Our Primer, Your Budget: Understanding Georgia's FY25 Fiscal Decisions

Our Primer, Your Budget Understanding Georgia’s FY25 Fiscal Decisions

© July 2024 Georgia Budget and Policy Institute All Rights Reserved.

This document may not be quoted without proper citation.

A PDF is available for reference and distribution at www.gbpi.org.

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Table of Contents About GBPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Letter from the President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Budget Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Georgia by the Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Who Are Georgians? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Steps Along Georgia’s Budget Path . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Budget Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54 Human Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 Criminal Legal Systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

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The Georgia Budget and Policy Institute’s mission is to advance lasting solutions that expand economic opportunity and well-being for all Georgians.

We envision a fair and inclusive Georgia where all people prosper.

Staci Fox, President and CEO David Schaefer, Vice President of Research and Policy Danny Kanso, Director for Legislative Strategy and Senior Fiscal Analyst Leah Chan, Director of Health Justice Ife Finch Floyd, Director of Economic Justice Ray Khalfani, Senior Analyst of Worker Justice and Criminal Legal Systems Ashley Young, Senior Education Analyst Hillary Dong, Health Policy Fellow Jessica Woods, Vice President of Finance and Operations Erin Robinson, Director of Outreach and Strategic Campaigns Narek Boyajian, Fund Georgia’s Future Coalition Manager Lauren Frazier, Director of Strategic Communications Jennifer Heron, Brand Manager To get in touch with our team, contact gbpi@gbpi.org

Letter From the President Dear Friends: Twenty years ago, a group of Georgians came together to create an organization that monitors how the state raises and spends money for the purposes of transparency and democracy, and that organization became the Georgia Budget and Policy Institute. Looking back at our first primer in 2011, our state budget has more than doubled although the sources of income and the allocation of our fiscal resources have proportionally remained the same.

This year, you will see progress benchmarks throughout the primer as we look back over the 20 years of our work. Much has been accomplished; more remains to be done. Georgia’s budget is more than just numbers on paper; it is the roadmap guiding the operations of our state agencies.

It reflects the values and priorities of our policymakers and has far-reaching implications for the public at large—for businesses and labor, educators and students, children and their families and for all who call Georgia home. In many ways, the budget is the measure of our willingness to serve our fellow Georgians.

The budget is always a mixed bag of progress and regress. In fiscal year (FY) 2025, GBPI is thrilled to see Georgia’s per-person spending rise for the first time above pre-pandemic levels and to see a restoration of the FY 2024 $66 million University System of Georgia formula funds. The Pre-K budget also increased by $98 million to $541 million, which includes $52 million more for pre-K than the proposed Governor’s budget.

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Dual Enrollment program funding increased from $76 million to $91 million, and the $9.3 million increase to Childcare and Parent Services (CAPS) may be the largest increase in the program’s history.

In schools across Georgia, an allocation of $6.3 million has been designated to offer free breakfast and lunch to low-income students in K-12 public schools.

There is a $20 million increase this year for school bus replacement, stacked upon $188 million provided for school bus replacement in FY 2022-2024. $354 million was appropriated to support pupil transportation, which also included transportation personnel salary increases.

HB 1015, provided for a reduction in the state’s personal income tax rate to 5.39%. While most Georgians will not notice the impact of this change, it is expected to cost $361 million in FY 2025. Another measure, HB 1023, reduces the state’s flat corporate income tax rate to 5.39% at an estimated cost of $151 million.

In addition, bills such as HB 1010 passed to increase the maximum parental leave from three weeks to six weeks for state and public school employees.

However, it is important to note that the bill does not include any state funding.

Our legislature also left half a million Georgians without healthcare coverage by denying the federal funds to expand Medicaid in the state for another year.

For the fourth consecutive year, the Revenue Shortfall Reserve is maxed out at $5.4 billion, while undesignated reserves will hit an estimated $11.6 billion during Georgia’s 2025 fiscal year, which runs from July 1, 2024, through June 30, 2025.

These funds come directly from Georgians’ pockets and should be used to make key improvements in areas that demand immediate attention. Investing in the state’s struggling healthcare infrastructure and establishing a childcare trust fund are ideas put forth by our team at GBPI, and those ideas are supported by a majority of Georgians.

The state also continues to prioritize corporations over people, delivering outsized tax credits, deductions, and tax breaks to select groups or industries, such as the film industry, with little benefit for Georgians and inadequate transparency and safeguards in place. Furthermore, the decision in 2022 to shift Georgia to a new and less equitable flat tax system threatens the long-term stability of the state’s revenue system and is likely to increase the racial wealth gap, locking more people of color out of building economic stability.

The pages that follow provide a clear nonpartisan explanation of the state’s spending plan and summarize Georgia’s HB 916, the 147-page appropriations bill, allowing you to better understand the effects of state spending on your community and your life. At GBPI, we believe that by uplifting approaches that center on humanity, we can advance economic opportunities so that all Georgians can thrive. And one of those approaches is using our expertise to create our primer to make it easy to understand your budget.

In this together,

Staci Fox President and CEO Georgia Budget and Policy Institute

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Budget Basics Georgia’s 2025 fiscal year runs from July 1, 2024, through June 30, 2025.

The state has access to a total of $66.8 billion in resources. That includes $36.1 billion in state funding, $19 billion in federal funding and $11.7 billion in state employee benefit plan transfers and agency funds. In FY 2008, before the Great Recession, adjusting for inflation, the state of Georgia spent about $3,199 per person. Under the 2025 budget, Georgia will spend about $24 more per person, $266 million more than if spending had kept pace with inflation and population growth. Although this marks a long-awaited positive step forward, it took the state 17 years to bridge the spending gap created by the Great Recession. Since its founding in 2004, GBPI has advocated for robust state funding so that the state can invest in helping meet the needs of all Georgians.

The state budget outlines Georgia’s priorities, how it plans to spend money and how much revenue it believes it will collect. It is the most crucial piece of legislation lawmakers pass. The budget is the only legislation that the General Assembly is legally mandated to pass each year. The Georgia Constitution also requires that the state keep its budget balanced. Should the state generate revenue exceeding its expenditures, the surplus automatically flows into the Revenue Shortfall Reserve account. This process continues until the account amasses funds equaling 15% of the previous year’s revenue collections. Once this threshold is reached, any additional surplus funds are transferred to an “undesignated surplus” account. This reserve can be accessed based on the governor’s discretion, who has the authority to set the state’s revenue estimate. This estimate essentially limits the amount that the General Assembly is permitted to allocate, and it can be modified at any given time through an executive order.

The budget process is continuous and requires year-round engagement from advocates. Even as Georgia implements its current budget, it audits the previous year’s and plans for the next budget. Beyond the General Assembly, many others participate in the process, including the public, state auditors, agency leaders and budget officials, the state budget director and the governor.

By the Numbers Georgia’s budget for FY 2025 directly affects the quality of life for all 11 million Georgians across the state’s many diverse communities. The lion’s share of that money is allocated to core investments in the state’s economic future, including education, health care and transportation. Here are some examples of ways in which the state budget impacts Georgians: 2 million Georgians who are individuals with disabilities, seniors, children or parents with low incomes receive health care coverage and services through Medicaid and PeachCare ($5.4 billion in the FY 2025 state budget).

1.7 million students, supported by over 13,000 school bus drivers as well as 133,000 administrators and teachers, enroll in Georgia’s 2,300 K-12 public schools ($13.2 billion in the FY 2025 state budget).

449,000 students are enrolled in Georgia public colleges, universities or technical colleges ($5 billion in the FY 2025 state budget).

250,000 Georgians live under correctional control, with 175,600 on probation, 51,400 incarcerated, 15,700 on parole and 6,900 in the Juvenile Justice system. This accounts for $1.7 billion in the FY 2025 state budget.

18,000 miles of state highway are overseen by the Department of Transportation. The agency will also direct $224 million in FY 2025 and $469 million in amended fiscal year (AFY) 2024 to help maintain and improve over 100,000 miles of county roads and city streets (a total of $2.4 billion in the FY 2025 state budget).

Source: U.S. Census; Georgia Department of Community Health; Georgia Department of Corrections; State Board of Pardons and Paroles; Georgia Department of Community Supervision; Georgia Department of Education; Georgia Department of Transportation, Fact Book; Board of Regents, University System of Georgia Semester Enrollment Report, Fall 2024; Technical College System of Georgia, total enrollment Fall 2024.

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Who are Georgians?

Demographics of the State of Georgia

The State of Georgia is

65.5%

51%

of Georgians own homes

women*

Source: US Census 2020

Racial and Ethnic Composition of Georgia

Source: Lee, M. Atlanta Civic Circle (2022, February 9), How Georgia lawmakers are above average - in age and wealth.

White, 50.06% Black, 31.00% Latino, 10.49% Asian, Native Hawaiian, Pacific Islander, 4.54%

Source: US Census 2020

Who Creates Georgia’s Budget?

Demographics of the Georgia General Assembly

86%

The Georgia General Assembly is

of Georgia Legislators own at least one property

35% women*

*This only reflects gender binary Source: Center for American Women in Politics

Racial and Ethnic Composition of Georgia’s General Assembly

White, 62.71% Black, 28.81% Latino, 1.69%

Source: National Council of State Legislatures (2023), Legislatures At-A-Glance-Georgia

Asian, Native Hawaiian, Pacific Islander, 4.24%

Source: Lee, M. Atlanta Civic Circle (2022, February 9), How Georgia lawmakers are above average - in age and wealth.

Steps Along Georgia’s Budget Path Budget Request Instructions Sent to Agencies:

1

In early summer, the Governor’s Office of Planning and Budget (OPB) sends guidelines to agencies so each can prepare their request.

Agencies Prepare Budget Requests: Each agency prepares its requests and gets board approval (if applicable).

2

House Approves Its Budget: The House votes on changes to the governor’s budget proposals.

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9

Legislative Appropriations Process: The appropriations committees in the Georgia House of Representatives and Senate hold budget hearings for the current and upcoming fiscal years.

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Senate Approves Its Budget:

Conference Committee Meets:

The Senate reviews the House-passed budget for the current and upcoming fiscal years, makes changes, and then votes on the latest versions

The House and the Senate each vote to approve the final version

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Budget Documents Sent to the General Assembly:

Budget Request Submitted: The governor, OPB staff and agency leaders review and assess current and new budget requests.

Agencies submit all current and upcoming fiscal years to OPB by September 11.

3

4 Budget Request Analyzed:

Governor Finishes Budget:

In January, the governor presents the budget proposals within the first five days of the General Assembly session.

By the end of the calendar year, the governor finalizes the budget proposals.

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5

Final Version Approved: The lieutenant governor and speaker of the house appoint a conference committee of members of both chambers to negotiate a single version of the budget.

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Appropriations Bill Sent to Governor: The governor has 40 days from the end of the Legislative Session to sign the budget bill into law and may veto specific sections.

12 11

Revenue

Before the Great Recession, adjusting for inflation, Georgia spent about $3,080 per person in FY 2006. Under the 2025 budget, the state will spend about $142 more per person, $1.6 billion more than if spending had kept pace with population and inflation growth. It represents a real growth rate of 0.2% per year over two decades. For 20 years, GBPI has worked to help ensure that the state has enough funds to meet the needs of its residents. This per capita spending increase is small but meaningful progress in that direction and reflects GBPI’s work to defend against funding decreases.

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Georgia’s Revenue System Shaped by History of Racist Policies Georgia’s modern revenue system, which determines how much money the state can use to fund Georgia’s budget, was built during the turbulent decades of the 1930s through 1960s. At the time, segregationists governing the state resisted federal assistance from the New Deal and faced challenges in funding essential state government programs and services.

Structural racism exists when racist policies, practices, attitudes and other factors combine to create or perpetuate inequities. For example, racist policies and practices contributed to mass incarceration and worked alongside racism in hiring to worsen occupational segregation, where people of color work in lowpaying jobs. Similarly, Georgia’s regressive tax code disproportionately affects workers of color by taxing goods that individuals with low incomes need but not services that wealthier people buy with a larger share of their earnings. Over time, these disparities result in gaps in take-home earnings and wealth.

At the beginning of the 20th century, Georgia predominantly relied on a state property tax for its revenue. Over time, this tax was used to systematically disenfranchise, intimidate, and economically harm Black Georgians. The state also implemented a poll tax that it kept in place until 1945. Property tax assessors had broad discretion to assess value, unfairly favoring white landowners and pushing Black businesses and landowners into poverty, often resulting in property seizures. In 1929, the state introduced corporate and individual income taxes. In 1937, it established an individual income tax bracket structure. The state also implemented a sales and use tax of 3% in 1951, which was later raised to its current level of 4% in 1989.

Revenues from income and sales taxes increased, and the state repealed the property tax in 2016; local property taxes remain. In 2024, Georgia shifted from its decades-old, graduated income tax system to a more regressive flat income tax with personal and corporate rates set at 5.39%.

Historic injustices and policies have resulted in disparities in income across race and ethnicity. Regressive tax policies widen those disparities by asking those making the lowest incomes to pay the largest share of what they earn in taxes.

Black and Hispanic Georgians are Overrepresented Among Those Paying Highest Share of Income in State and Local Taxes Hispanic Black Multiple Races White Asian/Pacific Islander Lowest 20% of Incomes; Pays 10.3% of income in State and Local Taxes

Second 20% of Incomes; Pays 10.1% of income in State and Local Taxes

Middle 20% of Incomes; Pays 9.6% of income in State and Local Taxes

Fourth 20% of Incomes; Pays 9.8% of income in State and Local Taxes

Next 15% of Incomes; Pays 9.3% of income in State and Local Taxes

Top 5% of Incomes; Pays 7.5% of income in State and Local Taxes

Source: Institute on Taxation and Economic Policy, April 2024.

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Where Does Georgia’s Money Come From?

Georgia’s fiscal health hangs on the state’s capacity to raise money reliably from diverse sources. Like most states, Georgia collects revenue from personal and corporate income taxes, sales taxes, gas and vehicle taxes and other levies and fees. Income taxes are the cornerstone of Georgia’s revenue system, accounting for half of state funds. Sales taxes are the second largest revenue source, slightly less than a quarter of annual collections. A reliable revenue system requires both types of taxes.

Income taxes help balance the regressive effects of sales taxes and fees.

They allow the state to collect a proportionate share of revenue from the wealthiest earners and most profitable corporations. A healthy income tax can better withstand economic trends and provide a dependable baseline for state revenues.

Sales taxes provide a less stable source of revenue and are more likely to affect middle-class families and people with lower incomes. Georgia also offers exemptions from sales taxes for most services. However, sales taxes remain a key funding source that allows the state to raise revenue from consumption and economic inputs that would otherwise be tax-exempt.

Lawmakers have enacted measures to ensure that online marketplaces and digital downloads are taxed. However, the state’s sales tax is not imposed on most services and sectors of Georgia’s economy, such as health and personal care, financial or legal services. Some sales tax exemptions were intentionally created to avoid taxing products families rely on, such as groceries. Most services are not taxed since lawmakers have not updated the tax code to include them.

Income Tax Raises Half of All State Revenue

Key Revenue Estimate, 2025 Fiscal Year Income Taxes

$18,871,837,000

Personal Income Tax

$15,808,929,000

Corporate Income Tax

$3,062,908,000

52%

Sales Tax

$8,369,250,000

23%

Other Taxes and Fees

$5,116,679,212

14%

Motor Vehicle Title Tax (TAVT)

$788,313,435

Insurance Premium Tax

$680,835,519

Motor Vehicle License Fees

$416,725,078

Hospital Provider Payments

$410,990,552

Tobacco Tax

$221,139,206

Alcohol Beverage Tax

$222,546,068

Nursing Home Provider Fees

$152,886,715

Interest on Motor Fuel Deposits

$134,000,000

Interest on All Other State Deposits

$807,815,825

All Other Interest, Fees and Sales

$1,281,416,814

Designated Funds

$3,778,458,015

Motor Fuel Tax & Interest

$2,067,466,000

Lottery Funds

$1,560,273,909

Tobacco Settlement Funds Brain & Spinal Injury Trust Fund Safe Harbor for Sexually Exploited Children Fund Total

10%

$148,615,599 $1,848,188 $254,319 $36,136,224,227

Source: Governor’s Budget Report Amended FY 2024 and FY 2025; Office of Planning and Budget, June 2024.

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Appropriations Categories General Funds –The state-funded portions of education, Medicaid and other traditional state services are paid for through the $32.4 billion General Fund. This category includes money raised through income taxes, sales taxes and other taxes and fees.

Motor Fuel Funds – The $2.1 billion includes funds collected from the motor fuel tax that is designated explicitly for infrastructure.

Agency and Research Funds – The $5.9 billion in revenue includes tuition and fees from colleges and university system research funds, in addition to regulatory fees and revenue raised directly by individual state agencies.

Lottery Funds – The $1.6 billion in revenue is dedicated to prekindergarten programs and higher education scholarships.

Federal Funds – $19 billion in federal funds pay for a share of Georgia’s overall spending on health care, K-12 education, transportation and other services.

Tobacco Settlement Funds – This yearly payment of $149 million in FY 2025, resulting from a legal settlement with the country’s four largest tobacco companies over health care costs, can be allocated for any purpose in the budget.

Intrastate Transfers – The $5.8 billion of intrastate transfers include payments from the health benefit plan for state employees.

General and Federal Funds Make Up Most of $66.8 Billion in 2025 State Spending Tobacco Settlement Lottery Funds Motor Fuel Funding Agency Funds

State General Funds Federal Funds

Source: Conference Committee Substitute to HB 916 as signed by the governor; Office of Planning and Budget, June 2024.

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General Funds

$32.4 Billion (48% of Georgia’s Budget) Georgia’s General Fund largely comes from taxes on personal and corporate income as well as from taxes on consumer transactions. The state also taxes motor fuel and assesses provider fees on hospitals and nursing homes. Over 96 cents of every state-appropriated dollar pays for nine core priorities: • • • • • • •

Pre-K-12 Education (38 cents of every dollar spent) Health Care (20 cents) Higher Education (14 cents) Infrastructure and Transportation (9 cents) Corrections, Legal System, and Re-entry (9 cents) Debt Service (3 cents) Department of Human Services (3 cents)

The remaining General Fund spending is for state agencies, boards and commissions dedicated to activities such as economic development, agriculture and forestry and grant programs. The General Fund also covers the costs of operating the state’s legislative, judicial and executive branches.

Not included in Georgia’s General Fund are taxes and fees that are collected into several other funds. Lottery proceeds are also not included and account for about 5% of total state funds or $1.6 billion.

Motor Fuel Funds

$2.1 Billion (3% of Georgia’s Budget) Georgia’s Constitution mandates that revenue from state motor fuel taxes must be spent on roads and bridges. The money is dedicated to new construction, maintenance of existing infrastructure and debt service on past investments. Georgia’s 2024 motor fuel rates are 31.2 cents per gallon of gas and 35 cents per gallon of diesel, an uptick from last year. While the state taxes aviation gasoline at one cent per gallon, there is a tax exemption on jet fuel, which will cost the state an estimated $101 million in FY 2025. The state’s budget includes $2.1 billion in motor fuel revenue.

Education and Health Care Equal 73 Percent of $36.1 Billion Budget for Fiscal Year 2025 Other Public Safety and State Courts Human Services Debt Service General Government Criminal Legal Systems Pre K-12 Education

Transportation

Health Care

Higher Education

Source: Governor’s Budget Report Amended FY 2024 and FY 2025

Agency Funds

$5.9 Billion (9% of Georgia’s Budget) Agency funds include $2.5 billion in tuition and fees collected by the University System of Georgia and the Technical College System of Georgia.

The University System of Georgia alone accounts for $4.5 billion in Agency and Research funds. Each school retains the money collected from tuition.

Largest Share of Agency Funds goes to University System of Georgia University System of Georgia Board of Regents Agency Funds

$4,488,149,412

Technical College System of Georgia Agency Funds

$357,108,714

Indigent Care Trust Fund -- Public Hospital Authorities

$139,386,524

All Other Agency Funds Total

$880,186,144 $5,864,830,795

Source: Conference Committee Substitute to HB 916 as signed by the governor.

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Federal Funds

$19 Billion (28% of Georgia’s Budget) Georgia spends most of its federal money on: • • • • •

$10.9 billion for Medicaid, PeachCare and other health care programs $2.8 billion for Pre-K-12 education, which includes school nutrition programs, services for students from families with low incomes and support for students with disabilities $2.1 billion to support Georgia’s Universities and Technical Colleges $1.6 billion for the Georgia Department of Transportation $1.2 billion for human services, Temporary Assistance for Needy Families (TANF or cash assistance) and child welfare programs

Federal rules require the state to match federal funding for Medicaid and other investments that benefit Georgians. As a result, changes in federal funding are often reflected in state funding. $19 Billion in Federal Funds Mostly Pays for Health Care, Education, Infrastructure and Human Services Other Department of Human Services Department of Transportation

Higher Education

Health Care

Pre-K-12 Education

Source: Conference Committee Substitute to HB 916 as signed by the governor.

Intrastate Transfers $5.8 Billion

Intrastate transfers are typically payments from the State Health Benefit Plan (SHBP), which insures nearly 665,000 school system employees, state employees, retirees and their families. Last year, the employer cost of health coverage through SHBP, which is paid by the state and public schools, spiked by 67%. There is a two-year phase-in for K-12 schools, but the increase was effective immediately for most state employees. The required employer contribution increased by $7,200 per year for each employee, or by $635 per member, per month from $945 to $1,580. This increase was driven by an aging member population, the COVID-19 pandemic, stagnant subscriber levels and state policymakers’ decisions, such as a 2019 employer contribution holiday and a 2020 decrease in the employer contribution rate for state employees.

Gov. Kemp’s FY 2025 budget proposal plans for another increase in premiums for non-certified school employees (bus drivers, cafeteria workers, and others) to take effect on January 1, 2027.

Health Payments Make Up Most Intrastate Transfers State Health Benefit Plan Payments

$5,142,505,397

Medicaid Services Payments -- Other Agencies

$280,857,262

Self-Insurance Trust Fund Payments

$219,051,031

Other Intrastate Government Payments Total

$149,550,901 $5,791,964,591

Source: Conference Committee Substitute to HB 916 as signed by the governor.

2025 Tobacco Settlement Fund Budget $149 million (0.2% of Georgia’s budget)

Georgia receives yearly payments from a 1998 settlement signed with four of the nation’s largest tobacco companies, known as the Tobacco Master Settlement Agreement. is not required dedicate these for Georgia receives annualGeorgia payments from a largetosettlement signedpayments in 1998 with specific purposes.

The use of tobacco settlement money may vary from year four of the nation’s largest tobacco companies, known as the Tobacco Master to year, though most of Georgia the fundsisgo health care.

Settlement Agreement. nottorequired to dedicate these payments for

Most Tobacco FundsAs Used for Health 2025 Tobacco Settlement Fund can Budget specific purposes. a result, the Services use of tobacco settlement money vary Medicaid $124,062,351 from year to year, though most of the funds have been allocated to health care.

Public Health

$13,864,327

Adult Developmental Disabilities Waiver Services

$10,255,138

Other

$433,783

Total

$148,615,599

Source: Conference Committee Substitute to HB 916 as signed by the governor.

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Budget Trends Inefficient tax breaks cost the state money that should be invested in its people.

Georgia has a history of enacting new corporate tax exemptions and credits each year, and once in the tax code, exemptions and credits have typically remained there without further evaluation. Since 2004, GBPI has expressed concerns about this practice and advocated for change. There have been incremental wins along the way, such as sunset provisions added to new credits. Due to GBPI’s advocacy, during the 2021-2022 session, the state enacted legislation that allows the chairs of the General Assembly’s tax-writing committees to request individual analyses on a limited number of tax expenditures. Senate Bill 366, enacted in the FY 2024 Legislative Session, tweaked this process and now requires at least 12 economic analyses annually. This is positive movement, but there is still much work to do. Georgia ranks worst among the 50 states in disclosing information about tax credit programs and other economic development incentives.

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Budget Trends The $36.1 billion state budget signed into law by Gov. Kemp for FY 2025 took effect July 1, 2024. The budget represents an 11% year-overyear increase from the original FY 2024 budget that Gov. Kemp signed last year. Given that Georgia’s reserve accounts continue to overflow, Georgia can do more to address ongoing needs from health care to public education. The state government remains understaffed in critical areas, with Georgia’s full-time state workforce having shed approximately 4,400 employees over the past five years, a decline of over 7%. The state also continues to struggle with a high employee turnover rate of 21%, which has remained above 20% for the past five years.

The state responded to the 2020 pandemic-induced downturn by cutting spending and thinning its workforce. The strong fiscal response at the federal level helped to create an economic surge, which was reflected in higher-than-expected FY 2021 through 2024 state tax collections. These dueling responses produced a cycle in which state revenue collections continued to significantly outpace spending, adding to already historic levels of unobligated reserves.

Entering fiscal year 2025, Georgia has a clear opportunity to respond to long-standing needs. The level of unused resources currently available underscores that state leaders have chosen to maintain increasingly large reserves rather than addressing gaps in state government. However, state leaders have shifted their posture—with AFY 2024 marking the first time Gov. Kemp has allocated reserves for non-emergency spending.

Georgia’s Reserves Continue to Grow The $16.9 billion in state general fund reserves ($11.6 billion undesignated) remains the most pressing unanswered fiscal question facing lawmakers. Even as the state has moved spending closer in proximity to revenue collections in AFY 2024 and FY 2025, undesignated reserves remain at unprecedented levels.

With up to $2 billion made available, the AFY 2024 budget is the first non-emergency spend-down of the state’s undesignated reserves in recent history. However, because the funds are authorized as part of a conservative overall estimate for state tax revenues, the bulk—if not all— of the $2 billion in reserve funds will likely be remitted back to the state’s undesignated surplus account at the end of the fiscal year.

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State Savings Account Remains Full; Georgia Holds Record Reserves The Revenue Shortfall Reserve (RSR), Georgia’s rainy-day fund, provides stability in economic downturns. The fund is like a savings account to pay expenses and maintain services when revenues decline unexpectedly.

Money is not appropriated into the RSR; the balance grows at the end of each fiscal year if there is surplus state revenue (up to 15% of prior year revenue). The governor is also authorized to release for appropriation any amount over the minimum balance required, 4% of prior year revenues, in case of a fiscal emergency or as part of the annual state budget. Since the end of FY 2021, Georgia’s Revenue Shortfall Reserve has remained at its maximum level, with consistently conservative revenue estimates issued

by Gov. Kemp also resulting in an additional unobligated surplus.

Georgia finished FY 2021 with approximately $3.8 billion in unspent revenue, filling its rainy-day fund to 15% for the first time ($4.3 billion) and designating the remaining $2.3 billion as ‘undesignated surplus.’ After FY 2022, $6.7 billion in unspent revenues were distributed to grow the state’s RSR to $5.2 billion and increase the amount in undesignated surplus accounts to nearly $7 billion. In 2023, Georgia generated revenues of more than $4.1 billion above what the state spent, which increased the amount held in unobligated reserves to $10.9 billion and elevated overall state reserves to $16.3 billion. State revenue numbers released in July 2024 show that Georgia ended FY 2024 with $16.9 billion in reserves.

Georgia Revenue Shortfall Reserve Remains Full for Fourth Consecutive Year $6 $5

Billions

$4 $3 $2 $1

‘23

’22

‘21

’20

‘19

’18

‘17

’16

‘15

’14

‘13

’12

‘11

’10

‘09

$0 Source: Governor’s Budget Report, AFY 2024 and FY 2025

State Likely to Maintain $11 Billion+ in Undesignated Reserves, Following Historic Surpluses in Fiscal Years 2021-2023

Billions

$50 $40

$50,000,000,000

$30

$40,000,000,000

$20

$30,000,000,000

$10

$20,000,000,000

$0

$10,000,000,000 2019 (reported)

2020 (reported)

2021 (reported)

Total Net Taxes (Department of Revenue Total State Funds Appropriations

2022 (reported)

2023 (reported)

2024 $(projected)

End-of-year net balance to be added to RSR/unobligated surplus Revenue Shortfall Reserve

Unobligated Surplus Source: Department of Revenue, Comparative Summary of State General Fund Receipts (July 2022 – June 2024); The Governor’s Budget Report, Amended Fiscal Year 2024 and Fiscal Year 2025

Total Net Tax

Total State F

29

Over $11 Billion in Forgone Revenue Collections in FY 2025 Georgia offers a wide array of tax credits, deductions and other tax breaks, also known as tax expenditures, that give preferential treatment to certain taxpayers and corporations to achieve policy goals. Fifty-four of these tax breaks will cost the state $11.4 billion in lost revenue in the 2025 fiscal year. Several of Georgia’s largest tax breaks deliver outsized gains to select groups or industries, such as manufacturing, film or insurance, with less benefit to Georgia’s people.

Georgia lacks a comprehensive review process to measure and compare the costs and benefits of all existing and proposed tax breaks, and instead evaluates tax breaks on a case-by-case basis while frontloading measures with sunset provisions that are soon to expire.

The costliest industry-specific tax break offered is Georgia’s Film Tax Credit, designed to attract film production by subsidizing as much as 30% of the costs. The Georgia Film Tax Credit ranks as the largest tax subsidy of its kind nationally at an annual cost of about $1 billion.

Film Industry, Insurance Companies Receive Largest SpecialInterest Tax Breaks

$1,021 million End of year n

Film Tax Credit

$555 million

Special deductions insurance companies

$350 million

Jobs Tax Credit/Quality Jobs Tax Credit Exclusion of global income (GILTI)

$112 million $66 million

Bank Tax Credit

$66 million

Revenues from coin-operated amusement machines

$73 million

Credit for retraining employees

$62 million $101 million

Income Tax Credit for Contributions to Rural Health Care Organizations

$46 million

Qualified Law Enforcement Donation Credit

$69 million

Agribusiness Tax Credit

Unobligated S

$290 million

Manufacturer’s Investment Tax Credit

Exemption for the sale and use of jet fuel

Revenue Sho

$240 million

Research Tax Credit Qualified Education Expense Credit (SSOs voucher contributions for private schools)

Appropriation

$12 million

Source: Georgia Department of Audits and Accounts, “Georgia Tax Expenditure Report for FY 2025”

31

State Begins Flat Tax Implementation House Bill 1437, signed into law by Gov. Kemp in 2022, includes personal and corporate income tax rate reductions that will primarily benefit the state’s highest earners. This year, legislators accelerated the enactment of HB 1437 and passed HB 1023 to tie the state’s corporate income tax rate to its personal income tax rate, established at 5.39%. The law requires overall revenue growth of at least 3% to proceed without interruption through four additional steps to achieve full implementation by 2030.

However, the plan means forgoing over $2 billion in annual personal income tax revenues, which threatens the long-term stability of Georgia’s revenue system. Unless further action is taken, the state’s income tax rate will be reduced to 5.29% in January 2025 if state revenues meet the required 3% growth threshold.

Average Tax Cut for those with Cut

Accelerating Flat Tax from 5.49 to 5.39% Offers Small Benefits to Most; 13% of $349 Million in Cuts Goes to 60% of Georgia Households $1,400 $1,200 $1,000 $800 $600 $400 $200

Average Annual Income

$0

Bottom 20%

Second 20%

Third 20%

Fourth 20%

$14,000

$33,000

$58,000

$105,000

Next 15%

Next 4%

Top 1%

$183,000 $424,000 $1,876,000

Source: Institute on Taxation and Economic Policy, December 2023

Notes

33

Education In 2004, Georgia’s per capita spending on elementary, secondary education and higher education combined was 32nd in the nation; in 2021, it was 42nd. For 20 years, GBPI has continued to advocate for robust funding for K-12 education, including over 15 consecutive years when Georgia failed to financially support public schools to the level established under its own K-12 funding formula. In the last three years, GBPI has helped secure over $200 million for school bus replacement by underscoring student transportation needs. Since 2017, GBPI has also advocated for robust need-based aid for students pursuing higher education, especially as the state has shifted more of the cost of attending college onto students.

GBPI achieved a breakthrough in 2022 when $10 million was allocated to the new college completion grants program, a targeted intervention to help students with short-term economic challenges obtain their diplomas.

35

Georgia’s 2025 Education Funding Georgia’s Child Care Services and pre-kindergarten programs provide critical support to families and their children. In FY 2025, $72 million was allocated for Child Care Services, $9.3 million more than in FY 2024. The Pre-K program’s budget was $541 million, with legislators providing $25 million for a $2,500 salary increase for certified Pre-K teachers and assistant teachers.

Georgia Pre-K providers are reimbursed $25,741 for assistant teacher salaries, which is $5,500 more than last year. Lottery reserves fund Georgia’s Pre-K program.

Alongside Georgia’s programs for very young children, Georgia’s state budget for K-12 public schools is $13.2 billion in FY 2025, a $1.4 billion increase from FY 2024. This includes a $242 million increase in the State Health Benefit Plan (SHBP) employer contribution for certified school employees (teachers, literacy coaches, high school counselors, and administrative leaders). The state stopped paying the employer contribution for non-certified employees (bus drivers, paraprofessionals, custodians and others) in 2012, leaving individual districts paying the cost. However, included in the FY 2025 budget is $53 million in state funds to pay for the SHBP employer contribution for non-certified school employees. The budget also includes language to increase that $53 million in coming years to ensure parity of state funding between the SHBP employer contributions for certified and non-certified employees. Lawmakers also appropriated $368 million to provide a $2,500 raise for certified employees starting September 1, 2024.

The state budget for the University System of Georgia (USG) is $3.4 billion with $3 billion of those funds allocated to USG’s 26 colleges and universities for student instruction. The budget for the Technical College System of Georgia includes programs like adult education, workforce development and a 4% cost-of-living adjustment for eligible staff, totaling $489 million. The lottery funds support higher education programs such as College Completion grants and the HOPE Scholarship. There are currently $1.4 billion in unrestricted reserves and $2.2 billion in total education lottery reserves. In the 2024 legislative session, GBPI advocated for SB 526, the Good Faith Grant, which opened the door to the possibility of using lottery reserves to fund a program of robust need-based aid for students pursuing postsecondary education. The Good Faith Grant builds on the success GBPI achieved in securing college completion grants funding in the FY 2023 budget.

DECAL Budget for FY 2025 The Department of Early Care and Learning (DECAL) administers Child Care Services; the Georgia Pre-Kindergarten Program; Nutrition Services, which administers the federal Child and Adult Care Food Program; the Summer Food Service Program (SFSP) for low-income children in daycare facilities; and Quality Initiatives, which works to improve the quality and accessibility of child care programs. State funds support Child Care Services and the Pre-K Program.

The Fiscal Year (FY) 2025 budget sends $613 million to DECAL and includes about $72 million for the Childcare and Parent Services (CAPS) program, up from $62.5 million in FY 2024. CAPS consists of the state’s child care subsidy program and support for child care providers.

FY 2025 Budget Would Send $72 Million to Child Care Services Fiscal Year 2025: $71,882,694 Fiscal Year 2024: $62,534,475 Fiscal Year 2023: $61,436817 $0

$9

$18

$27

$36 $45 $54 Millions Source: The Governor’s Budget Reports and FY 2025 budget HB 916

$63

$72

The $9.3 million increase to CAPS is one of the largest increases the program has seen. Much of the investment will be used to increase provider reimbursement to the 60th percentile of the market rate. Before the temporary federal relief funding, the state reimbursed providers at around the 25th percentile, well below the federal standard. The historically low reimbursement rate has made it hard for many child care businesses to invest in their staff and classrooms. While the increase to the 60th percentile is an improvement, it is below the cost of quality care.

37

Georgia Pre-K Program Receives $100 Million Boost for Teacher Pay, Smaller Class Sizes and More Classrooms The FY 2025 budget provides a historic increase in state lottery funding for the Georgia Pre-K program to $541 million, about $98 million more than in FY 2024. The final FY 2025 budget includes about $52 million more for pre-K than the Governor’s budget recommendation.

The FY 2025 Budget Sends $541 Million to the Georgia Pre-K Program Fiscal Year 2025: $541,423,948 Fiscal Year 2024: $443,790,064 Fiscal Year 2023: $400,900,881 $0

$50

$100

$150

$200

$250 $300 Millions

$350 $400

$450

$500 $550

FY ’25

Source: HB 916 and The Governor’s Budget Reports, Amended Fiscal Year 2024 and Fiscal Year 2025 and Amended Fiscal Year 2023 and Fiscal Year 2024

The additional funding for Georgia Pre-K will be used to increase pay for lead and assistant teachers and bolster the program’s infrastructure; increases include: • • • • • • • • • •

$25 million for a $2,500 increase in base salaries for pre-K lead and assistant teachers. $19.4 million to create more salary alignment between pre-K lead and assistant teachers and their K-12 counterparts. $9.5 million for the first year of a four-year plan to reduce class sizes from 22 to 20. $17.5 million in operation funds to start-up grants for new pre-K classrooms, classroom replenishment grants every five years, and student transportation.

Start-up operation grants will increase from $8,000 to $30,000 per classroom.

Replenishment grants provide $15,000 every five years for classroom enhancements.

Student transportation funding will increase to $80.78 per child for all students. $11.5 million in additional operation grants to private Georgia Pre-K providers. $9 million for the Summer Transition Program, which provides supplemental support to certain rising pre-K and kindergarten students. $243 thousand for state employees’ 4% cost-of-living-adjustment (COLA).

Additionally, SB 233, the private school voucher legislation, included a provision for public schools to consider potential pre-K enrollment for capital outlays. This would support the building or remodeling of pre-K classrooms in public schools.

39

It’s Time for a Generational Investment in Child Care to Bolster the ECE System for the Next 20 Years

Pre-K

120% 100% 80% 60% 40% 20% 0 -20

Child Care

116%

FY ’25

FY ‘24

FY ’23

FY ‘22

FY ’21

FY ‘20

FY ’19

FY ‘18

FY ’17

FY ‘16

FY ’15

FY ‘14

FY ’13

FY ‘12

FY ’11

FY ‘10

FY ’09

FY ‘08

FY ’07

FY ‘06

FY ’05

15%

FY ‘04

% Change in State Funding

Child care is the foundation of early childhood education (ECE) in Georgia. The child care system often serves as the starting point for children participating in the Pre-K program and eventually entering kindergarten. However, since FY 2004, state child care funding has increased by only 15%, while funding for the Georgia Pre-K program has more than doubled.

The State Investment in Child Care has Changed Little in 20 Years and has Always Lagged Behind the Georgia Pre-K Program

Note: Analysis includes nominal dollars Source: The Governor’s Budget Reports including the proposed Amended Fiscal Year 2024 and Fiscal Year 2025 budgets

The Georgia Pre-K and child care systems are funded differently. The state lottery funds the Georgia Pre-K program almost entirely, and in recent years, lottery revenues have grown. There is also a $1.4 billion unrestricted lottery reserve over and above what is needed to cover HOPE scholarships in a shortfall, which state lawmakers have yet to tap.

Conversely, state general and federal funds cover CAPS. For years, the state has contributed what is minimally required to draw down federal resources, which are also inadequate. CAPS received federal relief dollars to stabilize the system during the pandemic. Those funds end completely in September 2024.

Ultimately, Georgia’s child care system has never had enough funding to help lower costs for most low-to-moderate-income families or reimburse providers at the true cost of quality care. Before DECAL temporarily boosted the CAP subsidies available with federal COVID relief funding, Georgia only served about 18% of eligible children. GBPI analysis found that in all but 17 counties, the cost of care for an infant was more than 7% of a typical family’s income, the federal government’s measure of affordable care. The same analysis found child care costs often take up even more of a typical Black or Latinx family’s income in most counties.¹

Furthermore, historically low CAPS reimbursement rates contributed to low pay for child care teachers. Zero to three child care teachers typically earn less than Georgia Pre-K lead teachers because their pay is based on tuition and low reimbursement rates. There is also a racial pay disparity as Black ECE teachers are more likely than white ECE teachers to be lead infant toddler teachers.² Black teachers often face significant systemic barriers to achieving the bachelor’s degree required to be a higher-paid Georgia Pre-K lead teacher.³ The growing costs place greater economic pressure on women, who are often the primary caregivers, even if they are working. A recent survey of Georgia parents found that mothers of young children are likelier to turn down a job opportunity or work less than fathers of young children.⁴ A 2018 analysis found that Georgia loses at least $1.75 billion in economic activity annually due to child care challenges.⁵ Georgia needs a generational investment in child care. State lawmakers should amend the state constitution to create a $7.5 billion, self-sustaining Child Care Trust Fund from the billions in the undesignated reserve. If managed similarly to Georgia’s Teacher Retirement System (TRS) and Employee Retirement System (ERS), the Child Care Trust Fund could sustain annual payouts between 5-10% per year to finance and expand high-quality, affordable child care options for families statewide. An initial payout of about 6% would equate to $486 million for CAPS in the first year. A child care trust fund could be the critical foundation for better care and education for children, lower costs for families, higher pay for teachers and a stronger Georgia economy.

1. Finch Floyd, I. (2024, May 21). From Barriers to Bridges: Expanding Access to Child Care and Improving Upward Mobility for Georgia’s Child Care Workers. Georgia Budget and Policy Institute. https://gbpi.org/from-barriers-to-bridges-expanding-access-to-child-care-and-improving-upwardmobility-for-georgias-child-care-workers/.

2. Georgia State University Andrew Young School of Policy Studies, Bright from the Start, Carl Vinson Institute of Government at the University of Georgia. (June 2016). Economic impact of the early care and education industry in Georgia. Georgia Department of Early Care and Learning. https://www.decal.ga.gov/documents/attachments/EconImpactReport.pdf.

3. Finch Floyd, I. (2024, May 21). From Barriers to Bridges: Expanding Access to Child Care and Improving Upward Mobility for Georgia’s Child Care Workers. Georgia Budget and Policy Institute. https://gbpi.org/from-barriers-to-bridges-expanding-access-to-child-care-and-improving-upwardmobility-for-georgias-child-care-workers/.

4.Hart Research. (2024). Meeting the needs of Georgia’s young families. Georgia Early Education Alliance for Ready Students. https://geears.org/wp-content/uploads/HART-RESEARCH-REPORTPARENT-SURVEY.pdf.

5. Goldberg, H., Cairl, T. and Cunningham, T. (2018). Opportunities lost; How child care challenges affect Georgia’s workforce and economy. Georgia Early Education Alliance for Ready Students and the Metro Atlanta Chamber. https://geears.org/wp-

State Investment in Pupil Transportation Begins to Address Rising Expenses Over 930,000 students, around 55% of all K-12 public school students, ride the school bus. To help support those who serve them, lawmakers added $5 million to provide transportation personnel a 4.1% salary increase (in 2023, Georgia school bus drivers were paid 21% below the national average).

Lawmakers also appropriated $354 million to support pupil transportation, including $20 million for new school buses. These added funds allow the state to support 40% of school districts’ pupil transportation operating costs.

FY 2025 funding builds upon the additional $188 million for school bus replacement provided in the AFY 2022 budget with instructions for it to be used in FY 2022-2024.

Even with pre-FY 2025 transportation personnel salary increases and the AFY 22 infusion included, the state spent less per student in FY 2023 ($117.33) than FY 2002 ($120.73), over two decades prior, not even counting the impact of inflation. Over this 22-year span, the cost of labor, fuel and vehicles have increased—a trend especially stark in FY 2022. School districts, which are required by state law to provide school bus services to students, must find additional funding in other areas. State funding for pupil transportation, like that provided in FY 2025, can help shorten school routes, improve safety and free up more money for the classroom.

$800 $700 $600 $500 $400 $300 $200 $100 $0

Total Costs

State Funding

‘00 ’01 ‘02 ’03 ‘04 ’05 ‘06 ’07 ‘08 ’09 ‘10 ’11 ‘12 ’13 ‘14 ’15 ‘16 ’17 ‘18 ’19 ‘20 ’21 ‘22 ’23 ‘24 ’25

Per Student

State Funding for Pupil Transportation Has Just Begun to Address Inflation

Note 1: FY 2023 is the most recent data available of actual costs for student transportation.

Note 2: FY 2022, 23 and 24 state funding include one-third of the AFY 2022 bus replacement funding, per language in AFY 2022 appropriations bill Source: Georgia Appropriations Bills AFY 2000 – FY 2025; Georgia Department of Education; School System Expenditures FY 2000 – FY 2023

Inflation Overtakes Recent Teacher Salary Increases

This year, lawmakers passed a $368 million increase to the state salary schedule for Georgia public school certified employees. The base salary for FY 2025 is $43,592 for 10 months of employment. Governor Kemp has made teacher pay raises a primary education policy goal and successfully led the General Assembly in allocating raises of $3,000 in FY 2020, $2,000 in FY23, $2,000 in FY24 and $2,500 in FY25. The cost of living has increased at a rate that, even with the pay increases, the buying power of the teacher base salary is thousands of dollars less than it was 17 years ago. If salaries kept pace with inflation, teachers paid the base salary in 2024 would have made $7,900 more annually—$395 more per pay period. Georgia ranks 39th in the nation for average teacher starting salary, and 20th for average overall teacher salary. In comparison, Alabama is 23rd and 31st in those same categories; South Carolina is 33rd and 35th; and Florida is 16th and 50th.

Teachers’ Base Salaries Continue to Lag Growing Cost of Living $60,000 $50,000 $40,000 $30,000 $20,000

-10,000

State Salary Base

‘24

’23

‘22

’21

‘20

’19

‘18

’17

‘16

’15

14

‘13

’12

‘11

’10

‘09

’08

$0

‘07

$10,000

Constant FY 2007 Dollars

Source: GBPI State Salary Schedule FY07-FY25; CPI-adjusted FY07 dollars.

Note: 2009 was the sole year where the pay raise exceeded inflation, providing a $72 boost to teachers’ salary.

43

Private School Vouchers and Property Tax Exemption Put K-12 Public School Funding at Risk This year, the General Assembly passed SB 233 (“The Georgia Promise Scholarship Act”), a voucher bill that was conservatively predicted to divert as much as $150 million away from public schools to private schools. Even with adjustments limiting the scholarship to families with incomes below 400% of the poverty line ($125,000 for a family of four; state median income for a family of four is $95,000), the bill will drain millions away from K-12 public schools. Between 2008 and 2022, Georgia’s existing voucher programs diverted $1.3 billion to private schools.

Alongside SB 233, the General Assembly provided for a statewide referendum to cap annual assessment increases for homesteaded property taxes (taxes on the home you live in) at the rate of inflation.¹ Should voters pass this referendum, it will restrict the ability of school districts to fund their local schools. These changes are occurring against the backdrop of federal pandemic-era public school funding that is coming to an end,² and Georgia ranks 34th among states for per-pupil funding adequacy.³ Georgia also underfunded K-12 public education for nearly two decades (fiscal years 20032022), a net underfunding of over $10 billion.⁴ Consequently, Georgia public schools and students are only now beginning to emerge from a long period of inadequate financial support that fell short of what was provided for by the Quality Basic Education formula.

¹Owens, S. (2019, May 23). How does Georgia fund schools? Georgia Budget and Policy Institute. https://gbpi.org/how-does-georgia-fund-schools/ ²Lefebre, J., & Master, S. (2024, February 28). Expiration of federal K-12 emergency funds could pose challenges to states. Center on Budget and Policy Priorities. https://www.cbpp. org/research/state-budget-and-tax/expiration-of-federal-k-12-emergency-funds-could-posechallenges-for ³Education Law Center. (2023). Making the grade 2023. https://edlawcenter.org/research/ making-the-grade-2023 ⁴Owens, S. (2022). (Graph: Two decades of underfunding: Cuts to K-12 education FY 2003-FY 2022). https://gbpi.org/wp-content/uploads/2022/01/State-Of-Education-Funding-2-1.png

University System of Georgia/Board of Regents Budget Updates The 2025 budget for the University System of Georgia (USG) and Board of Regents is $9.7 billion. State general funds allocated to USG’s 26 colleges and universities for student instruction, support services and basic college teaching operations total $3 billion for FY 2025. This teaching budget increased 6% from FY 2024, totaling $204 million. The $9.7 billion total also consists of $1.8 billion in federal grant funding and $1.6 billion in other funds for cooperative extension services, public libraries and research funding initiatives.

The FY 2025 USG teaching budget includes the following highlights: • • •

•

A 4% cost-of-living increase for full-time, benefit-eligible employees at $92 million.

The employer contribution rate to the Teachers Retirement System (TRS) has increased by $8 million, moving from 19.98% to 20.78%.

Restoration of the FY 2024 $66 million USG formula funds – because in the 2023 Legislative Session, all 26 USG institutions sustained unique reductions; this detrimental decrease came after a 10% USG system-wide cut of $230 million at the beginning of the COVID-19 pandemic, which was never restored.

A $22 million increase of employers’ share of health benefits.

45

Tuition and Fee Rate Updates The USG tuition rates in the 2024-25 academic year are set to increase for in-state students by 2.5%, and for out-of-state students by 5%. Additionally, a new third-level rate will establish tuition for out-of-country students at 2% more than the rate for out-of-state students. The Board of Regents decided on this increase (after keeping tuition flat for six of the last eight years) due to inflation of goods and services and competition from the private sector for staffing. In the 2023-24 academic year, the average tuition and fees for a public four-year college in Georgia are $8,306, ranking sixth lowest in the country and below the national average of $11,260.

The mandatory fee structure at 20 of USG’s 26 institutions has been increased to cover the growth of online student course delivery. Online enrollment rose 91% from fall 2019 to fall 2022, from 38,929 to 74,525 students. This change includes an online fee equivalent to their institution’s technology fee and a 50% charge of their institution’s mandatory fees.

University System of Georgia’s Disinvestment in Public Higher Education Obtaining a post-secondary education is critical to obtaining gainful employment. Students who are racially and financially marginalized and lack basic resources are exceptionally vulnerable to policies that do not adequately fund higher education.¹ The USG funding formula provides that education costs be calculated based on credit hour production and shared between the state and students, with the state generally covering 75% and students covering 25%.

Since 2002, USG has reduced its share of student support, resulting in underfunded public higher education. This lack of equitable access to college affects individuals who have been historically excluded from building wealth and unable to afford education. Recent efforts have been made to address the issue, including an increase of $230 million in the FY 2023 budget to eliminate the special institution fee and a budget cut restoration of $66 million in FY 2025. Additionally, there has been a 6% increase in the USG teaching budget. Despite these changes, the state only funds 57% of higher education, 18% less than it would if the USG funding formula were adhered to.

80%

73%

70% 66%

60%

57% 50%

50%

‘24

’23

‘22

’21

‘20

’19

‘18

’17

‘16

’15

‘14

’13

’11

‘10

’09

‘08

’07

‘06

’05

‘04

’03

‘12

47%

40% ‘02

Percentage of State Share

The University System of Georgia Has Shifted More Cost to Students Since 2002

Year Source: GBPI Analysis of the University System of Georgia Data, Fall 2024 Percentage of State’s Share of Funding Formula ¹Postsecondary Value Commission, Voight, M., Dancy, K., DiBenedetto, K., Parker, A. G., Mugglestone, K., Peters, E. E., Roberson, A. J., Voight, M., Engle, J., Rorison, J., Matsudaira, J., Troutman, D., & Addo, F. (2021). Equitable Value: Promoting economic mobility and social justice through postsecondary education. https://www.postsecondaryvalue.org/wp-content/ uploads/2021/07/PVC-Final-Report-FINAL-7.2.pdf 47

Technical College System of Georgia The Technical College System of Georgia (TCSG) includes 22 colleges providing technical and core academic education.

The 2025 budget for TCSG is $489 million. Approximately $418 million has been reserved for technical education, which provides funding for workforce development and continuing education or training for youth and adult learners. The rest of the budget has been allocated for Adult Education programs that cater to individuals without a high school diploma, and business initiatives such as Quick Start. Quick Start is a workforce training program that aims to encourage job creation and retention for start-ups, while also supporting business expansion. The Quick Start budget for 2025 is $22 million.

The Technical Education FY 2025 budget includes: • A 4% cost-of-living increase for full-time, benefit-eligible employees at approximately $10 million.

• A budget of $222,318 to reflect the Teachers Retirement System (TRS) employer contribution rate increase from 19.9% to 20.7%.

• A $9 million funding increase reflects a 3% increase in enrollment.

From fall 2022 to fall 2023, TCSG enrollment grew by 1,770 full-time equivalent (FTE) students. Out of the 22 institutions, 14 experienced an increase in enrollment; one remained flat (North Georgia Technical College); and seven institutions saw a decrease in enrollment.

Technical College System Enrollment Changes Fourteen TCSG Institutions Experienced an Increase in Enrollment 6,000

+170

+264 +352

5,000

+70

+234 +246

Fall 2022

Gwinnett

Central Georgia

Wiregrass Georgia

Lanier

Augusta

Chattahoochee

Columbus

Georgia Piedmont

Southeastern

+87

Southern Crescent

Oconee Fall Line

Savannah

+228

+136

+97

+74

+47

1,000 0

+214

South Georgia

2,000

+86

Albany

3,000

Change: +20

Southern Regional

4,000

Fall 2023

Source: GBPI analysis of Technical College Enrollment from Fall 2022 and Fall 2023

Seven TCSG Institutions Experienced a Decrease in Enrollment 4,000 3,000

Change: -189

2,000

-84

-24 -50

-119 -89

Fall 2022

1,000 Georgia Northwestern

Athens

West Georgia

Coastal Pines

Ogeechee

Fall 2023 Atlanta

0

Lorem ipsum

Source: BPI analysis of Technical College Enrollment from Fall 2022 and Fall 2023

49

Lottery Funds Support Georgia Pre-K and Post-Secondary Programs Georgia’s lottery funds are constitutionally dedicated to supporting education.

In FY 2025, lawmakers designated $1 billion from lottery sales to fund postsecondary education. While the lottery-funded Pre-K program experienced historical budget growth, lottery-funded post-secondary programs saw funding shifts due to inter-program transfers and changes in expected expenditures.

In Georgia, the Pre-K program helps prepare four-year-old children for success in kindergarten and beyond. In FY 2025, the Pre-K budget increased by $98 million to $541 million, which includes $52 million more for pre-K than was in the Governor’s budget.

HOPE Scholarships – Public Schools and HOPE Scholarships – Private Schools are merit-based awards provided to students enrolled at public and eligible private four-year institutions in Georgia.

• Changes to the HOPE Scholarships – Public Schools program budget included a $12 million reduction to align funding with expected program expenditures (funding the HOPE Scholarship at a 100% factor rate) and a $17 million transfer from the HOPE Scholarships program for USG schools to the HOPE Grants programs for TCSG institutions. These changes decreased the HOPE Scholarships budget from $875 million to $846 million for FY 2025.

• HOPE Scholarships for Private Institutions decrease from $91 million to $75 million. This is due to reductions in expected program expenditures for the HOPE Private Award rate ($2,496) and HOPE Zell Private Award rate ($2,985).

HOPE Grants are merit-based awards for students enrolled at public two-year institutions in Georgia. The HOPE Grants program experienced a net $4 million reduction, ($21 million decrease to reflect expected program expenditures and $17 million increase in transfer funds from the HOPE Scholarships for USG institutions).

The HOPE Grants program’s FY 2025 total is $77 million, down from $81 million in FY 2024.

The HOPE High School Equivalency Examination Grant is designed to encourage those taking the High School Equivalency Exam to pursue higher education at eligible post-secondary institutions within the state. Eligible Georgians can be awarded up to $200 to cover GED exam fees. In the fiscal year 2024, the budget for the program was $1.3 million. However, due to a reduction in funds to reflect expected program expenditures of $845,510, the budget for fiscal year 2025 has been reduced to $500,000.

51

Education Lottery Reserves The Lottery for Education account is required to maintain a minimum balance, called the shortfall reserve, of 50% of the previous year’s net lottery proceeds.

If lottery ticket sales underperform, the state can draw on this reserve to fund HOPE. Once the 50% level is reached, additional reserves are unrestricted.

In FY 2023, total education lottery reserves were $2.2 billion, with a $737 million required shortfall reserve and $1.4 billion in unrestricted reserves.

The Education Lottery Totals $2.2 Billion in FY 2023, $1.4 Billion more than HOPE Shortfall Reserve $2,500,000,000

$2,000,000,000

Total Lottery Reserves, $2.2 billion

$1,500,000,000

$1,000,000,000 Required Shortfall Reserve, $737 million

Source: State Accounting Office--Georgia Revenues and Reserves Report

’23

‘22

’21

‘20

’19

‘18

’17

‘16

’15

‘14

’13

‘12

’11

‘10

’09

$-

‘08

$500,000,000

The College Completion Grants Program In fall 2022, the first College Completion Grants were awarded to students who qualified for financial support to finish their post-secondary education.

Four-year and two-year college students who completed at least 80% of their degree program could receive up to $2,500 in College Completion Grants. In the 2023 and 2024 Legislative Sessions, bills were proposed to increase the award amount and to decrease the degree completion threshold from 80% to 70% for four-year programs and from 80% to 45% for two-year programs.

Another bill would have extended the College Completion policy sunset year from 2025 to 2027. The College Completion Grants budget remains flat at $10 million for FY 2025. Since 2022, the College Completion Grants program has been making a positive impact across the state: College Completion Grant 2023-24 Academic Year Highlights • In FY 2023, 6,891 awards (totaling $7 million) were granted to 6,065 recipients.¹ • 58% of College Completion Grants recipients earned a certificate, diploma or degree during the 2023 academic year.

• 50% of College Completion Grant recipients were deemed Pell Grant eligible.

• 70% of credentials earned by College Completion Grants recipients were bachelor’s degrees, 14% were associate degrees, and 15% were distributed between certificates and diplomas.

• 27% of recipients simultaneously received a HOPE Scholarship award and a College Completion Grants award, while 7% simultaneously received a Zell Miller Scholarship award and College Completion Grant award.

1. Georgia Student Finance Commission. (2023). The Georgia College Completion Grants Program. Retrieved May 1, 2024, from https://gsfc.georgia.gov/about-gsfc/annual-reports.

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Health In 2004-2005, Georgia had the 8th highest uninsured rated in the nation, and in 2022, the 3rd highest. Over the last 20 years, GBPI has continued to advocate for health care access achieving incremental but meaningful wins like the 2023 elimination of the 5-year Medicaid waiting period for pregnant women and children who are lawful permanent residents. GBPI has also pursued larger strategic priorities like closing the coverage gap. In addition, GBPI has advocated for increasing state investments in the systems that support Georgians’ health.

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Georgia’s 2025 Health Budget The Departments of Behavioral Health and Developmental Disabilities (DBHDD), Community Health (DCH) and Public Health (DPH) are the primary agencies focused on the state’s health care and public health systems.

Georgia plans to provide $7.3 billion in state funds for these three agencies in the fiscal year (FY) 2025 budget year, which accounts for about 1 in every 5 state dollars projected to be spent in the new fiscal year. General Fund appropriations account for $6.6 billion, or about 90%, of the state funds for these three agencies. Other sources, like Tobacco Settlement Funds, account for the remaining $740 million in state funds. Overall, general funds for these three agencies increased by $666 million, or about 11%, from the original FY 2024 budget. Although DCH accounts for the majority of state health spending, general fund appropriations at DCH, DBHDD, and DPH have more than doubled over time since FY 2005, 2010, and 2012, respectively.

General Fund Appropriations for Health Agencies Over Time $5,000 $4,500 $4,000

Millions

$3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500

DCH DBHDD DPH *Excludes general funds for attached agencies Source: Georgia’s 2025 Fiscal Year Budget (HB 916), signed by the governor; Office of Planning and Budget’s Budget in Briefs FY 2005 – 2024.

FY ‘25

FY ’24

FY ‘23

FY ’22

FY ‘21

FY ’20

FY ‘19

FY ’18

FY ‘17

FY ’16

FY ‘15

FY ’14

FY ‘13

FY ’12

FY ‘11

FY ’10

FY ‘09

FY ’08

FY ‘07

FY ’06

FY ‘05

$-

Health Agencies’ Turnover Rates Improve, But Challenges Remain Turnover rates for the state’s three health agencies have improved since the pandemic’s start; all three agencies’ turnover rates have decreased to levels that are about the same as or below the state average. Notably, the turnover rate at DBHDD decreased from a high of around 36% in 2021 to approximately 22% in 2023. These turnover rate decreases reflect, in part, sustained compensation adjustments over time, including the $5,000 costof-living (COLA) increases in amended fiscal year (AFY) 2023, the $2,000 COLA increases in FY 2024 and the one-time $1,000 bonuses in AFY 2024.

Those increases will be further augmented by the 4% COLA increases (not to exceed $3,000) in FY 2025. Despite these gains, the higher-than-average percentage of employees eligible for full retirement within the next five years at all three health agencies presents additional challenges.

40%

Percentage of health agency employees eligible for full or early retirement at or above state averages

35% 30% 25%

State Averages

20% 15% 10% 5% 0%

DBHDD DCH DPH Full retirement within next five years Early retirement within next five years

Source: Georgia’s Department of Administrative Services’ Annual Workforce Reports for fiscal years 2020 – 2023.

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Investments Made in Increasing Pay for Health-Related Providers The FY 2025 budget makes critical investments across the three health agencies by increasing Medicaid reimbursement rates for a range of community-based health care and behavioral health providers. Many of these rate increases are intended to improve pay, particularly wages for hourly workers. The rate increases may also improve access to care for Georgians with lower incomes.¹,²

Type of provider impacted New Option Waiver (NOW) and Comprehensive Support Waiver (COMP) program providers who deliver home- and community-based services for individuals with intellectual or developmental disabilities Independent Care Waiver Program and Elderly and Disabled Waiver Program providers who deliver home- and community-based services for individuals with intellectual, developmental, or physical disabilities Community Behavioral Health Rehabilitation Services providers who deliver preventive or rehabilitative services to individuals with mental health issues or substance use disorders Georgia Pediatric Program providers who deliver home-based nursing and personal care for medically fragile children Primary care and OB/GYN providers who deliver services that correspond to select CPT codes (including office/in-patient visits, obstetrical care, cesarean delivery, VBAC delivery) Speech-language pathologists, audiologists, physical therapists, and occupational therapists (including Babies Can't Wait providers) who deliver a range of services to people of all ages who may have sensory, physical, cognitive, or other issues Optometrists who deliver vision care Total

Total state funds to cover reimbursement rate increase

Agency

$79,901,675

DBHDD

$39,596,901

DCH

$26,658,091

DBHDD

$15,957,601

DCH

$12,693,821

DCH

$5,631,858 DCH & DPH $392,173 $180,832,120

DCH

¹Saulsberry, L., Seo, V., & Fung, V. (2019). The impact of changes in Medicaid provider fees on provider participation and enrollees’ care: A systematic literature review. Journal of General Internal Medicine, 34(10), 2200-2209. https://pubmed.ncbi.nlm.nih.gov/31388912/ ²Alexander, D., & Schnell, M. (2020). The impacts of physician payments on access, use, and health (NBER working paper 26095). National Bureau of Economic Research. http://www.nber. org/papers/w26095

Public Health DPH operates programs focused on health promotion and health-related disaster response and preparedness as well as disease and injury prevention.

The department receives around $400 million in General Funds and nearly $14 million in Tobacco Settlement funds. The largest state-funded programs support 159 county health departments, help prevent the spread of infectious diseases and provide services for children. Total DPH spending in FY 2025 represents an increase of 8% over the original 2024 budget. Notably, the budget includes about $1 million in new state funds to expand the maternal home visiting pilot launched in the prior fiscal year into additional counties.

More Than Half of DPH’s State Funding Flows to Counties Immunization, $2,499,402 Epidemiology, $8,362,958 Inspections & Environmental Health, $9,086,284 Emergency Preparedness & Trauma System Improvement, $9,385,750 Adolescent & Adult Health Programs, $31,486,212

Funding to County Health Departments, $210,326,713

Administration & Vital Records, $37,283,299 Infectious Disease Control, $45,895,124 Infant & Child Health Programs, $45,915,831 Source: Georgia’s 2025 Fiscal Year Budget (HB 916), signed by the governor

Federal money makes up nearly half the department’s $835 million budget, while state and other funds comprise the remainder. Of those federal funds, more than half is accounted for by the Special Supplemental Nutrition Program for Women, Infants, and Children (or WIC), which provides lowincome pregnant and postpartum people and children under age five with healthy food, nutrition information, breastfeeding support and other services.

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Behavioral Health and Developmental Disabilities DBHDD primarily serves uninsured and underinsured Georgians living with developmental disabilities, mental health conditions and substance use disorders. It also provides community-based services through contracted providers and operates state hospitals. The department also operates forensic evaluation and treatment programs under the court system’s jurisdiction. Georgia plans to allocate $1.6 billion in General Funds and $10 million in Tobacco Settlement Funds to DBHDD. Total state spending for DBHDD in FY 2025 represents a 10% increase over the original 2024 budget.

More than half of that increase is dedicated to funding that will expand home- and community-based services for Georgians with intellectual and developmental disabilities and boost compensation for their providers.

Mental Health and Developmental Disabilities Services Account for Three-Fourths of DBHDD’s State Funds

Administration, $31,096,735

Addictive Diseases and Substance Abuse Services, $60,225,820

Forensic Services, $156,718,071 Direct Care Support Services, $157,740,536

Mental Health Services, $699,614,364

Developmental Disabilities Services, $543,132,827

Source: Georgia’s 2025 Fiscal Year Budget (HB 916), signed by the governor

Medicaid and PeachCare

DCH administers the state’s health care safety net, reimburses hospitals for services provided to uninsured and underinsured Georgians, manages health insurance coverage for state and school system employees and regulates health and long-term care facilities. The FY 2025 budget provides DCH with almost $4.6 billion in General Funds. State funding allocated to the Department of Community Health increased by $507 million, or 11%, above the original fiscal year 2024 budget. About 94% of the Department’s overall state funding is earmarked for Medicaid and PeachCare, which provide health care coverage to about 2 million Georgians with lower incomes.

Most enrollees are children under the age of 18. More than half (56%) of FY 2025 state funds for Medicaid and PeachCare support coverage for older adults and individuals with disabilities. An encouraging addition to the FY 2025 budget is $10.5 million in state funding to expand dental coverage to Medicaid-eligible adults.

Over Half of State Medicaid/PeachCare Funding Covers Healthcare Costs for Older Adults and Individuals with Disabilities $124,111,399

$2,755,670,208

0%

10%

$2,054,583,190

20%

30%

40%

Medicaid - Aged, Blind, Disabled

50%

60%

70%

80%

90% 100%

Medicaid - Low-Income Medicaid

PeachCare

Source: Georgia’s 2025 Fiscal Year Budget (HB 916), signed by the governor

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Medicaid Unwinding Brings Coverage Losses and Budget Changes Like all states during the pandemic, Georgia received additional federal funding to keep Georgians continuously enrolled in the health care safety net without conducting regular eligibility checks. The Medicaid continuous eligibility policy started to ‘unwind’ in April 2023, and every child and adult enrolled in Georgia’s health care safety net was slated to have their eligibility redetermined before the end of May 2024. The FY 2025 budget includes shifts to reflect projected enrollment declines associated with the Medicaid unwinding (i.e., decreased projected utilization of both the Aged, Blind, and Disabled program and the Low-Income Medicaid program) and to reflect the return to the standard federal match rate (a decrease from 72% to 66%).

As of January 2024, about 18% of the adults and children who had Medicaid and PeachCare at the start of the Medicaid unwinding in April 2023 have lost their coverage. For those who have lost coverage, there are three paths depending on household income, employment status, and other variables: Enroll in an alternate form of health insurance coverage (e.g., individual health insurance marketplace), re-apply to Medicaid or PeachCare, or fall into the health insurance coverage gap and remain uninsured.

Adult Enrollment

Jan ‘24

Dec ’23

Nov ‘23

Oct ’23

Sept ‘23

Aug ’23

July ‘23

June ’23

May ‘23

2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0

Apr ‘23

Millions

Medicaid/PeachCare Enrollment Has Decreased About 18% Among Adults and Children Since Medicaid Unwinding Began

Child Enrollment

*Most recent enrollment data available as of May 2024 Source: GBPI analysis of Medicaid and CHIP enrollment data from Centers for Medicare and Medicaid Services

Procedural Denials During Unwinding Likely Impacted Children’s Coverage Losses Most Georgians who have lost coverage during the Medicaid unwinding have lost it for procedural reasons, which means they may still be eligible but are denied coverage due to a human or technological error in the renewal process.¹ These temporary losses in coverage can wreak havoc on Georgians’ health and financial security. Additionally, these procedural denials can negatively impact the state’s budget. Georgians who remain eligible for Medicaid but lose coverage are likely to re-enroll, which creates extra work for the state’s eligibility caseworkers and results in variable state expenditures.² State data on procedural denials by age or by race/ethnicity are not publicly available; however, based on the available information, there is cause for concern. Children represent most of the population covered under Medicaid and PeachCare in Georgia, and child eligibility criteria are more expansive than adult eligibility criteria. For various reasons, children would theoretically be less likely than adults to become ineligible and more likely to lose coverage for procedural reasons. Children of color and children living in rural communities are overrepresented in Medicaid and PeachCare. Due to inequitable access to economic security for their parents and families, about 1 in every 2 Black and Latinx children under 18 years old in Georgia are covered by Medicaid and PeachCare compared to about 1 in every 4 white children.³ Similarly, about half of children in small towns and rural areas of Georgia are covered by Medicaid and PeachCare compared to about 40% in metro areas of the state.⁴ These same children may also be more likely to get caught up in the complexity of the bureaucracy. For example, children in rural Georgia whose families lack access to high-speed internet or children whose parents speak a non-English language may have a harder time with the already complicated renewal process—resulting in a coverage loss even if their child is still eligible. ¹GBPI analysis of: Georgia Department of Community Health (2024). 2023-2024 Medicaid Redetermination Information (March 2024 version) [Data Set]. ²Sugar, S., Peters, C., De Lew, N., & Sommers, B.D. (2021). Medicaid churning and continuity of care: Evidence and policy considerations before and after the COVID-19 pandemic [Issue Brief]. Assistant Secretary for Planning and Evaluation. https://aspe.hhs.gov/reports/medicaidchurning-continuity-care ³KFF (2022). Medicaid coverage rates for children by race/ethnicity [Data Set]. https://www.kff. org/ ⁴Osorio, A., Alker, J., & Park, E. (2023). Medicaid’s coverage role in small towns and rural areas. Georgetown University Center for Children and Families. https://ccf.georgetown.edu/ 63

Georgians Face Significant Barriers to Healthcare Coverage Unequal access to affordable, high-quality health care continues to impact Georgians across the state. Georgia ranks third nationally in the number of Georgians without health insurance coverage. Almost 1-in-6 non-elderly adults and 1-in-16 children in the state are uninsured across income levels.¹ The burden is heaviest on Georgians living in rural communities and Georgians of color—particularly Latinx Georgians. Across states, Georgia’s healthcare system ranks 45th overall based on measures like healthcare access, cost, avoidable hospital use, reproductive care and women’s health, as well as prevention and treatment.² Uninsured rates by race/ethnicity, 0 - 64 years old, 2022

Uninsured Rates by County, 0-64 year olds, 2021 <11% 11 - 16% 17 - 22%

Asian/Native Hawaiian and Pacific Islander

10%

White

11%

Multiple Races

12%

Black

13%

Hispanic/Latino

30%

>22%

Source: KFF’s Uninsured Rates for the Nonelderly by Race/Ethnicity; United States Census Bureau’s Small Area Health Insurance Estimates ¹GBPI analysis of: KFF. (2022). Health insurance coverage of children 0-18 and of adults 19-64. https://www.kff.org/state-category/health-coverage-uninsured/health-insurance-status/ ²Radley, D.C., Baumgartner, J.C., Collins, S.R., & Zephyrin, L.C. (2023). Scorecard on state health system performance. The Commonwealth Fund. https://www.commonwealthfund.org/ publications/scorecard/2023/jun/2023-scorecard-state-health-system-performance

This year, on our 20th anniversary, GBPI is including for the first time a feature on housing to underscore the historical and continuing critical role that housing plays in the health of Georgians every single day. In the past 20 years, access to housing has become more difficult. In 2002, 42.7% of Georgia renters were cost-burdened. In 2022, 47.7% of Georgia renters were cost-burdened.

Why is Investment In Housing Important for Health?

Access to safe, affordable and stable housing significantly impacts health outcomes. Unsafe housing has been linked to poor health, such as lead exposure causing damage to children’s nervous systems. High housing costs result in families having less money for other necessities, such as food and medicine. Access to safe, affordable housing has been associated with improved health and decreased health care expenses. A study found that access to housing and case management services reduced the frequency of emergency room visits and length of hospital stays for adults with chronic mental illnesses who experienced homelessness.

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Georgia’s FY 2025 Housing Budget

Most Tobacco Funds Used for Health Services 2025 Tobacco Settlement Fund Budget Medicaid

State in housing is crucial to ensuring all Georgians have the Public investment Health opportunity to achieve optimal health.

These investments are primarily found Adult Developmental Disabilities Waiver Services in the Department of Behavioral Health and Developmental Disabilities Other (DBHDD) and the Department of Community Affairs (DCA). State housing Total funds for FY 2025 total approximately $34.7 million.

Fiscal Year 2025 State Housing Spending by Program Accountable Housing Initiative, $1,000,000 State Housing Trust Fund for the Homeless, $7,828,745

Georgia Housing Voucher Program, $25,919,311

Source: Georgia’s 2025 Fiscal Year Budget (HB 916), signed by the governor

Funding for Supportive Housing Vouchers Stagnates in FY 2025 As a part of the Olmstead Settlement Agreement, the Georgia Housing Voucher Program (GHVP) was established in 2010 to provide permanent supportive housing for eligible individuals with serious and persistent mental illness at risk of or currently experiencing homelessness. According to the settlement agreement, the state is obligated to provide supportive housing to 9,000 individuals with serious and persistent mental illness. As of April 2023, just over 2,000 individuals were housed through the GHVP.¹ Despite the unmet need, the GHVP is level-funded in the FY 2025 budget, leaving its base funding at around $26 million. The House of Representatives sought a $2.5 million increase for the program, but the Senate removed this increase while awaiting a response from the U.S. Department of Justice regarding the state’s compliance with the settlement agreement. ¹ Robinson, L., and Ruppersburg, M. (2023). Georgia Housing Voucher Program.

Department of Behavioral Health and Developmental Disabilities. https://namiga.org/wpcontent/uploads/sites/21/2023/05/NAMI-GHVP-Presentation-5.5.23-1-1.pdf

Increases in State Housing Trust Fund, Conditional Housing Program The State Housing Trust Fund for the Homeless saw an approximately $4.6 million increase in the FY 2025 budget, raising its budget to around $7.8 million. These funds were allocated to improve homelessness services and allow DCA to pursue new federal grant opportunities. Over 68% of DCA’s budget comes from federal funds and grants, with state funds accounting for just 25% of the agency’s funding.

One million dollars were allocated to the Accountable Housing Initiative, a voluntary transitional housing program for up to 18 months established with the passage of HB 1410 earlier this year.

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Human Services In 2004 and again in 2022, the most recent year for which data is available, approximately 1 in 5 children lived in poverty. In addition, about 1 in 10 Georgia children experienced even greater hardship as they lived in extreme poverty, half the poverty line. Over the past 20 years, GBPI has worked toward achieving greater economic security for Georgia children. The organization has achieved small wins along the way, such as minor adjustments to programs like Temporary Assistance for Needy Families (TANF), which should serve Georgia’s poorest families, but does not reach as many as it could. The state has made few adjustments to TANF that would benefit poor families since the program started in 1997. Thanks in part to the work of GBPI, in 2023, the Georgia legislature ended the family cap, which prevented families from receiving an incremental grant increase if they had another child while receiving TANF. Now these families receive a little bit more in benefits to help pay for diapers and baby supplies.

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The Department of Human Services Budget The Department of Human Services (DHS) oversees various services, including foster care, child welfare, support for low-income individuals, aging services and child support. There are four agencies that are included in the DHS budget for administrative reasons: the Council on Aging, Georgia Vocational Rehabilitation Agency, Family Connect and the Safe Harbor for Sexually Exploited Children Fund Commission. The FY 2025 budget includes about $1 billion for the department, about a 4% increase from FY 2024.

The FY 2025 Budget Would Include $1 Billion for The Department of Human Services Fiscal Year 2025: $1,028,095,764 Fiscal Year 2024: $985,477,516 Fiscal Year 2023: $920,040,060 $0

$200

$400

$600 Millions

$800

$1,000

$1,200

Source: HB 916 and The Governor’s Budget Reports, Amended Fiscal Year 2024 and Fiscal Year 2025 and Amended Fiscal Year 2023 and Fiscal Year 2024

More Than Half of the $43 Million Increase to DHS Would Be for Pay Raises The FY 2025 DHS budget is $43 million more than FY 2024. The increase includes: • $15 million for a 4% cost of living adjustment for state employees.

• $7 million for an additional salary increase for caseworkers for child welfare, elderly abuse investigations and prevention, child support and law enforcement officers working with the Georgia Vocational Rehabilitation Agency.

• $4.9 million for the Gwinnett Commercial Sexual Exploitation Recovery Center.

Child welfare, foster care and adoption-related services account for about 63% of the agency’s budget. The next biggest share of spending is federal low-income assistance programs such as Medicaid, the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF), accounting for 16% of the agency’s budget. The department’s administration and smaller programs such as elder care services, child support services and the attached agencies account for the remaining funds.

Foster Care, Adoption, and Child Welfare Services Make Up More than Half of the DHS Budget Foster Care & Adoptions

$387,931,138

Child Welfare Service Low-Income Family Support Elder Care Services Department Administration Child Support Services

$250,707,672 $161,192,645 $83,826,498 $62,091,779 $34,136,145

Agencies attached for administrative purposes Georgia Vocational Rehabilitation Agency Family Connection Safe Harbor for Sexually Exploited Children Fund Commission

$28,997,214 $10,359,889 $8,476,159

Council on Aging $376,625 Source: HB 916 and The Governor’s Budget Reports, Amended Fiscal Year 2024 and Fiscal Year 2025 and Amended Fiscal Year 2023 and Fiscal Year 2024 71

Division of Family and Children Services (DFCS) Eligibility Workers are Excluded in the Budget’s Additional Pay Increases for Frontline Workers The FY 2025 budget creates a disparity among DFCS frontline workers. It includes the statewide 4% COLA and a $3,000 pay increase for caseworkers in child welfare, child support and elderly abuse investigations. In contrast, the budget only includes the 4% COLA for entry-level eligibility workers but does not grant them the $3,000 pay increase. DFCS eligibility workers or Economic Support Specialists (ESS) process Georgians’ applications and ongoing eligibility for SNAP, TANF, Medicaid and other programs for people with low income.

This is not the first time that child welfare workers have gotten a major pay increase while eligibility workers did not. In FY 2018, salaries for entry-level child welfare workers increased by more than $6,000.

Entry-level ESS got a pay raise of about $1,300 in FY 2019. Under the FY 2025 budget, pay for entry-level child welfare workers would have grown by an estimated 26%, adjusted for inflation, since FY 2017, while entry-level eligibility workers would have only seen an estimated 7% growth in their salaries.

ESS staff are essential to some of DFCS’ core operations but struggle with an immense workload. For example, they worked the past year to redetermine 2.8 million Medicaid recipients. Despite hiring efforts, eligibility workers had, on average, 910 cases each in January 2024.¹ Turnover, which has historically been high among these staff, has improved in the past year. The fiscal year turnover rate was 16.5% in March 2024, down from 17.7% a year prior. However, most turnover is among staff who have been with the agency for a year or less.² ¹Georgia Department of Human Services, Division of Family and Children Services. (2024, February 27). Presentation to the DHS & DFCS advisory board. ²GBPI open records requests from DFCS’ Office of Family Independence.

Change in Entry-Level Salaries among DFCS Frontline Workers has been Unequal

Percent Change in Base Salary since 2017

30%

DFCS eligibility workers

DFCS child welfare caseworker 26%

25% 20% 15% 10%

7%

5% 0% -5% -10% -15%

FY ‘17 FY ’18 FY ‘19 FY ’20 FY ‘21 FY ’22 FY ‘23 FY ’24 FY ‘25

Note: Analysis is adjusted for inflation using the U.S. Bureau of Labor Statistics’ CPI Inflation Calculator. At the time of writing, inflation data were only available to March 2024. GBPI therefore used the March of each calendar year to represent each fiscal year. Without corresponding inflation data for FY 2025, the percent change between FY 2017 and FY 2025 are estimates of inflation-adjusted change.

Source: GBPI analysis of entry-level salary data from the Department of Human Services, Division of Family and Children Services

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After Nearly Three Decades, State Lawmakers Finally Repealed the Family Cap in 2023 In 2023, the Governor called for a repeal of the family cap in the Temporary Assistance for Needy Families (TANF) program, which provides small cash payments to families in poverty. GBPI educated lawmakers on why these were important steps to support expecting families and families with infants. The policy passed the legislature with the majority support of both parties.

TANF was built on racist and sexist narratives of single motherhood.¹ Lawmakers, the media, and prominent think tanks propagated a false notion that single mothers living in poverty, especially Black single mothers, were unwilling to work. Moreover, they claimed that these mothers chose to have children to receive a slight increase in their welfare benefits.² The latter myth was the basis of the TANF family cap, a policy that denied or limited an incremental increase in monthly benefits if a mother had another child while receiving cash assistance.

Georgia incorporated this policy into its TANF program in 1997.

GBPI has long advocated for a stronger cash safety net. In 2020, GBPI urged state leaders to repeal the family cap.³ Many other states had already ended the policy, noting that research found it was ineffective at reducing babies born to single mothers.⁴ GBPI also pulled together research presenting strong evidence that increasing cash support broadly for expecting mothers and birthing people improved short and long-term outcomes for the parent and the baby.⁵ Ultimately, the end of the family cap will help only a few families. Punitive policies like the family cap, harsh work requirements for applicants and clients and extremely low benefits contributed to a TANF caseload decline for over two decades. In 2020, TANF reached about five families for every 100 in poverty, one of the lowest ratios in the country.⁶ In FY 2023, Georgia served only 219 families subjected to the family cap.⁷

¹Camardelle, A., & Khalfani, R. (2020, October 1). Cash matters: Reimagining anti-racist TANF policies in Georgia. Georgia Budget and Policy Institute. https://gbpi.org/cash-matters-reimagininganti-racist-tanf-policies-georgia/ ²Floyd, I., Pavetti, D., Meyer, L., Safawi, A., Schott, L., Bellew, E., & Magnus, A. (2021, August 4).

TANF policies reflect racist legacy of cash assistance: Reimagined program should center black mothers. https://www.cbpp.org/research/income-security/tanf-policies-reflect-racist-legacy-of-cashassistance ³Camardelle, A. (2020, February 3). Repeal Georgia’s cap on kids. Georgia Budget and Policy Institute. https://gbpi.org/repeal-georgias-cap-on-kids/ ⁴Wiltz, T. (2019, May 3). Family welfare caps lose favor in more states. Stateline. https://stateline. org/2019/05/03/family-welfare-caps-lose-favor-in-more-states/.

Donovan, P. (1998, February 1). Does the family cap influence birthrates? Two new studies say ‘no’. The Guttmacher Institute. https://www.guttmacher.org/gpr/1998/02/does-family-cap-influencebirthrates-two-new-studies-say-no. ⁵Finch Floyd, I. (2022, August 29). Cash supports should be integrated into the maternal-infant health policy agenda. Georgia Budget and Policy Institute. https://gbpi.org/cash-supports-shouldbe-integrated-into-the-maternal-infant-health-policy-agenda/. ⁶Shrivstava, A., & Azito Thompson, G. (2022, February 18). TANF cash assistance should reach millions more families to lessen hardship: Access to TANF hits lowest point amid precarious economic conditions. Center on Budget and Policy Priorities. https://www.cbpp.org/research/familyincome-support/cash-assistance-should-reach-millions-more-families ⁷Division of Family and Children Services. (2023). Welfare reform in Georgia 2023: Senate bill 104.

Department of Human Services.

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Georgia’s Department of Labor Budget The $8.6 million in the FY 2025 budget for the Georgia Department of Labor (DOL) increases spending from FY 2024 levels by over $443,000. This net increase reflects staff cost-of-living adjustments. It also reflects that the state is shifting funds away from typical program uses and redirecting them to the state’s modernization of its customer service platform and Unemployment Insurance (UI) system technology.

Over the last two decades, state investments to maintain DOL’s long-term resiliency have significantly declined, despite DOL’s role in stabilizing the economy and protecting dislocated workers during two of the worst recessions in history, 2009 and 2020. Since FY 2005, state spending on DOL’s UI division has declined by 30%. Also, state lawmakers have withheld portions of “administrative assessment” revenue from DOL for decades,¹ likely totaling hundreds of millions of dollars, despite the boosts that full yearly allocations could provide for DOL.

Implications of Georgia’s Current Underinvestment A significant share of FY 2025 state spending to support DOL modernization relies on taking $2 million away from DOL programs critical for UI benefit administration and collecting UI Trust Fund revenue from employers. These fiscal actions threaten to spur DOL staff reductions² and weaken trust fund revenue. This comes at a critical economic period when trust fund levels should replenish while statewide unemployment claim levels are low.

Georgia’s UI Trust Fund is at a disadvantage due to having one of the lowest average employer contribution rates in the country,³ which is further worsened by routine cuts made by lawmakers.

¹GA Department of Audits and Accounts. (2007, October). Special Examination on Administrative Assessments within the DOL. ²DOL Commissioner Bruce Thompson testimony in March 6, 2024 Senate Appropriations Subcommittee hearing, starting at 59:35. Found at https://vimeo.com/ showcase/9076500?video=913412333. ³Georgia had the 48th lowest average employer contribution rate in 2023, per the U.S. Department of Labor’s Employment and Training Administration.

Notes

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Criminal Legal Systems Over the last 20 years, the costs of running Georgia’s prisons have risen by almost 70%. Despite promises of reform over the years, the number of individuals within the custody of the Georgia Department of Corrections has largely remained unchanged, hovering near 51,000 in 2023. During this period, GBPI has continued to work on key issues like reducing local reliance on fines and fees that entangle communities of color in the criminal legal system and contribute to the incarceration of Georgians in poverty.

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Georgia Department of Corrections FY 2025 Budget Georgia’s Department of Corrections (GDC) budget for fiscal year (FY) 2025 is $1.5 billion. This year’s budget continues a three-year trend in prison spending. This increase is driven by efforts to improve employee retention through pay raises and to address the increased spending on health care contracts in response to issues such as rising prison violence, chronic health needs and an aging incarcerated population.

GDC Policies Work Against Health and Safety Needs and Perpetuate Workforce Exploitation GDC’s FY 2025 spending is $166 million higher than FY 2024 and over $214 million higher than FY 2023. This includes nearly $52 million for prison safety and infrastructure. This approach appears to be focused on expanding incarceration through increased spending, and it perpetuates unsafe prison dynamics and repeats unsuccessful approaches that undermine steps toward humane, rehabilitative policies for successful re-entry.

Despite a nearly $72 million increase in health and pharmacy contract spending in FY 2025 and a nearly 40% increase in prison health spending since FY 2022, incarcerated Georgians’ mental and physical health often depends on their ability to pay GDC’s medical co-pay, prescription, phone and commissary fees. For each of the last three years on record, incarcerated Georgians and their loved ones have been charged more than $10 million in fees by GDC,¹ which they often cannot afford but pay as a means of survival.

GDC has yet to apply for federal funding opportunities to help facilitate the closing of health care coverage gaps for Georgians returning from incarceration.² Lawmakers allocated nearly $43 million to increase GDC staff pay, yet incarcerated Georgians continue to be used as a source of unpaid and unprotected labor.³ Lawmakers added nearly $52 million in FY 2025 for prison safety and infrastructure, but undermined these efforts by maintaining inequitable prison labor practices and fees, which contribute to toxic stress, illness, and injury, perpetuating an unsafe environment for those incarcerated in Georgia.⁴

¹FY 2025 Governor’s Budget Report. GA Department of Corrections’ annual revenue data from FY 2021 to FY 2023. ²Hinton, E., Pillai, A., & Diana, A. (2024, April 16). Section 1115 waiver watch: Medicaid pre-release services for people who are incarcerated. KFF. https://www.kff.org/medicaid/issue-brief/ section1115-waiver-watch-medicaid-pre-release-services-for-people-who-are-incarcerated/ ³Lyons, B. (2022, June 30). California lawmakers reject ballot proposal that aimed to end forced prison labor. Cal Matters. https://calmatters.org/justice/2022/06/california-prisoners- workinvoluntary-servitude/ ⁴Christman, A., & Lu, H. (2024, April). Workers doing time must be protected by job safety laws.

National Employment Law Project.

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