(The Center Square) – Consumer confidence will be key in restoring Georgia’s economy, the state economist said Thursday.
Jeffrey Dorfman, Georgia's state economist, said economists will be able to start evaluating the state’s recovery rate once people’s fear of spending subsides. Consumer confidence has plummeted by 30 points over the past two months, according to the University of Michigan's monthly consumer survey.
“That's going to be really telling,” Dorfman told members of the House Appropriations Committee during a virtual meeting. “Is it going to go lower? Will it flatten out? Will it start to bounce back a little bit? That’ll be one of the early signs about how quick our recovery is going to be?”
The University of Michigan conducts monthly telephone surveys with a sample size of 500 Americans. Questions range from how people see their personal financial future and the economy’s and spending flexibility.
In February, consumer confidence was one-tenth of a point above the normal level of 100. By March, it dropped to 89. When the effects of the pandemic started in mid-March, consumer sentiment saw its biggest month-to-month decline in April, to about 72.
May numbers should be published within the next two weeks, Dorfman said.
Georgians have been spending less, according to the amount of sales tax collected by the state in March. Gross sales and use tax collections, reported in April, were $107 million less than the April 2019 report.
Compared with the same time last year, the state saw its biggest sales tax revenue decline – 56 percent – in the hospitality sector. Tax collections on sales from general merchandise dropped by 50 percent. Sales tax collected from the food service industry was 27 percent less.
The state may be able to recoup some of its loss through the new marketplace facilitator tax, which brings in sales tax from a variety of online dealers. It would make a difference of about $15 million a month, Dorfman said.
“Now, it's a lot better to have an extra $15 million a month than not,” Dorfman said. “But that is not going to save you from the hard choices you and your fellow legislators are going to have to make.”
Lawmakers have until June 30 to finalize a new budget for the 2021 fiscal year, which starts July 1.
Appropriations committee leaders have asked state agencies to reduce their budgets by 14 percent and called on congressional representatives for federal aid.
Kelly Farr, executive director of the Governor’s Office of Planning and Budget, said the state would not see the full implications of the response to the COVID-19 pandemic until around Memorial Day, when revenue from April’s tax collections will be known.
“What happens when the revenue doesn’t show up?” Farr asked rhetorically.
The state would have to dip into its rainy day fund, which until March had a balance of $2.8 billion.
After a request from Gov. Brian Kemp, lawmakers in March added $100 million from its reserves to fight COVID-19. However, the state may be able to recover the funds from the federal Coronavirus Aid, Relief and Economic Security (CARES) Act, which directed $4 billion to Georgia to combat COVID-19.