(The Center Square) – A study confirms what outgoing Georgia Gov. Brian Kemp warned state lawmakers about when he signed the fiscal year 2027 budget – lawmakers may have to dig into the state surplus to find $1 billion to meet the budget allocations, even after he cut $344 million.
The reason is not an economic downturn or dip in state funding, but tax cuts approved by the General Assembly.
A report from the Georgia Budget and Policy Institute says the tax cuts were “recklessly approved” and will not only affect the 2027 budget, but the state’s future spending plans.
House Bill 463 reduces the state’s income tax from 5.19% to 4.99% beginning with the 2026 tax year. The standard state income tax deduction increases from $12,000 to $15,000 for single filers and from $24,000 to $30,000 for married filers beginning with tax year 2027.
The analysis shows the bill’s impact in the first year is $12 billion, according to Daniel Kanso, who authored the report with Leah Chan and Ashley Young. About $10 billion in tax credits were eliminated, which will not cover the revenue loss.
“And as bad as that is, the actual full cost of the bill over nine years is $6.3 billion,” Kanso said in an interview with The Center Square. “There’s no plan to pay for that.”
The tax cuts cannot happen unless the state meets certain revenue benchmarks. The state’s fiscal revenue would have to be more than 4% more than the previous year, net tax collections would have to be higher than they were in the previous three years, and the state must maintain enough in its Revenue Shortfall Reserve to cover projected revenue decreases.
Sen. Blake Tillery, R-Vidalia, said during debate over the tax cut on the last day of the session that he knew the 10 tax cuts would not cover the lost revenue.
“I can’t give you the exact dollar because they just came across the hall with a deal, but I can tell you that I’m not worried about the fiscal impact because of the triggers,” said Tillery, who ran unsuccessfully for lieutenant governor.
The state had about $15 billion when the legislative session started, according to Kanso. It was split between the Revenue Shortfall Reserve, which had about $6 billion, and undesignated overflow at $9 million. Lawmakers approved $6.2 billion through mid-year budget adjustments.
“It includes a gas tax suspension, it includes rebates for homeowners, for income taxpayers and then about $4 billion of infrastructure projects,” Kanso said. “So with that spend down, we’re going to go from $15 billion to close to $9 billion.”
The General Assembly is holding a special session on June 17 to discuss a 2024 voting law that was passed but not funded. It takes effect on July 1. Kemp also said the lawmakers will consider new congressional district lines for 2028. The budget is not one of the topics included in the governor’s call for a special session.
Kanso said he would not expect lawmakers to override any of the governor’s vetoes, anyway.
“It’s not something we’ve seen under this general assembly, but that is an option for them, even though it is not named in the executive order,” Kanso said. “The first time they convene (after the governor issues the vetoes), that is their only opportunity to override any vetoes.”