Alabama could enter 2023 with the largest budgets in state history. But the message from two of Alabama’s financial officials on Tuesday was caution.
In budget presentations ahead of the start of the 2022 legislative session on Tuesday, Kirk Fulford, deputy director of the Legislative Services Agency’s tax division and state finance director Bill Poole, said the reported record revenues over the past year were fueled by federal coronavirus aid. With the disappearance of this funding, the men warned that the money could slow down.
“We’re seeing a lot of key indicators that I think are unsustainable, whether it’s the growth in the personal income rate … out of whack,” Poole said at a joint meeting of the budget committees of the legislature. “All of these indicators are clearly unusual and unsustainable circumstances.”
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But even excluding one-time coronavirus-related money, there could be significant increases in spending. Gov. Kay Ivey is expected to propose an education budget of $ 8.2 billion in his state-of-the-state speech on Tuesday, up from $ 7.6 billion this year, and a budget of 2 , $ 7 billion for the General Fund, against $ 2.4 billion last year.
The governor will discuss the details of the proposal in tonight’s speech. Poole said the two budgets would invest heavily in mental health services, prison infrastructure and education, as well as teacher training and recruitment. Ivey will also propose an increase of at least 6.5% in operating funding for public colleges and universities.
“We have appropriated ourselves in a very, very cautious manner over the past fiscal year depending on the circumstances of the pandemic and the uncertainty,” said Poole. “It’s a big increase. It’s not a substantial percentage increase, reflecting income.”
Poole did not mention the salary increases for teachers or government employees, but said Ivey would address them in his speech tonight.
An improved economy; record spending on goods and federal aid led to what Fulford called “abnormal” growth in both state budgets. Revenues paid to the General Fund increased by 11.4% between 2020 and 2021, in part due to a 38.9% increase in revenues from the simplified use tax by sellers (also known as Internet sales tax) and financial institutions excise tax, a tax on banks and credit unions. It increased by 156%.
The Education Trust Fund, fueled primarily by income and sales taxes, grew even faster, increasing 16.42% year over year. Tax revenues jumped 21% year over year; Sales tax revenue increased 11%, and Internet sales tax in the ETF, like the general fund, increased 38.9%.
“I can go back 50 years and I can’t find a 15% increase in sales tax growth,” Fulford said.
But Fulford also said the state could approach a “fiscal cliff” when the COVID relief money runs out. Fulford and lawmakers expressed concern that local school districts were spending federal aid on current expenses that would not be sustainable once funding was exhausted.
“We have to tell our local school systems that received this money outside of state… Senate Finance and Taxation Education Chair Arthur Orr, R-Decatur.
Lawmakers have said they want to spend about $ 1.5 billion in American Rescue Plan Act (ARPA) funds on one-time expenses, like construction or broadband. But Representative Barbara Drummond, D-Mobile, said building broadband doesn’t mean just wire, but hiring people to keep it going for many years to come.
“Can these funds be used for this purpose?” Drummond asked.
Sally Smith, executive director of the Alabama Association of School Boards, who attended the meeting, said the money was intended for specific uses, such as recovering learning losses from the pandemic.
“We made sure the word went out that yes you could hire people to do this but it was a temporary position,” she said.
House Republicans, who hold a qualified majority in the House and Senate, unveiled a priority list earlier this month that included unlicensed postponement, legislation against critical race theory and increases in salary for teachers. But House Speaker Mac McCutcheon, R-Monrovia, and Senate Speaker Pro Tem Greg Reed, R-Jasper, both said on Tuesday he expected the legislature to focus on allocation of the $ 1.5 billion ARPA sent to the state.
“We have to make a decision on this first, and then we’ll move on to the other program,” McCutcheon said.
Republican leaders say they want to use the money for broadband expansion, water and sewage infrastructure, and compensation for health care providers, though no decision has been made. still been caught on splits. Minority House Leader Anthony Daniels of D-Huntsville said housing and child care should also be considered.
“We need to think about where our investments will be best spent and deliver the results we need in the long term,” he said.
Contact reporter Brian Lyman of Montgomery Advertiser at 334-240-0185 or [email protected]