Georgia has more money than ever. The state’s total fund balance at the end of the last fiscal year – including all of the state’s various reserve accounts – surged to $19.07 billion, up from $18.46 billion the previous year. Among these funds, Georgia’s undesignated surplus now stands at an unprecedented $11 billion. That is according to the Georgia Revenues and Reserves Report for Fiscal Year 2024 (FY24), which was released last week.
This historic level of strength offers a rare opportunity to chip away further at Georgians’ tax burden without risking the state’s financial position.
Georgia’s remarkable growth isn’t simply due to soaring revenues. In fact, in a true comparison — excluding the interest earned on the state’s bank accounts, and adjusting for the motor fuel tax suspension in FY23 — revenues in FY24 were actually lower than a year earlier.
Yet, despite this drop in revenue, the state managed to increase its surplus. The key to this financial achievement lies in its disciplined approach to fiscal management — specifically, holding spending down.
Georgia has demonstrated that sound budgeting can create long-term financial security without raising taxes. While Georgia’s revenues have grown very quickly, since the COVID-19 pandemic, it has increased spending more slowly than many other states. That has allowed Georgia to maintain a healthy balance sheet that positions it well for future growth.
Despite this spending restraint, priority areas have benefited from the increased revenue. For example, state spending on K-12 education grew by 23% (about $2.5 billion) between FY20 and FY25, even though projected enrollment this year was slightly lower. The University System of Georgia received an increase of almost one-third (more than $800 million) during that same period of time. Spending also rose for the Transportation Department (19%), Medicaid (48%) and many other agencies and programs.
Still, the state has built a formidable surplus. And this surplus creates an opportunity to the taxpayers who made this possible. That was the sentiment behind Gov. Brian Kemp’s announcement on Tuesday, where he outlined his support for a $1 billion tax refund that would give taxpayers $250-$500 when they file taxes next year.
For the longer term, we recommend devoting at least half of the $11 billion undesignated surplus to establish a taxpayer relief fund. This fund would finance further and faster income tax cuts, providing immediate relief to residents and stimulating the economy over the long run. By reducing the tax burden, Georgia can further encourage businesses to invest, create jobs and foster a more dynamic economic environment. The fund would be available to avoid drastic spending cuts in the event future revenues fell faster than expected.
It’s a win-win approach for Georgia to create meaningful tax relief while continuing to provide necessary public services at fiscally responsible levels.
Now more than ever, it is crucial for the state to remain competitive with its neighboring states. Four out of five states bordering Georgia already have a lower top marginal income tax rate. By financing tax cuts through a taxpayer relief fund, Georgia can bolster its economic appeal, retaining its workforce and attracting new investments. Keeping tax rates competitive will ensure that Georgia remains an attractive option for both businesses and individuals looking to relocate, ultimately driving long-term economic growth.
View our report on the next steps for tax reform in Georgia.