Savannah Chamber

21 5 include a superior transportation, logistics, and distribution infrastructure, low costs of doing business, a favorable tax structure, an educated workforce, and very competitive economic development incentives. State and Local Government Prior to the pandemic, the state prepared for a substantial slowdown in revenue collections by cutting its budget for FY 2020 and FY 2021. At that time, the main threat was thought to be an escalation of the trade war. The cuts were timely and helped to reduce the fiscal impact of the COVID-19 crisis on the state's economy. Nonetheless, budget cuts reduced state government employment in 2020-21, but revenue collections held up far better than many expected. Large transfers from the federal government also helped to shore up state as well as local governments' balance sheets. In 2022, a combination of increasing revenue collections and federal largess will reverse the downturn in state and local government jobs. The upturn in hiring will not be very vigorous because it is well understood that stimulus funds from the federal government have ended. Another reason why state government will not hire too many new workers is that several long-term fiscal challenges loom, the biggest of which is uncertainty about federal funding for mandated programs, especially Medicaid. Mandatory spending on Medicaid is gradually crowding out spending on K-12 education, higher education, and infrastructure, three spending areas essential to boosting--or even maintaining--Georgia's competitiveness, productivity, and culture for innovation. The second challenge is an antiquated tax structure that does not align with the state's shifting economic structure. Consequently, when Georgia's economy expands state taxes do not generate as much revenue as before. Pension liabilities and state retiree healthcare costs are the third and fourth challenges, and these will limit hiring and exacerbate the effects of the next recession. The fiscal situation facing most local governments is better than the one facing state government, so most local jurisdictions will boost hiring more quickly. Compared to state government, local governments depend very heavily on property taxes and fees for services so the housing boom means most local governments will generate enough revenue to sustain and expand programs. In Georgia, residential real estate prices probably will rise by about 6 percent in 2022. Less positively, commercial real estate prices will increase only slightly and might decrease in some jurisdictions, which does not bode well for future property tax digests. Federal Reserve Policy The shift in Federal Reserve policy from an extremely accommodative stance to a neutral, or slightly restrictive one poses a slightly stronger economic headwind for Georgia. That is because Georgians carry relatively more debt and have relatively less savings so higher interest rates will hurt. In addition, interest- sensitive economic sectors such as real estate development, home building, and building materials manufacturing will feel the impact. Economic Development Georgia's economic development prowess will be a major driver of growth in 2022 and beyond. Foreign direct investment was very strong. In fact, Korea's nineteen projects account for the largest job creation due to investment in Georgia by a single country. Projects from Germany accounted for the second largest number of jobs created by foreign direct investment. As national, state, and regional economic growth continues, Georgia will find that it is easier to capitalize on its many advantages. That is because the number of projects that U.S. states compete for will increase, improving Georgia's prospects for new landing economic development projects that expand the economic base. Because it takes many years to build out the typical project, many already underway continue to provide a substantial tailwind to Georgia's economic growth in 2022 and beyond.

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