Faced with sharp cuts to federal government funding and services under President Trump’s recently signed tax-and-spending bill, Republican Gov. Brian Kemp has directed state agencies to stick to about $32.5 billion in annual discretionary spending through June 2027 but also to prepare backup plans.
In its budget instructions, the Governor’s Office of Planning and Budget asks agencies to “internally prepare thoughtful plans” for contingencies as the office monitors “economic trends and policy changes at the national level.” It also asked agencies to report any federal grant terminations.
Absent in the memo is any mention of Trump by name or any specific federal budget cuts.
But Kemp’s budget instructions are laced with caution as the federal government pulls back the billions that it normally spends to supplement Georgia’s own taxing and spending, spending that has enabled the governor year after year to boast of surpluses in the state budget.
Like Kemp, his fellow Republicans in the Georgia General Assembly have praised Trump’s “one, big beautiful bill,” even as they’ve signaled they’re unlikely to call a special session of lawmakers to deal with the measure’s repercussions and the uncertain state of the U.S. economy.
Anything from news to natural disasters may change the plans for spending for the two fiscal budget years that began July 1.
For example, the tax-and-spending bill just passed by the U.S. Congress and signed by Trump on July 4 might cut $12 billion in Medicaid spending over 10 years in Georgia, a cut of about eight percent. About two million aged, blind, disabled or low-income Georgians depend on Medicaid for health care; the federal government pays about two-thirds of the cost.
Also, the federal government is already working on its own next budget. The Trump administration has proposed cuts of more than $10 billion at the U.S. Department of Education — though not to its main funding stream to state school systems. Education is Georgia’s biggest single state expense, though in K-12 schools, the federal government pays about $2 for every $14 paid by the state of Georgia. Yet more school money comes from local property taxes.
The Trump administration has already halted millions in federal grants to Georgia agencies that were supposed to pay for computer upgrades, broadband access and other projects, The Current learned in a two-month investigation.
Over the next few months, Georgia will have to decide how to respond to reconciliation, grant cuts and any federal budget cuts. Georgia might backfill some cuts or it might just do less with less.
Yet Georgia’s rising population nudges the budget upward, even in times of certainty and with tax-cutting fiscal conservatives in charge. The state pays some fixed amount for every person enrolled in k-12 schools, Medicaid and other programs. When enrollment rises, so does spending. Unless, that is, the state decides to cut spending per person.
Kemp doesn’t have to stick to his initial budget instructions — last year’s midyear adjustment added billions to spending that was supposed to stay steady. The financial response to 2024’s Hurricane Helene came in a midyear adjustment. So did billions in spending for infrastructure, paid for out of savings — including $501 million for water works in Coastal Georgia.