Georgia's state economist warns lawmakers that the recession could reduce state tax collections in coming months, while Gov. Brian Kemp again paints the budget as a means to spur more economic growth. ing.
In a video from Davos, Switzerland, where they are attending the World Economic Forum, lawmakers and the Republican governor told a joint House-Senate budget committee meeting Tuesday that Georgia will use the surplus it has accumulated while cutting taxes and boosting its budget to pay down debt. He said it should be done. employee salary. He also touted proposals to invest in transportation projects.
“Our fiscally conservative approach is working well,” Kemp said. “As a result, we have the opportunity to make an unprecedented investment in our state while also implementing the largest tax reduction in state history.”
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Kemp wants to allocate $1.5 billion in cash to the Georgia Department of Transportation by June 30 to accelerate planned road construction and establish a freight infrastructure program. $200 million of that money would go to cities and counties, increasing the amount the state sends to local governments to maintain their own roads and bridges. He also wants to spend $500 million to pay cash for other construction projects and pay down debt in the state's employee pension fund.
Public school teachers will receive a $2,500 raise starting July 1, on top of the $1,000 bonus Kemp gave in December. State and public university employees will receive a $1,000 bonus plus a 4% raise.
The governor also emphasized his support for accelerating the state income tax, which is expected to generate $1.1 billion in windfall revenue.
Georgia Governor Brian Kemp is pictured here leaving the House of Representatives after delivering the State of the Union address on January 11, 2024 in Atlanta, Georgia. Kemp has touted the budget as a way to spur economic growth. (AP Photo/Bryn Anderson)
“We have chosen a prudent and fiscally conservative path, paying off all of our debt while returning money to the public,” Kemp said. “And we need to continue on that path, or we risk going down the path of these failed blue states.”
The Kemp administration is projecting tax revenues to fall by nearly 7% in the current budget year, which is more than halfway through. The state's income tax revenue is down 4.5% through December, even before the income tax cut takes effect. However, overall revenue continued to grow by 1.6% in the first six months of the budget year, in part because the state resumed collecting taxes on gasoline and diesel fuel.
But state economist Robert “Bob” Bushman told lawmakers he expects the national and state economies to turn around in the coming months.
Bushman warned that a mild economic recession is likely to begin in the first half of this year.
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He said there was still a chance the economy would avoid a recession, but that growth would likely be very weak in that scenario. “It's not going to be a recession,” Bushman said. “It’s going to feel like the only one.”
The economist said there are other factors pushing down tax revenues, including income tax cuts and reduced spending by people who have used up the money they saved during the pandemic. He also said it could reduce spending on sales taxable goods and increase spending on non-taxable services.
“As budget planners, we have to be conservative,” Bushman said, noting that predicting too much revenue could lead to painful cuts.
