Lawmakers now challenged to budget money for teachers, income tax cuts

Gov. Brian Kemp’s proposed spending plan for next year includes some universally popular items – such as another pay raise for public school teachers – but it must contend now with competing priorities and lawmakers’ concerns about budget cuts.

The governor released next year’s budget – a record $28.1 billion budget – for next year shortly after outlining his priorities during his state-of-the-state speech at the state Capitol. The additional $2,000 pay bump for teachers would cost about $350 million.

“There’s no question that many groups in our state need pay raises – teachers, for one, law enforcement, many others,” House Speaker David Ralston said after hearing the governor’s speech but before seeing the budget. “So assuming that we can find the money in the budget, then we’ll try to support as the best we can.”

For the Blue Ridge Republican, a key priority has been passing the second installment of an income tax cut initiated in 2018, when state officials expected federal tax law changes to deliver a windfall to the state. The first tax cut, which took the state’s top income rate from 6% to 5.75%, is seen as at least partly to blame for the state’s sluggish income tax revenues so far this year.

All told, Georgia is collecting a little more money than it had by this point in the last fiscal year, but only 0.3% more, according to the Georgia Department of Revenue.

And two years ago, lawmakers set up a 2020 vote to consider lowering the income tax rate to 5.5%, down one-quarter percentage point. The cost: about $550 million.

Now that Kemp has officially handed off the budget, Ralston’s chamber will have its turn to leave an imprint. For starters, you can expect chatter about that income tax rate cut – something Ralston says he sees as a commitment that lawmakers made two years ago.

Already this session, the state’s unsteady revenues – which triggered Kemp’s call for budget cuts – has quickly pushed along a revenue-producing measure that stalled last year. The measure requires third-party vendors who rely on websites or apps to transact business – think Etsy.com or Uber – to collect and remit a tax if one is owed.

The prospect of collecting some $150 million in new revenues – and potentially hundreds of millions of dollars beyond that, by one group’s estimate – caused this bill to move at break-neck speed by Georgia standards, even requiring the state Senate to suspend a timing rule. It cleared both chambers Thursday and now moves on to the governor’s desk. If he signs it, the tax would take effect April 1.

“Those who are concerned about cuts and the tightening of the budget, anything that would relieve pressure – especially in a piece of legislation like this that raises no new taxes, doesn’t tax anything that’s not already taxed, just collects those monies due – could certainly relieve some pressure there and concern on how we’re going to meet the desires of providing services to our state,” said Rep. Brett Harrell, a Snellville Republican who sponsored the bill.

The measure wasn’t without its detractors, though. The House gave it final approval with a 111-to-54 vote, with dozens of Democrats opposing it. Rep. Josh McLaurin, a Sandy Springs Democrat, said afterwards that he objected to treating rideshare companies the same as an online retailer. A separate bill dealing with how rideshare companies like Uber and Lyft should be taxed is expected.

“What you saw today, in my judgment, was skepticism, or at least concern, that the next phase of this – the taking up of the uniqueness of rideshare – either won’t happen or it won’t happen on terms that are favorable to the people who are making a living and using rideshare as a substitute for transit,” McLaurin said.

Others weren’t as quick to breathe a sigh of relief over the prospect of surging sales tax revenues.

“We saw two years ago when they changed the federal tax code that some people came to us and said we were going to have a billion dollar windfall, an $800 million dollar windfall, that we would come into the 2020 session flush with money,” said Senate Minority Leader Steve Henson, a Stone Mountain Democrat.

“We found that that is not the case,” Henson said. “So we’re going to wait. I think we should wait and see how that [online sales tax] actually does change things, how well they’re collected.”

Henson said Democrats support some aspects of Kemp’s budget, particularly the teacher pay raises and emphasis on the state’s foster system. The governor wants to triple an adoption tax credit, bringing it up to $6,000, lower the age someone can adopt from 25 to 21 and create a Families First Commission to re-evaluate the state’s foster care system.

But Henson said Kemp’s plans for cracking down on child sex trafficking and gang violence don’t address problems early enough.

Senate Democratic Caucus Chair Gloria Butler said at a press conference following Kemp’s speech that the proposed budget cuts remain a concern.

Courts and judicial agencies submitted draft budgets to Kemp proposing to furlough public defenders and cut funding for “accountability” courts that let defendants avoid conviction if they follow programs that can include of work, rehabilitation or
counselling.

“Governor Kemp’s cuts would reverse the state’s progress,” Butler said.

Kemp’s budget proposal also includes about $45 million to award a $1,000 pay increase to state employees who make less than $40,000.