Alabama state budget

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Alabama Gov. Bob Riley signed the state's FY2011 $1.6 billion state budget on April 21, 2010.^[1]Alabama's fiscal year begins in October and ends in September.^[2]

The state faced a $1.2 billion budget gap for fiscal year 2010.^[3] However, in Gov. Bob Riley's State of the State 2010 Address he announced that his proposed budget for FY 2011 has "no cuts" and "general fund agencies will receive the same amount of funding that they will be getting this year."^[4] State lawmakers, like Rep. John Knight said they were surprised by Riley's address. According to the Legislative Fiscal Office the state's general fund is facing a shortfall of about $600 million.^[5] The state cut the budget by $426.7 million, including $296.8 millino from K-12 education and $117.2 million from higher education.^[2]

Alabama will receive more than $282 million from H.R. 1586, a $26 billion plan to give states money for Medicaid and education that the President signed into law on August 10, 2010.^[6]

See also: The Alabama State Budget on State Budget Solutions

[edit] Fiscal Year 2012 State Budget

State education officials advised local school administrators to expect 3-5% funding cuts in FY2012.^[7]

[edit] Fiscal Year 2011 State Budget

[edit] Oil Spill

Alabama lawmakers anticipate that the British Petroleum (BP) oil spill in the Gulf of Mexico will have a big impact on the state's budget. Areas that were be affected immediately are the general fund and the education allocations fund, State Rep. Terry Spicer said. “Revenues in the state were already down and we thought we had bottomed out,” he said. “Our budgets in 2011-2012 now will be pretty much devastated.”^[8] The state filed a claim with BP for $148 million in state taxes lost due to the impact of the oil spill on the Alabama coast.^[9] Resolution of that claim is on hold because of a lawsuit that the state attorney general filed against BP.^[9]

[edit] Federal Funds

Alabama will receive more than $282 million from H.R. 1586, a $26 billion plan to give states money for Medicaid and education that the President signed into law on August 10, 2010. The funding breaks down to $133 million for Alabama's Medicaid budget and $149.5 million for education.^[10] Lawmakers had already factored the federal funds into the state's FY2011 budget, but they had planned on receiving more than the state actually got, so the state will start the fiscal year in October 2010 with $64 million shortfall.^[10] Alabama's Medicaid program covers health care for nearly 1 million people in the state, with the total program including state and federal funds costing more than $5 billion, three-quarters of which is covered by federal funds.^[10] An estimate from the U.S. Department of Education says that the $149.5 million in education money for Alabama covers the salaries of 2,700 education personnel.^[10]

[edit] Education

The education portion of the FY2011 budget totals $5.5 billion.^[9] The represents a decline of 20% over the past three years.^[7]

The governor said that any changes to the education budget would depend on the resolution of the state's claim for lost taxes as a result of the oil spill because the claim was mostly for sales and income taxes, which support the state education budget.^[9] The claim was for $148 million, the equivalent of 3.3% of the education budget.^[9] Officials hope that the $149 million from the federal jobs bill will lessen the impact of any budget cuts after Oct. 1.^[9]

The federal funds were not enough to keep banks from seeking loans, however. Five school districts have already borrowed against lines of credit they have with local banks to fund basic school operations, and 25 additional districts are planning to follow suit in the next few months, which would represent 20% of the state's districts.^[7]

[edit] FY2010

Gov. Bob Riley hopes to get through the end of FY2010, which ends on Sept. 30, 2010, without making further budget cuts to education, although Paul Hubbert, executive secretary of the Alabama Education Association, said school officials would "not going to be shocked" if the governor cut an addition 2%.^[9] The governor started FY2010 by announcing September 29, 2009, a 7.5% cut from the budgeted $5.7 billion Education Trust Fund, reducing it to $5.3 billion from $5.7 billion.^[11][9] However, in light of federal stimulus money which won't be available, Legislative fiscal officer Joyce Bigbee estimates a $600 million shortfall for 2011. Tax revenues are estimated to be equal to 2009 at $1.3 billion.^[12]

Gov. Riley announced August 21, 2009, adjustments for Alabama’s second major budget, the $1.5 billion General Fund, because of declines in state revenue. Spending adjustments for many of the agencies funded by the General Fund were ordered to modify their standard allocations of 25% each quarter to 22% for the 1st to 3rd quarters and 34% for the 4th quarter.^[13]

[edit] Budget Background

Constitution of 1901 has numerous amendments addressing the call for a balanced budget. Amendment No. 26, ratified in 1993, calls for a proration of state funds when the revenues actually received are less than the obligations appropriated by the Legislature and approved by the Governor.^[14]

Alabama's fiscal year begins October 1 and ends September 30 of the following year. Each year the state's agencies submit budget requests along with expenditures, an estimated condition of funds and a planning summary. All agencies must submit their requests by December 1 to the Governor. On December 8 the revenue projections for the following fiscal year are finalized. At the beginning of each regular legislative session, the Governor submits a two-part budget proposal for lawmakers to consider.^[15]

• The FY 2010 Education Trust Fund totaled $5.7 billion (reduced to $5.3 billion by Gov. Riley September 2009) compared to the FY 2009 budget of $5.8 billion.^[16]
• The FY 2010 General Fund budget totaled $1.5 billion compared to the FY 2009 budget of $1.9 billion.^[17]

The following is an example of a budget preparation calendar typical of the second and third years of a legislative quadrennium. During the first and fourth years, the Legislature comes into session in March and January, respectively; therefore, time frames are somewhat different for those two years.^[18]

• August 31 Budget instructions and forms mailed
• October 15 - December 20 Executive budget hearings
• November 1 Budget requests due
• December 1 Preliminary budget information to Governor
• December 8 Revenue projections finalized
• January 8 Governor's budget recommendations finalized
• January 21-31 Appropriations bills prepared and printed
• February 4 Governor presents budgets to Legislature
• February 4 - May 18 Regular Session of the Legislature

See Alabama state budget (2008-2009) for more details.

[edit] Accounting Principles

Main article: Alabama government accounting principles

Created in 1947, The Department of Examiners of Public Accounts is responsible for auditing the books, accounts, and records of all state and county offices, officers, bureaus, boards, commissions, corporations, departments, and agencies and reporting on expenditures, contracts, or other audit findings found to be in violation of law.^[19]

The rules under which the Department operates are found in Title 41, Chapter 5 of the Code Of Alabama. The majority of audit work performed by the Department consists of traditional financial and compliance audits, including Federal compliance. These audits focus on two areas: reliability and accuracy of financial statements; and compliance with laws, ordinances, regulations, and other requirements. In addition, the Department performs "operational audits" and sunset reviews that go beyond the traditional audits and address economy, efficiency and effectiveness of operations. Such audits have been developed because the performance of governmental entities is not generally measured by profit and cannot therefore be determined through analysis of financial transactions alone. Operational audits and sunset reviews are not normally comprehensive, but focus on particular aspects of operations.^[20] The Department’s audit reports are published on their Web site.

Credit Rating	Fitch	Moody's	S&P
Alabama[21]	AA	Aa2	AA

The Institute for Truth in Accounting (IFTA) rates Alabama “Tardy” in filing the state’s Comprehensive Annual Financial Report (CAFR) – The annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA does not consider Alabama’s CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis does not iclude significant liabilities for the pension plans and for other post employment benefits, such as health care.^[22] Alabama’s Comptroller's Office is responsible for filing the CAFR, which are published on their Web site. Michael G. Hudson is Alabama’s Acting State Comptroller.

[edit] Economic Stimulus Package

Alabama is expected to receive approximately $3 billion from the $787 billion economic stimulus package. ^[23] According to White House officials the stimulus bill is estimated to create or save 51,000 jobs. ^[24] For more information on how the federal stimulus funds are being used in the state of Alabama, visit the state recovery website.
Like some states across the country Gov. Bob Riley announced that he rejected the unemployment funds. Of the $7 billion dedicated to unemployment benefits, Alabama was expected to receive $100 million however, Riley and other governors said that they fear that the the strings Congress attached would lead to higher business taxes. ^[25] Gov. Riley was quoted by the Asscoiated Press saying:

"It's illogical for anyone to think government can expand benefits and no one has to pay for it." ^[26]

However, a bill has been introduced in the Alabama Legislature to challenge Gov. Riley's rejection of the funds. ^[27] Sen. Rodger Smitherman, introduced the legislation in early March 2009 and was quoted by the Associated Press saying:

"There is no reason to believe our record unemployment will be this high four years from now when stimulus money ends, so our benefit costs should decrease, not increase." ^[26]

According to preliminary reports Alabama is expected to receive:

• $71.8 million in home weatherization funding for low-income families ^[28]
• $55.5 million towards the state energy program ^[28]
• $1 billion towards education ^[29]
• $513.69 million towards improving highway infrastructure ^[30]

[edit] Budget transparency

See also: Evaluation of Alabama state website

On February 11, 2009, Governor Bob Riley signed an Executive Order to create a state spending database.^[31] The order mandated that the site, to be operated by the state Department of Finance, be up by March 1, 2009. The site was launched recently,^[32] and is now available to citizens.

[edit] Economic Stimulus Transparency

• The American Recovery and Reinvestment Plan of 2009 designated $787 billion to be spent throughout the U.S. Of that $787 billion stimulus package, it is estimated that 69%, or over $541 billion, will be administered by state governments.^[33]

• Alabama will receive an estimated $3 billion in Federal funding.^[34]

• The economic recovery website for Alabama is available here.

[edit] Error in ARRP

On November 16 and 17, 2009, many errors were found in the $747 billion plan that showed the plan set aside money for districts that do not exist. According to Recovery.gov, the plan shows its funds will go to 884 Congressional Districts, though there are only 435.^[35][36]

The ARRP website created 4 phantom districts in Alabama.^[37]

[edit] Legislation

Alabama Executive Order 46

[edit] Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases

State Database	Searchability	Grants	Contracts	Line Item Expenditures	Dept/Agency Budgets	Public Employee Salary
open.alabama.gov

[edit] See Also

• Alabama taxpayer-funded lobbying
• Government budgets

[edit] External links

[edit] Additional reading

• Alabama 2011 Executive Budget
• Gov. Bob Riley,"The 2010 State of the State Address," January 12, 2010
• Gov. Bob Riley,"The 2009 State of the State Address," February 3,2009

[edit] References

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