Georgia monthly tax collections rise as state braces for COVID-19 tumble

A mannequin models a face mask and jumpsuit at a Decatur boutique store, Bleu Hanger, which is temporarily closed because of COVID-19. The store is adapting to the new retail environment, selling clothes online and allowing customers to come by to pick up a face mask. Jill Nolin/Georgia Recorder

Georgia saw a bump in state revenues last month ahead of an expected drop due to the COVID-19 pandemic, which has put Georgians out of work and kept many people hunkered down at home.

All said, state collections were up 9.8% last month – or $163 million – from last March, with a 25.5% jump in people paying their income taxes in March.

It could be one of the last bits of sunny news state budget writers hear in the coming months, although how deep the outbreak’s imprint will be on the state’s economy remains to be seen.

“You have a lot of businesses that have been doing their best to continue to pay folks after they’ve shut down, so it’s just kind of hard to judge,” said State Rep. Terry England, who chairs the House Appropriations Committee. “There’s just a lot of unknowns.”

The Auburn Republican said the hit to the state budget will likely begin to show up in April’s collections, with a bigger bite coming in May.

The net sales tax collections, meanwhile, were down 2.4% in March, which reflects consumer spending from February. Those taxes were paid on transactions made before Georgia had its first official cases of COVID-19 and before a public health emergency was declared.

Since then, commerce in the state has been brought to a crawl. Restaurant dining rooms are closed, many storefronts are locked and most Georgians have been ordered to stay put at home. The last full week of March brought the highest ever unemployment claims filed in a single week in Georgia.

Even much of the panic buying that has since left some grocery store shelves bare isn’t likely to help prop up the state budget, since Georgia doesn’t tax most grocery items. There is about three months left to go in this fiscal year, and lawmakers – who suddenly suspended their legislative session last month because of outbreak – must still pass a spending plan for July 1 and on.

It will take time to assess the economic impact on the state budget, which helps educate children, provide health care for low-income Georgians and funds various other public services across the state.

“I think that’s sort of going to be the new normal, where we do expect to see the economic crisis catch up to us in the months of April and May and probably June as well,” said Danny Kanso, a policy analyst with the Georgia Budget and Policy Institute.

“And then after that, we’ll start to see some of these longer run effects set in and start to realize the effects of lower employment levels, lower consumer spending, folks with less disposable income and also some of the changes that may come about as a result of this public health crisis until people really feel secure leaving their homes, going to restaurants, retail establishments and things like that,” he said.

Kanso said it will likely be some combination of federal aid and funds from the state’s rainy day that helps keep state services intact.

“Without additional supplemental federal funding, we would be looking at some very deep budget cuts that we haven’t seen since the Great Recession,” Kanso said.