When Alabama legislators report for the regular session next year they will be facing some most serious financial problems. As has been reported, the turmoil on Wall Street has created a tremendous hole in the operating budget for state government. It was estimated to be about $120 million a few weeks back. As a result, the state will be facing spending cuts later this year. The budget hole developed when Alabama’s investments on Wall Street lost money. Governor Bob Riley planned the state’s $2 billion General Fund budget in anticipation of getting $117 million in capital gains from the investments, but there have been none. I believe the state will have to deal with the budget-cutting process known as “proration” before the fiscal year ends. Some believe the revenue projections – by any standard – were overly optimistic.

Most state employees have never experienced proration of the General Fund budget in the middle of a fiscal year. The last time a Governor had to make those cuts to the General Fund budget was in fiscal 1993 when spending was cut 3.2%. The Special Education Trust Fund budget will be in proration unless the economy turns around in a big hurry and nobody believes that will happen. The state has an obligation to fund public schools and colleges and it will be a real test this time to meet all of the needs. State officials are watching the education budget’s two main ingredients ‘ income and sales taxes ‘ to see how that budget will hold up during the economic slowdown. Things don’t look very promising at this juncture. The Governor and legislative leaders will have a difficult time keeping existing state programs’ funding at current levels without new revenues. The educational programs will face significant cuts and that will be most difficult to deal with. Most observers say 2009 won’t be a good time to be in the Legislature.

Source: Associated Press

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