Finding a General Fund budget out of Alabama’s shell game
Just keep your eye on the ball as the shells start moving at a frantic pace.
First, there’s always the option of cutting the General Fund to match expected revenues. For most conservatives, that’s the answer. At the same time, across-the-board cuts aren’t helpful. Nobody rolls back their housing budget the same as their vacation budget if they need to save money; they prioritize. Relying on precision cuts has support in the Legislature and is popular with many voters across Alabama.
That said, let’s assume that Gov. Robert Bentley and a potential legislative majority have some common priorities that start with the presumption that they want to spend more money in the General Fund than they’re expecting. That consensus amount now seems to be somewhere in the $150-250 million range.
Most also realize the importance of growth revenues in the General Fund. Unless we want to play this annoying budget game every couple of years, we need revenues that have even a remote chance to keep up with the fiscal drivers of Medicaid and corrections.
Almost all legislators want to create economic certainty by ending the revenue guessing game; it’s simply bad for Alabama. Our anemic economy grew around 0.7 percent last year. That’s about half the national average. With every tax imaginable percolating in Montgomery, it’s reasonable for businesses to wait and see how this is going to play out.
So what’s the politically viable path that puts more money in the General Fund, moves growth revenues and creates economic stability?
The first move is to put the state’s use tax revenues into the General Fund instead of the Education Trust Fund (ETF). And, no, I’m not talking about moving the revenues and non-education spending lodged in the ETF.
Yes, I know that sounds like World War III with Alabama’s education establishment, but hang with me.
The move accomplishes the objective of moving growth revenues into the General Fund and increasing the amount of dollars available by around $200-$275 million. With a little massaging, that should be enough to fund government at a constant level, cover prison-reform spending and give a head nod toward priorities like Dianne Bentley’s domestic-violence program.
At the same time, it would leave a financial hole in the ETF. The first option is to clear the deficit by tackling education-spending reform. We’re probably not funding the K-12 classrooms at optimal levels, but we’re spending in several areas that need extra fiscal scrutiny. There’s not a lot of interest in trying to cut back education spending, so let’s table that option for the moment.
The second alternative, thought it might be wishful thinking, is that the economy grows and fills the lost revenues without additional legislative action. No new taxes, no gaming and a vanishing budget problem. That would be great, but our economy is going to need a serious boost for that to be viable.
The third option actually reflects State Superintendent Tommy Bice’s concern that moving money from the ETF could cause proration. It might, but the ETF proration-prevention account should have more than enough resources to stop that from happening. We wouldn’t see immediate cuts to education, and legislators would have a little short-term breathing room to “backfill” the ETF.
That move has a couple of political advantages.
Right now, they’re fighting the losing battle of raising revenue for what amounts to prisons and Medicaid. If they’re filling an Education Trust Fund hole, they can argue that it’s “for the children.” Even though tax hikes are still unpopular in Alabama, the political optics of relating them to education are far better. As for gaming, funding education is consistent with the methods used to enact lotteries around the nation.
Gaming and taxes won’t be any more popular in the next regular session than they are right now, but creative legislation now might make them more palatable. If they still don’t muster enough support, it’s either living on the prayer of better economic growth or breaking out scalpels and surgical masks to slice into Alabama’s budgets.