Why It Matters
Georgia’s governor has instructed state agencies to hold the line on spending as the state faces a significant revenue shortfall stemming from a new income tax reduction. The fiscal constraints will shape the budget decisions of whoever takes office next, potentially limiting resources for education, disability services, and other core government functions.
What Happened
Gov. Brian Kemp directed state agencies to maintain current spending levels and prepare contingency budgets that identify potential cuts and efficiency improvements. The directive came as Kemp completed his final budget cycle, having already trimmed more than $300 million in proposed new spending from his budget earlier this year.
Richard Dunn, director of the Office of Planning and Budget, issued a memo to agency heads instructing them to submit budget requests by September 1. Any requests for funding increases must demonstrate “urgent, unavoidable need” that cannot be addressed through internal reallocation and require approval from Dunn’s office.
The spending constraints stem from a tax cut package lawmakers passed this year. The measure lowered Georgia’s income tax rate from 5.19 percent to 4.99 percent and exempted some overtime and tips from taxation. The changes created a projected $1.3 billion revenue shortfall for the next fiscal year.
Kemp’s earlier budget cuts included $9.3 million from services for people with disabilities and $30.7 million from school transportation funding. The incoming governor—either Republican Rick Jackson or Democrat Keisha Lance Bottoms—will inherit these constraints and oversee the 2027 legislative budget session.
By the Numbers
$300 million — new spending cuts included in Kemp’s final budget
5.19% to 4.99% — Georgia’s income tax rate reduction
$1.3 billion — projected annual revenue shortfall from the tax cut
$9.3 million — reduction in disability services funding
$30.7 million — cut to school transportation funding
September 1 — deadline for state agencies to submit budget requests
Zoom Out
States across the country face recurring tension between tax reduction and budget stability. Revenue shortfalls often force administrations to either cut services, redirect existing funds, or seek alternative revenue sources. Georgia’s situation reflects broader national patterns of states attempting to balance voter demands for lower taxes against obligations to fund education, infrastructure, and social services.
The Kemp administration has framed the tax cut as part of “historic tax relief.” Critics, including the Georgia Budget and Policy Institute, contend that the state is prioritizing tax reductions over funding for vulnerable populations. Staci Fox of that group stated that “the budget instructions issued for the 2027 legislative session make clear that our state cannot afford to continue prioritizing corporations and the wealthy.”
What’s Next
State agencies face a September 1 deadline to submit their revised budget requests under the new constraints. The next governor will take office in January 2027 and immediately confront decisions about whether to seek additional revenue, pursue deeper spending reductions, or redirect funds between priorities. The contingency plans agencies are drafting will likely inform those choices.