Sometimes, it’s worth remembering just how far we’ve come from a low point. The state’s revenue report this past week is such an occasion.
Georgia’s fiscal year ends each June 30, so the latest data tell us how a full year of pandemic-affected revenue shaped up. The answer: about $3.2 billion more than last year.
But arguably more important, the state’s tax take in fiscal 2021 was also about $3.1 billion more than in 2019, the last full year before the pandemic hit.
A year ago, this hardly seemed possible. As the above figures suggest, revenue was basically flat between 2019 and 2020 – which at the time was actually a welcome development to most budget watchers. Because strong revenues mostly reflect a strong economy, keeping pace during a recession with what had been a solid year economically was fairly remarkable.
But there was a sense this time last year that the good fortune couldn’t last. Cases of COVID-19 were still climbing and expected to spike even higher during the winter, which they did. Tax withholdings from unemployment checks were expected to flow back out of the treasury in the form of refunds once Georgians filed their tax returns. The ground felt shaky.
A year later, those concerns appear to be over. But there may be reason yet for some caution.
Before lawmakers go and spend the whole surplus, they might consider whether it represents a boom or a bubble.
Certainly, much of the credit for this revenue gusher belongs to Gov. Brian Kemp for reopening Georgia’s economy as quickly as prudence allowed. And we must remember our economy was humming along before the pandemic hit, and well-positioned for a rebound.
But that isn’t the whole story here. The chief argument that the state is experiencing a bubble centers on the billions and billions (and billions …) of federal tax dollars pumped into our economy over the past year-plus. That was unprecedented, and it’s highly unlikely to last.
For context, know that federal payments and commitments to Georgia’s state and local governments already, at some $23 billion, are approaching an entire year’s state budget. And that’s only the third-largest category of federal relief spending.
The largest, according to the Committee for a Responsible Federal Budget, was the $46 billion in loans and grants distributed to businesses via the Paycheck Protection Program, aid to airlines and restaurants, and so on. Then there’s the $26 billion in stimulus checks to Georgia residents.
Another $22 billion went out in the form of unemployment checks, child-care assistance and food stamps. Healthcare, higher education, housing and other assorted targets account for another $10.5 billion.
Add everything up, and some $136 billion in emergency funding has been sent or committed to Georgia. Again, for context, this represents about $1 for every $4 our state’s economy generates each year.
That kind of money can’t slosh through the state without having some effects. You see it in workers staying on unemployment as long as possible, and in businesses raising wages to lure them back. You see it in cars flying off lots – when supply-chain problems aren’t getting in the way – and in home sellers receiving multiple offers before even listing their houses. You see it in higher prices at the grocery store and the hardware store.
And yes, you see it in state revenues.
There will be great temptation for lawmakers to spend that $3 billion on new programs. In most cases, they should demur. Revenues may not be quite so strong in 2022, even if the economy remains solid. There are 136 billion reasons why.
If lawmakers commit to new, ongoing programs with this one-time money, they will dig themselves a large hole for future years. We’ve come a long way from the hole we thought we were in; we can’t afford to trip into a new one of our own making.
