Proposal to revamp state budget structure stalls in Senate

Alabama State House

As lawmakers continue to seek common ground to solve the state’s current budget challenges, the public had the chance to weigh in on a controversial proposal to guard against future shortages.

Senate Bill 12, sponsored by Sen. Paul Sanford, would pool the state’s two major funds, the Education Trust Fund and the General Fund, into a new Alabama Recurring Expense Fund.

According Sanford, the bill allows the general fund to share in some of the growth revenue now earmarked for what is essentially a savings account in the Education Trust Fund.

In a presentation to lawmakers in March, the Legislative Fiscal Office projected a $287 million surplus in the Education Trust Fund and a $290 million shortfall in the General Fund. Some have questioned whether the practice of earmarking tax revenue for the Education Trust Fund – then creating a barrier between the education and General Fund – is the root cause of the state’s current budget shortfall.

“There’s a crisis in the state of Alabama,” Sanford said. “We’ve tried some one-time fixes. It’s my understanding that the FY16 budget will have an excess of $200-225 million that will be diverted into the stabilization fund. (…) I certainly don’t want to look at families with kids and people with mental health problems and say we’re going to cut funds when we have $200 million sitting in a kitty not to be touched.”

Several members of the committee expressed concerns that the proposal would siphon money away from education at a time when reports are that public schools in Alabama are underfunded.

“I appreciate Senator Sanford for bringing this up. We’ve had a lengthy discussion on splitting the funding,” Sen. Gerald Dial said. “We don’t fund education as we should. I can’t vote for supporting a fund that’s going to balance the budget on the backs of kids.”

Sens. Rodger Smitherman and Hank Sanders also expressed deep concerns about the proposal, citing inadequate funding for textbooks and school resources in the current budget.

A favorable vote from the committee would have allowed the bill to go before the full body for a vote and, Sanford argued, a fair debate on all of the options to address the budget concerns.

Sanford compared the state’s current fiscal situation to a household with a healthy savings account but in danger of having its lights cut off.

“I’ve got a $150 million cork to plug the hole. It might take two or three other ideas, but I’m not going to watch [essential services] get cut off without dipping into my savings. If the taxpayers knew and recognized that there was several million going into a pot that can’t be touched, they might do what we would do in our own households.”

“The state is in financial distress,” Sanford said. “But raising taxes is not the only way to plug this hole.”

In a speech to lawmakers last year, Gov. Robert Bentley said that the General Fund was stretched thin because the fund covers the cost of prisons, courts, and Medicaid. However, state revenue from income, sales, and utility taxes are earmarked for the Education Trust Fund. The governor has argued for $581 million in tax increases as a way to drive revenue to the General Fund.

At the public hearing on Wednesday, Susan Kennedy of the Alabama Education Association spoke in opposition to the proposal and suggested that the panel consider the business taxes that undergird the General Fund.

“I applaud him for trying to address a problem we all know is there. But I disagree with the solution,” she said. “When you asked the people where their tax money should go, they said [it should go to] education. There are some taxes out there that the General Fund could take advantage of, and some extremely large tax exemptions. Maybe there will be a will to take advantage of those now.”

The committee voted 8 to 5 to postpone the legislation indefinitely.