That and lower corporate income taxes will mean a decrease in collections for fiscal 2023, which ends June 30, and a much smaller surplus, Dorfman said.

For the first half of fiscal 2023, collections are up 6.5% or $966.7 million over the prior year period. But the economist said those gains won’t hold when Georgians start filing their income tax returns in the coming months.

That’s all important because the tax collection allows the state to help fund K-12 schools and universities, provide health care to more than 2 million people, patrol and build roads, and train workers.

Lawmakers on Tuesday began a week of hearings on Governor Brian Kemp’s $32.5 billion budget proposal, which includes $2,000 increases for more than 200,000 teachers and state and university employees, plus major increases for education and health programs.

Kemp spoke to the House and Senate budget committees remotely on Tuesday from Davos, Switzerland, where he spoke at the World Economic Forum.

He told lawmakers his budget plan “puts money where the needs are greatest.”

While Dorfman presented some bad news on state revenues, much of the economic news was good. Georgia still has a low unemployment rate and 167,000 jobs have been added since the COVID-19 pandemic hit in 2020, he said. Even in areas where there are layoffs, such as information technology, those workers are being picked up by other companies, he said.

Georgians have increased savings since the start of the pandemic, but also continue to spend money, he said, something that has led to large increases in sales tax collections in recent years.

“So far, consumers are not short of money,” he said, adding that while people are increasing their credit card debt, delinquent payments are low.

Announcing several new major job projects in recent years — including two electric vehicle factories — Kemp said last week the state has a role to play in making sure those workers can find housing.

The state also needs to find workers to fill those jobs. Dorfman noted that the state’s population is not growing as it did in the 1980s and 1990s, and that Georgia must compete with other Southern states for people moving from the North.

House and Senate leaders have added new features to this year’s budget hearings, including discussions about state obligations, auditing and federal COVID-19 aid funding, which Kemp decides how to spend.

For example, Caylee Noggle, head of the Department of Community Health, said that because of rising costs, the health insurance program for 650,000 teachers, college and government employees, retirees and their dependents could run into massive shortfalls over the next two years. That helps explain why Kemp recommended spending more than $1 billion to support the State Health Benefit Plan.

Greg Griffin, the state auditor, told lawmakers that nearly all audits of 10 special interest tax credits requested by the House and Senate tax committees have been completed. Responding to a question from a lawmaker, Matt Taylor, deputy director of the agency, said all of them so far show that they cost the state more money than they bring in.

Georgia’s Senate, in particular, has been critical of special interest tax breaks and has been eager to eliminate or reduce some of them. State Senator John Albers, R-Roswell, has been advocating for years for legislation to measure the effectiveness of tax breaks, which lobbyists often push for certain industries with the promise that they will create jobs.

Tax break cuts are also seen as a way to fund a further reduction in the income tax rate. Lawmakers voted to cut the income tax rate last year, and some senators want to do away with it altogether.