Kyle Wingfield

Columnist

By now, you should know Georgia is more fiscally responsible than the federal government. If not, the folks in Washington, D.C., are working overtime to demonstrate it. 

Congress continues to debate the “Big, Beautiful Bill” and whether it will cut deficits (compared to current policy) or expand them (compared to current law). The difference boils down to the fact that some of the bill’s main tax provisions simply lock into place the rates that have prevailed since the Tax Cuts and Jobs Act of 2017, which are scheduled to expire at year’s end. In other words, the federal government is already forgoing those revenues, so extending them wouldn’t reduce revenues compared to the present. It will simply reduce revenues compared to the future, when the current rates expire. Then again, the original reason for the expiration date was to massage the bill’s cost as it was being debated eight years ago – even though everyone knew there was a high likelihood that at least some of the rate cuts would be preserved eventually.

To see how budgeting is done without these gimmicks, look no further than the Gold Dome.

The state government operates under a balanced budget requirement, so there is no deficit spending a la Washington. Still, the state historically has issued bonds to pay for infrastructure projects, from bridges to new college classrooms.

Lately, however, it has eschewed even that borrowing – to the benefit of taxpayers. The budget year that begins July 1 will be the third straight with no “bond package,” as that section is typically called. Instead, over the course of three years the state has paid cash for projects totaling $3.45 billion.

The savings to taxpayers comes from the interest payments they’ll never have to make.

To issue bonds for that $3.45 billion would have cost a total of $6.26 billion over the course of 23 years, according to estimates provided by the Governor’s Office. The difference of about $2.81 billion represents the interest payments that would have been made.

That’s an average of $120 million per year that future taxpayers won’t have to pay. All of this was made possible by the state’s conservative approach to budgeting. Georgia now holds nearly $19 billion in reserves: $8 billion in rainy-day and other official reserve accounts, plus another $11 billion in surplus cash.

Those surpluses have built up despite a series of tax cuts and tax rebates, not to mention those cash expenditures for infrastructure projects we’ve been talking about. How? The state has been spending (get this, D.C. types) less than it takes in.

Maintaining that approach is vital. As our neighbors continue to make themselves more competitive by cutting their own tax rates, Georgia can’t let up.

While using the surplus to pay cash for investments saves money in the long run, those extra reserves can also be used to help finance tax cuts that will produce even larger future savings. Putting some of the money in a “taxpayer relief fund” would allow lawmakers to trim even more from tax rates in the future, knowing that if they overshot by mistake and revenues came in lower than expected, there would be money in the bank set aside to cushion the blow.

Mixing the two approaches would be mutually reinforcing. The lower cost of borrowing would reduce the amount state taxpayers had to spend in the future – in turn, freeing up money that wouldn’t have to be raised in taxes.

As we have seen in recent years, sound tax policy also helps to attract new residents – who then add to the tax base and help ease the pressure on everyone else. That virtuous circle helps explain why Georgia has been able to add surpluses despite cutting taxes. But it only works as long as spending is restrained.

Let’s keep it up. Who knows? Maybe someday even Washington will notice and follow suit.

Kyle Wingfield is president and CEO of the Georgia Public Policy Foundation.