Senate panel to hear debate over proposal to revamp state budget structure

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A proposal to cover General Fund expenses using surplus education funds will get a public hearing this week. The Senate finance and taxation committee will hear reasoning on both sides of the debate over whether pooling the state’s two major funds, the Education Trust Fund and the General Fund, could guard against future budget shortages.

Senate Bill 12, sponsored by Sen. Paul Sanford, would establish a new fund to capture money allocated for both the Education Trust Fund and the General Fund. Every month, the Department of Revenue would cover the state’s expenses by dividing the balance of the new Alabama Recurring Expense Fund as needed.

In a presentation to lawmakers last 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 revenues 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.

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.

The public hearing will be held 10:30 a.m. Wednesday.

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