’s economy must grow by approximately 2.5% simply to hold state revenue collections constant,” the budget’s economic report said.

Kemp and lawmakers want to reduce the state income tax rate in fiscal 2021, though by how much isn’t known at this point. The state’s legislative session began Jan. 13 and runs through March 27.

In the proposed budget for 2021, Kemp said he kept his promise of raising the base pay by $2,000 for certified public school teachers in pre-kindergarten through 12th grade, a move that will cost $362.2 million. This year, teachers got a $3,000 increase.

Kemp said the two years of pay raises “fulfill my promise of a combined $5,000 for our educators.” The budget also includes $45 million to fund a $1,000 pay increase for each full-time state employee earning less than $40,000 annually.

The capital program allocates $346 million in GO bonds for public schools and $167.4 million in bonds for repairs and renovations in the University System of Georgia. The Technical College System of Georgia will benefit from $68.8 million for repairs, renovations, and equipment.

The Department of Transportation will receive $50 million of bond financing for the repair, replacement and renovation of bridges statewide.

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