Georgia’s chief economist told lawmakers Thursday that a return to normalcy is needed to soften the blow to the state’s $27 billion budget, which is set for deep cuts amid coronavirus-prompted closures.
That assessment was one of several that budget-writing state lawmakers got Thursday in a sobering overview of the sharp drop in tax revenues poised drive the General Assembly’s upcoming budget negotiations.
Whether Georgia bounces back enough to soften the budgetary blow will depend on how confident consumers feel to venture out of their homes to shop and return to work, Jeffrey Dorfman, the state economist, told lawmakers Thursday.
“It’s all going to depend on consumers and when we feel safe,” Dorfman said. “When we choose to [return to] normal is what’s going to matter.”
Revenues from income, sales and other taxes in Georgia were down almost $1 billion for the month of April compared to April of last year, as both mandatory and voluntary actions taken to curb the virus’ spread saw businesses close and people stay put in their homes.
Lawmakers now face the need to make steep spending cuts, press for federal relief and pull from Georgia’s emergency reserves to balance the budget.
Some measures have eased the pain from coronavirus like a boost in online retail sales and purchases of alcohol by home-bound Georgians. But a spike in unemployment claims, plummeting of sales taxes on hotel stays and general merchandise, and the delayed deadline to file state income taxes have combined to put Georgia in a serious financial bind.
“You’re going to see some crazy economic numbers in the news over the next couple of months,” Dorfman said Thursday.
Members of the Georgia House and Senate Appropriations committees met jointly Thursday in an online meeting for the first time in the coronavirus era. They plan to hold another virtual meeting next Wednesday before convening in person later this month, ahead of a June 30 deadline to pass the 2021 fiscal year budget.
Lawmakers have already asked state agencies to start preparing for 14% cuts across the board in next year’s budget, with revenue forecasters expecting a decline of between $3 and $4 billion in tax collections in the coming months. Those cuts will almost certainly lead to scaled-back services and furloughs for teachers, social workers and more.
“We understand that times are tough for y’all and for us,” said House Appropriations Committee Chairman Terry England, R-Auburn. “We appreciate and take very seriously our roles here and what we’re trying to do and to be good stewards of taxpayer dollars.”
Dorfman, the state economist, told lawmakers Thursday the full impacts of the crisis are tough to predict since the only comparable historical event was the Spanish Flu of 1918, for which he said there is not much useful data.
Instead, lawmakers should plan to see a continuing downward trend in revenues through at least this month in sales taxes and for much longer when it comes to corporate tax collections, with businesses poised for months of diminished profits, Dorfman said.
“We don’t really have a good idea based on history of how this is going to go,” Dorfman said. “Hopefully, in the weeks and months to come, we’ll get a better idea as we experience this together.”
The worst economic data is expected to come after Memorial Day (May 25) when officials will learn how bad tax collections were during Georgia’s mandatory shelter-in-place period last month, said Kelly Farr, director of the state Office of Planning and Budget.
Speaking at Thursday’s meeting, Farr credited lawmakers for carrying out the bulk of 4% cuts that Gov. Brian Kemp ordered earlier this year for the current state budget, before coronavirus was ever an issue. But the shortfall will likely force officials to tap into the state’s roughly $2.8 billion reserve fund to float the fiscal 2020 budget until July 1, Farr said.
“We basically start spending out of the rainy day fund to make up for the lack of revenue,” Farr said Thursday.
Appropriations chiefs urged calm and courage as lawmakers hash out the budget. Senate Appropriations Committee Chairman Blake Tillery, who assumed the role following the death of former budget guru Sen. Jack Hill last month, said Georgia’s budget experts have already set to figuring out solutions.
“We’re in a time that’s going to require a lot of us to pull together and work together,” said Tillery, R-Vidalia.