Georgia’s recovery from recession evident in weak state revenues: GSU report
By David Pendered
Georgia’s economy and employment rate are improving, but that doesn’t mean the state government will have a surge of revenues available to lawmakers when they devise a budget in the upcoming Legislative session, according to a new report from Georgia State University.
Sally Wallace, director of GSU’s Fiscal Research Center at the Andrew Young School of Policy Studies, prepared the new analysis. The center delivered the report at a time when it can inform the upcoming debate over Georgia’s 2017 state budget.
Gov. Nathan Deal is to deliver his budget proposal later this month. The governor likely will hit the highlights at the 2016 Eggs and Issues Breakfast hosted Jan. 12 by the Georgia Chamber of Commerce.
While the governor has long proclaimed improvements in Georgia’s economy and, implicitly, the quality of life of Georgia residents, Wallace’s analysis discovered at least two trends worth noting:
- Post-recession hiring has occurred mostly in sectors that pay relatively low wages – services and health care – meaning state revenues from income taxes aren’t popping;
- People spend a growing amount of their income on services, which are often exempt from sales taxes – meaning the state doesn’t collect money to spend.
The report begins with a short recitation of good news the state has enjoyed in the six years since the end of the Great Recession:
- “Georgia’s economic landscape has strengthened considerably after the long, entrenched recession of 2007-09. Georgia’s revenues suffered heavily during the Great Recession, as was the case in states across the United States.”
The report doesn’t stay positive for long.
For instance, a paragraph that explains a chart that shows most job growth occurred in fields that pay below $60,000 a year, stated:
- “For many years, Georgia and the United States have seen a decline in manufacturing, and the construction industry was hit hard during the recession. While the number of employed Georgians has increased to an estimated 4,467,376 (Georgia Department of Labor, October 2015) from a low of 4,187,159 (March 2010), there has been a decidedly different mix of employment by industry post-recession.”
By the end of the report, the future doesn’t look bright in terms of the state raising revenues to address programs that were trimmed during the downturn. Let alone expand them to accommodate the needs of residents who aren’t earning the salaries they did a decade ago.
- “This brief overview of the economic trends in Georgia demonstrates that the state has shown signs of recovery in terms of employment, income, and revenue growth. However, given the changes in the composition of income and consumption, the natural growth in the income and sales taxes will be challenged as is expected in many states across the country.”
Wallace’s study is independent of the economic forecast released in November by Rajeev Dhawan, director of GSU’s Economic Forecasting Center at the Robinson College of Business. The two reports head in a similar direction.
Here are highlights of Dhawan’s analysis, released in November:
- “In the first nine months of 2015, Georgia added only 46,500 new positions for a growth rate of 2.3 percent, compared to a gain of 103,900 and a growth rate of 3.1 percent in the same period last year. Is Georgia the only state that has put on the brakes? Texas has, because of falling oil prices; but other leading GDP states, namely California and Florida, have not seen this kind of deceleration. … ”
- “In the Atlanta metro area, the hospitality sector saw a 5.0 percent growth in jobs up from 4.8 percent over the same period last year, mostly due to a 22.3 percent increase in large meetings and conventions.”