What to Do With Revenue?

You’ve heard the saying “follow the money.” What happens when the money follows you?

No, I’m not revealing myself as a lottery jackpot winner. I refer to the task Georgia lawmakers face in dealing with an unexpected and seemingly unwelcome budget surplus. It’ll be the overarching theme of the legislative session that began this past week.

You’ve heard the numbers before, but they’re worth repeating because they’re so staggering:

  • The fiscal year that ended June 30, 2021, yielded $3.7 billion more than expected in revenues.
  • Even after filling its rainy day fund to the statutory limit, the state has a surplus of $2.2 billion.
  • Through the first five months of the current fiscal year, revenues were running almost $1.7 billion ahead of last year’s torrid pace.
  • All of that money comes on top of the billions in federal COVID-19 aid the state still isn’t totally sure how to spend.

While some lawmakers harbor spending dreams both new and old – there’s always Medicaid expansion, the left’s great white whale – budget writers have fretted publicly about such temptations.

This budgetary gusher may not spew forever, but commitments made now to any particular program cannot, politically, be so temporary. As veteran lawmakers know, spending promises made during good times are expected to continue even when times are bad.

And times could be bad sooner than most expect.

The breakneck speed with which Congress has been shoveling (borrowed) money out the door, which has coursed through the economy and fattened revenues in Georgia and elsewhere, won’t continue forever. It may already be largely finished. If so, that’s one reason to expect state revenues to pull back.

State coffers aren’t all that’s inflated, as anyone who’s gone grocery shopping lately is well aware. Price inflation is at a multi-decade high. Metro Atlanta leads the way, with prices in December a whopping 9.8% higher than a year earlier. That will take a bite out of growth sooner or later.

Finally, the entire post-lockdown economic cycle has been such a roller coaster, there’s reason to believe the ride will take an extended dip at some point.

So yes, it would be short-sighted to treat these revenues-on-steroids as the new normal. Yet, there are only so many one-time uses for this (perhaps) one-time money that make any kind of sense.

What to do? This past week, Gov. Brian Kemp proposed refunding $1.6 billion to taxpayers.

“I believe that when government takes in more money than it needs, surplus funds should be sent back to the hardworking men and women who keep our state moving forward,” Kemp said when unveiling his plan. “Because that’s your money, not the government’s.”

Even with the plan to return $1.6 billion to taxpayers – single filers this year would get $250, and married couples filing jointly $500 – the budget would still grow. Under Kemp’s plan, the state would fully fund k-12 schools as well as higher education. It would pay to train an additional 1,300 healthcare professionals, a potentially critical need after so many have suffered pandemic burnout and walked away. It would raise the pay of teachers, troopers and other employees by thousands of dollars a year. And so on.

So, it’s not as if the tax refund would shrink the budget. But is there any better, responsible way to spend it?

The state has debts, including unfunded liabilities for retirees, and picking one to pay down could have real benefits in the future. That said, my ivory tower is not quite tall enough for me to believe that’s going to happen during an election year.

All public borrowing is ultimately a claim against future taxpayers. If we’re not going to reduce their burden, the next best thing is reducing the burden on taxpayers today by refunding their money. Georgia could, and other states no doubt will, do worse.

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