It was reported recently that the revenues that fund state government operations and public education in Alabama saw decreases that were “steeper and longer” than anything the Legislative Fiscal Office (LFO) has ever seen. The record for decreases in the general fund taxes had been set in 1954 and the current decrease was two-and-a-half times larger than it was then. Unfortunately, the budget cuts that took place this year as a result won’t be anything like what is expected in the near future.
The question looms, what is the answer – both short and long term? Without the influx of federal money from the ARRA, our state would have been in extreme difficulty this year. The LFO says $513 million from the ARRA funds went into the general fund and about $1 billion went to the special education trust fund. So what happens when the federal funds are no longer available?
Of the $3 billion in ARRA funds the state expects to get, only about $659 billion will remain in 2011 according to reports from the LFO. Education is expected to get $511 million of that amount, leaving only $148 million in ARRA funds to help out in the general fund. According to a number of fiscal experts, Alabama has two choices on the short term solutions:
• Borrow more money from the Alabama Trust Fund which would require a constitutional amendment.
• Make more drastic cuts in state spending which means good programs and services will be cut sharply.
The long range solution to the state’s fiscal problems will be much more difficult. The following have been suggested as long-term solutions:
• Fewer earmarks of state tax revenues.
• Revise our tax code which would require some tax increases in certain areas. It would also include the cutting out of some existing tax loopholes.
• Increase taxes, such as property taxes, and keep spending levels fairly stable.
Nobody, including me, believes the Alabama Legislature will pass any tax increases in 2010. Perhaps 2011 will be a different story, but that depends on several factors. The economy may have improved to the extent that no additional revenues are needed. But, if that doesn’t happen, the solution for the long term will depend on how badly the needed services – including public education – have already been cut and how the in 2011 cuts would affect Alabama citizens.
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