ATLANTA — Georgia's budget director told lawmakers on Friday that Gov. Brian Kemp is trying to avoid state employee layoffs even as he orders budget cuts.
Office of Planning and Budget Director Kelly Farr, speaking Friday before a joint meeting of the House and Senate Appropriations Committees, told lawmakers that state officials don't entirely understand why revenue collections are lagging.
The Republican governor has ordered agencies to cut 4% from their budgets this year and proposed 6% cuts from the 2021 budget that lawmakers will write beginning in January. Many areas of the $27.5 billion budget are exempt from cuts, however, including most education services and the state-federal Medicaid program. This year's cuts, which begin next week, amount to about $200 million. Next year's cuts would be about $300 million.
House Appropriations Committee Member Al Williams, a Democrat from Midway, told Farr that many state employees are worried they're going to lose their jobs.
"There's a lot of panic right now among the rank and file workers," Williams said.
Farr noted that when a number of agencies reported they planned job cuts, he sent a letter last week telling them to justify why they weren't cutting other expenses instead. He said budget staffers are examining how many state agency jobs are vacant and how many employees normally quit, retire or are fired. He said officials are also examining travel, vendor contracts and other expenses.
"There may be people who lose their jobs through this process, but there will be great consideration given," Farr said.
State fiscal economist Jeffrey Dorfman told members of the General Assembly on Thursday that revenues for the first three months of the 2020 budget year, which began July 1, are expected to decrease 0.5%; the budget was based on estimated growth of 2%.
Dorfman said cutting the state's income tax rate in January and shifting a larger share of state vehicle taxes to counties is weighing on state revenues, with Georgia's economy needing to grow 2.5% this year just to keep state tax revenues from falling. But Dorfman said revenues are "disappointing" and lagging behind projections even after factoring in those planned reductions.
While officials are hoping for a rebound, Farr said the picture could continue to deteriorate.
"It could be worse," Farr said. "I hope it's not. I pray it's not."
Dorfman highlighted economic uncertainty and said his forecast for the 2021 budget year will include "a 50-50 chance of a mild recession" beginning early next year.
The uncertainty could affect two budget measures that Kemp and Republican lawmakers will be considering in January. One is the planned next phase of the income tax cut, which would lower the state's top tax bracket to 5.5%. It also would cut revenues by about $250 million in the 2021 budget, as lawmakers would have to plan for six months of a $500 million yearly cut that would begin in 2021. The second big-ticket item is the remaining $2,000 on the $5,000 teacher pay raise that Kemp has promised. That could cost more than $350 million.
"This legislature has been very interested in returning tax dollars to taxpayers, and that means the governor needs to set priorities and make sure there's enough money for agencies such as K-12, where he has boosted funding," Dorfman said.