Fiscal Analysis: How Does Georgia Compare to Other States

Everyone loves rankings. While it’s very helpful to understand where you rank compared to your peers, it’s also important to make sure the comparisons are valid.

Everyone loves rankings. While it’s very helpful to understand where you rank compared to your peers, it’s also important to make sure the comparisons are valid.

When comparing state taxing and spending it’s important to account for two factors: cost of living and differences in state and local government roles. The cost of living in California, for example, is higher than in Georgia, so the salary for a similar government job will usually be higher in California. Therefore, comparing per capita spending between states can be misleading. This is why economists often prefer to compare spending as a percentage of state personal income.

Combining state and local data is also important because some states, like Georgia, are very decentralized, with local government accounting for a large portion of all government spending, while state government plays a larger role in other states.

Given these two factors, the most fair fiscal comparison between states is state and local revenues or expenditures as a percentage of state personal income.

The latest Census Bureau data on state and local finance (Fiscal Year 2012) paints an interesting picture for Georgia. Generally perceived as a low-tax state, total taxes as a percentage of personal income in Georgia at the state level were lower than all but 6 states. Local taxes, however, ranked higher than all but 15 states. Overall, Georgia’s taxes ranked 39th highest.

Georgia drops to 43rd highest in terms of total revenue, with state revenue next to lowest and local revenue in the top ten.

Due to large amounts of federal funding, Georgia’s spending ranks more toward the middle at 32nd highest.

Rankings as a Percentage of Personal Income – FY12
		State and Local	State Only	Local Only
	Total Taxes	39	44	16
	Total Own Source Revenue	43	49	7
	Total General Expenditures	32	42	17

The data below singles out a few categories of combined state and local spending. Georgia ranks very high in operational spending on correctional institutions (11th), elementary and secondary education (9th) and hospitals (14th), and very low in transportation and debt service.

Georgia’s high spending on corrections was an impetus for major criminal justice reforms in 2012 and 2013. These reforms have already resulted in tens of millions of savings and are projected to save more than $300 million, so we can expect this ranking to moderate over time.

Georgia’s FY12 spending on elementary and secondary education ranks 9th highest, but could rise higher. Since 2012, Georgia’s state spending on elementary and secondary education has increased by $1.4 billion dollars, with Gov. Nathan Deal touting significant K-12 spending increases in his last two budgets.

The closing of rural hospitals has dominated the headlines in Georgia over the past few years, despite this data showing Georgia devotes a significant amount of funding (relative to other states) to hospitals.

Georgia’s low spending on transportation supports the current efforts to increase transportation funding. By almost any measure, Georgia is spending less than most states on transportation.

Finally, Georgia’s spending on debt service is lower than all but one state. This is one reason Georgia is one of only 8 states earning the highest credit rating from all three major bond rating agencies.

Everyone loves rankings. While it’s very helpful to understand where you rank compared to your peers, it’s also important to make sure the comparisons are valid.

When comparing state taxing and spending it’s important to account for two factors: cost of living and differences in state and local government roles. The cost of living in California, for example, is higher than in Georgia, so the salary for a similar government job will usually be higher in California. Therefore, comparing per capita spending between states can be misleading. This is why economists often prefer to compare spending as a percentage of state personal income.

Combining state and local data is also important because some states, like Georgia, are very decentralized, with local government accounting for a large portion of all government spending, while state government plays a larger role in other states.

Given these two factors, the most fair fiscal comparison between states is state and local revenues or expenditures as a percentage of state personal income.

The latest Census Bureau data on state and local finance (Fiscal Year 2012) paints an interesting picture for Georgia. Generally perceived as a low-tax state, total taxes as a percentage of personal income in Georgia at the state level were lower than all but 6 states. Local taxes, however, ranked higher than all but 15 states. Overall, Georgia’s taxes ranked 39th highest.

Georgia drops to 43rd highest in terms of total revenue, with state revenue next to lowest and local revenue in the top ten.

Due to large amounts of federal funding, Georgia’s spending ranks more toward the middle at 32nd highest.

Rankings as a Percentage of Personal Income – FY12
		State and Local	State Only	Local Only
	Total Taxes	39	44	16
	Total Own Source Revenue	43	49	7
	Total General Expenditures	32	42	17

The data below singles out a few categories of combined state and local spending. Georgia ranks very high in operational spending on correctional institutions (11th), elementary and secondary education (9th) and hospitals (14th), and very low in transportation and debt service.

Georgia’s high spending on corrections was an impetus for major criminal justice reforms in 2012 and 2013. These reforms have already resulted in tens of millions of savings and are projected to save more than $300 million, so we can expect this ranking to moderate over time.

Georgia’s FY12 spending on elementary and secondary education ranks 9th highest, but could rise higher. Since 2012, Georgia’s state spending on elementary and secondary education has increased by $1.4 billion dollars, with Gov. Nathan Deal touting significant K-12 spending increases in his last two budgets.

The closing of rural hospitals has dominated the headlines in Georgia over the past few years, despite this data showing Georgia devotes a significant amount of funding (relative to other states) to hospitals.

Georgia’s low spending on transportation supports the current efforts to increase transportation funding. By almost any measure, Georgia is spending less than most states on transportation.

Finally, Georgia’s spending on debt service is lower than all but one state. This is one reason Georgia is one of only 8 states earning the highest credit rating from all three major bond rating agencies.