Kemp trumpets Georgia economy overseas as state economist warns tax collections will slow
Gov. Brian Kemp unveiled his $32.5 billion spending proposal Friday, handing it off to lawmakers who will want to leave their mark on the budget too. Ross Williams/Georgia Recorder
State lawmakers have started digging into Gov. Brian Kemp’s $32.5 billion spending proposal for next year.
The second-term governor’s budget includes initiatives he promised on the campaign trail – like a one-time property tax break and another bonus tax refund – as well as $2,000 pay raises for educators and state workers, $130 million for two electric vehicle training facilities and $52 million to move forward with his plan to slightly expand Medicaid eligibility.
Kemp is also proposing to spend an additional $61.2 million to fund scholarship and grant awards at 100% of tuition at Georgia’s public colleges and universities, saving a full-time student an average of $444 annually.
Kemp delivered his usual budget pitch from afar this time, though. He was invited to attend the World Economic Forum in Davos, Switzerland, where he rubbed elbows with CEOs at a posh private lunch and spoke on a panel about American politics – where he was asked about election deniers and partisanship.
The governor told lawmakers Tuesday that he was at the event to share “Georgia’s success story” and talk about his administration’s conservative principles at the gathering of world leaders.
“That’s what our jobs are to do is to fight for our position and tell people what we believe and why we think we’ve been successful in our state and that’s exactly why I’m here: To tell them like it is whether they like it or not,” Kemp said.
Kemp is riding a high these days. Fresh off his decisive victory over longtime rival Stacey Abrams, he can also tout a string of high-profile clean energy economic wins that include two major electric vehicle plants and, most recently, the expansion of solar panel manufacturer Qcells operations.
“We’ve shown them that you can grow the whole pie while the government takes a smaller piece and still have enough to feed everyone,” Kemp said.
Kemp unveiled his 400-page spending proposal Friday. Lawmakers will continue to focus on kicking off the budget process this week, with more hearings set for Wednesday and Thursday.
‘We’re going to get a big shock’
The state is sitting on a $6.6 billion budget surplus and a record $5.2 billion rainy day fund. Revenues continue to grow, even though the state economist is cautioning that this will slow.
Last month’s revenues were up 7.5% over last year, and collections for the first six months of the budget year that began July 1 are up 6.5% over last year.
For one, State Economist Jeffrey Dorfman says budget writers should not expect to see $3 billion revenue from capital gains taxes, which he described as an unexpected boost from last spring’s tax filing season that contributed to half the state’s monster surplus.
“This year, very few people have lost their jobs and employment in Georgia is up. But if most people are like me, we didn’t make any money in the stock market in 2022 so we’re not expecting to see any of that $3 billion in capital gains show up when people file their tax returns this year,” Dorfman said.
“So, when you get those monthly reports and you see that it says we’re running ahead of last year, you got about two and a half more months of that,” he said. “We know we’re going to get a big shock when those tax returns come in and people don’t pay taxes on those profits they didn’t make.”
Dorfman also advised lawmakers against using surplus revenues for recurring expenses. Kemp already has designs for about half the extra funds, including his promised tax relief and paying for the suspended gas tax.
But Dorfman hedged on whether an expected recession would crimp state revenues.
“We need to understand that we are not tied that tightly to the national economy and that revenues can vary surprisingly from the state of the economy,” he said. “We can have it bad when the country has it good. We can have it good when the country has it bad.”
Medicaid expansion debate, the 2023 edition
The governor is pressing forward with his limited Medicaid expansion plan after a federal judge sided with him last year and the Biden administration opted not to appeal that decision.
First unveiled in late 2019, Kemp’s partial Medicaid expansion would extend coverage to about 50,000 new people as long as they complete 80 hours of work, job training or other qualifying activity each month. This work requirement was at the heart of the conflict that has stalled the program.
Now, Kemp has proposed spending $52 million implementing the program, called Pathways to Coverage. He has also budgeted $92 million for the state’s reinsurance program, which helps reduce insurance premiums and has been more broadly embraced.
Georgia is one of 11 states that have not fully expanded Medicaid under the Affordable Care Act, even after additional federal financial incentives were offered. The state continues to have one of the highest rates of uninsured people in the country.
Democrats continue to push for full expansion, which could extend coverage to about a half million low-income Georgians. House Minority Leader James Beverly, a Macon Democrat, said the issue remains his caucus’ top priority, arguing that Kemp’s plan is not the most effective way to spend state dollars.
“It is no longer a conservative thing. It’s foolishness. It’s just fiscal irresponsibility for him to continue down this road,” Beverly said Tuesday.
Beverly has filed a bill that would fully expand Medicaid, as well as a measure that calls for a call center and a robust public education campaign to help reduce the number of people who will lose Medicaid coverage when a pandemic-era rule ends in April.
In Georgia, Medicaid enrollment has grown to about 2.6 million people, up from about 1.8 million before the pandemic. About 500,000 could lose their health coverage once the federal government no longer blocks states from dropping people from the Medicaid rolls.
Kemp, who was among the GOP governors who urged the Biden administration to end the continuous Medicaid coverage rule, has proposed spending $8.4 million this year and another $3.2 million next year on the unwinding process.
Every person who currently has Medicaid coverage must go through the eligibility determination process, and state agencies will try to transition those who are eligible to the governor’s health care program, said Caylee Noggle, commissioner of the state Department of Community Health.
Originally, Kemp’s partial Medicaid expansion was expected to enroll about 50,000 as a high-end estimate. But Noggle said Tuesday that as many as 200,000 who are already on Medicaid might qualify for the new program.
“This next 12 months, there’s going to be so much movement of members coming on and members coming off,” she said.
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