State reserves hit record

ATLANTA - Georgia's reserves are flush with cash.

State tax collections rose 7.5 percent - or $1.2 billion - for the fiscal year that ended June 30, money managers reported Friday. And the state's rainy day fund is stocked with a record-high $1.2 billion, about $400 million of that new money.

The rosy financial picture is certain to ignite fresh tensions within Georgia's ruling Republican Party, which squabbled earlier this year over whether there was enough money for a tax cut.

House Republicans, led by Speaker Glenn Richardson, pushed through a $142 million one-time property tax refund. But Gov. Sonny Perdue vetoed it in May, arguing that the state didn't have the cash. At the time, the Perdue administration said revenues were showing signs of slipping.

"We are certainly pleased the economy seems to have rebounded," Perdue spokesman Bert Brantley said Friday.

Mr. Richardson argued that the healthy numbers released Friday show the time is ripe for tax reform.

"I think we need to sit down and decide the best way to return money to the taxpayers of Georgia," he said.

The Georgia arm of the anti-tax group Americans for Prosperity agreed.

"The state has been wrong and wrong again," the group's executive director Jared Thomas said. "This is money that has been overcharged to Georgians."

Mr. Thomas is leading a petition drive urging state officials to return millions in the state reserves to Georgians in the form of tax relief.

But Alan Essig, the executive director of the Georgia Budget and Policy Institute, said the state needs the money in case there's another downturn in the economy similar to what Mr. Perdue experienced when he first took office in 2002.

The overall jump in revenues for the year was fueled largely by a 9.4 percent increase in individual income tax collections and a 17.9 percent increase in corporate income taxes.

Motor fuel tax collections also skyrocketed by 20 percent over the prior fiscal year. That money is funneled directly into roads and transportation.

The state tax on gasoline rises automatically when prices jump to certain levels. It's already gone up twice in recent months which has led to calls for a special session to provide Georgians relief at the pump, at least temporarily.

The overall surplus for fiscal year 2006 is about $600 million. Of that, $188 million will go into the midyear education adjustment to fund the growth in student enrollment growth in Georgia.