6 years ago

Budget Basics: the facts about Alabama’s budget system

Alabama State Capitol
Alabama State Capitol

Many taxpayers are familiar with the federal budgeting system, thanks to incessant coverage of budget standoffs, government shutdowns, and increasing national debt. Yet many Alabamians remain completely unfamiliar with Alabama’s budget and the budgeting process. When the Legislature convenes in March, leadership will face the daunting task of balancing the FY2016 budget at a time when the long-term budget outlook is bleak.

It’s imperative that Alabama taxpayers understand how the process works, where the money goes, and what challenges the State is facing. The general public, particularly those in the private sector, commonly feel disconnected with or ambivalent toward budget debates at the state or federal level. Recent talk of tax increases will likely stir interest in this complex topic, so let’s start with the basics.

The most unique thing about Alabama’s budget is that it was split into the General Fund (GF) and the Education Trust Fund (ETF) when public education began in 1927.  Currently, only three states maintain two separate budgets.

The ETF primarily funds K-12 education and higher education and includes salaries and benefits for teachers, administrators, and support staff.  The ETF receives 52% of the State’s overall appropriations and is predominantly funded by revenues from state income and sales taxes.

The GF covers nearly everything else, such as the operation of the executive, legislative, and judicial branches of state government, public safety, and Medicaid. The GF is financed by tax revenue such as the ad valorem and insurance premium taxes; however, this fund receives only 15.9% of the State’s total appropriations per fiscal year. (Note: The 32% that doesn’t go into either of the two major funds will be discussed in a later installation.) In April 2014, the State enacted a budget for fiscal year 2015 of which $1.8 billion was allocated for the GF and $5.9 billion for the ETF.

Thirty-five percent of GF appropriations are directed to the State’s Medicaid obligations and twenty-two percent is directed to corrections. The proportion of the State budget devoted to these two commitments explains (at least in part) the ongoing attention given to Medicaid expansion and prison reform. According to the Legislative Fiscal Office, funding for Medicaid and corrections has increased from 34% of the GF in 1984 to 57% in 2014.  Estimates from The Heritage Foundation show that if Medicaid were expanded in Alabama, it would cost the State between $470 million to $693 million from 2014-2019. Furthermore, according to the Council of State Governments, Alabama would need $840 million just to build enough prison space to account for the current overcrowding.


Taxpayers will need a better understanding of Alabama’s budget and the current fiscal climate in order to actively engage policymakers in upcoming budgeting decisions that will have long-term consequences for the State.

Annually, the Legislature’s “paramount duty” is to approve the State’s budget for the upcoming fiscal year. Alabama’s Constitution requires that the State pass a balanced budget and an amendment adopted in 1933 requires the proration—or across the board cuts–of State funds when revenues received are less than the monies appropriated. This is similar to the 2013 sequestration, or automatic across-the-board spending cuts, at the federal level that captured headlines.  The State experienced proration fairly regularly during the last decade, due to steadily increasing expenditures combined with stagnant economic growth. (Editor’s note: the state has not, however, experienced proration since Republicans took the majority in the Legislature in 2010.)

Alabama’s budget is also distinctive because about 88% of Alabama’s tax revenue is earmarked, whereas the average state earmarks about 25%.  This means that 88% of revenues collected are already obligated to specific sources by statute or constitutional amendment, not the “bridge to nowhere” or “big dig” type earmarks that you hear about from Washington. This leaves roughly 12% of total state funds to be allocated for current needs. The Governor and some legislative leaders have recently expressed openness to removing some earmarks to provide greater flexibility and discretion in appropriating funds.

Taxpayers will need a better understanding of Alabama’s budget and the current fiscal climate in order to actively engage policymakers in upcoming budgeting decisions that will have long-term consequences for the State.  Parts 2 & 3 of our Budget Basics series will explore in more detail the heaviest obligations of our state budget, what challenges the Legislature will face next session, and which options for reform are on the table.


Katherine Green Robertson is senior policy counsel for the Alabama Policy Institute (API), an independent non-partisan, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families. If you would like to speak with the author, please call (205) 870-9900 or email her at katheriner(at)alabamapolicy.org.

37 seconds ago

Raytheon holds event in Huntsville to encourage more girls to become engineers

Raytheon, a defense contractor with a large presence in Huntsville, held its annual “Introduce a Girl To Engineering Event” this week.

The company invited students from Alabama’s School of Cyber Technology and Engineering (ASCTE) to take part in an engineering challenge, followed by a panel discussion with accomplished female engineers and cyber professionals.

Yellowhammer News asked Teresa Shea, vice president of Cyber Offense and Defense at Raytheon Intelligence & Space, about the state of women in the cyber engineering and defense fields. Shea was one of the panelists that spoke with the students on Thursday.

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Shea joined the federal government’s National Security Agency shortly after earning her engineering degree and went on to have a distinguished career in the defense industry.

“What struck me then and inspires me to this day is the impact that intelligence has in saving lives and influencing policymakers. I’ve been in this field for over 40 years and would encourage all young women and men to consider intelligence and defense as a career choice. It is extremely rewarding and purposeful,” she told Yellowhammer.

Shea said that in recent years she has been thrilled to see more women joining fields based on science, math and engineering. She observed that many young people she meets in those fields “want to make the world a better place.”

“Many see cybersecurity as a way to do just that. With the increased amount of interconnectivity, cyber is underpinning everything we do. Protecting that foundation is critical. I’m excited that young women are recognizing that and taking on the challenge of becoming engineers and computer scientists to improve our security nation-wide,” Shea advised.

Yellowhammer asked Shea what kind of impact schools like the Alabama School of Cyber Technology and Engineering (ASCTE) are having on the engineering field.

“The Alabama School of Cyber Technology and Engineering is the only high school in the nation for students seeking advanced engineering and cyber technology studies. It’s groundbreaking for our country,” she began.

“We know that, especially for girls, exposure to STEM at a young age is very important. If we can reach high school-aged students, we can show them not only how important cyber is, but also how much fun and rewarding a career in cyber can be, especially when working closely with others as a team to problem solve. If we can ‘hook’ them in high school, we’ll have a strong pipeline of engineering talent for life,” she added.

Two young women involved in the event told WZDX that they found having prominent women involved in engineering fields “inspiring.”

In speaking to the assembled young women, Shea started by saying, “I am so proud of each and every one of you for choosing to attend ASCTE.”

“There are endless opportunities for you to make the world a better place – and cybersecurity is not always the easiest of careers. Like every field, you face challenges every day. However, working in cybersecurity is extremely rewarding and is a choice I’m proud to have made. I give you lots of credit for making this choice early in your educational career and I know that your contributions to this field will help make the world a safer place,” Shea told the students.

Henry Thornton is a staff writer for Yellowhammer News. You can contact him by email: henry@yellowhammernews.com or on Twitter @HenryThornton95.

1 hour ago

Ainsworth opts against 2022 U.S. Senate run

Lt. Governor Will Ainsworth (R-AL) on Friday announced he will not be a candidate in Alabama’s 2022 U.S. Senate contest.

The seat is being vacated by U.S. Senator Richard Shelby’s (R-AL) decision not to seek a seventh term.

Ainsworth, who is serving his first term as lieutenant governor, is the prohibitive favorite to be the Yellowhammer State’s next governor.

“After discussions with my wife, Kendall, and prayerful consideration, I have decided that I will not be a candidate for the U.S. Senate,” he wrote in a social media post. “Because our twin boys and daughter are young and need a father who is present and deeply involved in their lives, I feel strongly that God’s plan currently calls for me to continue leading on the state, not federal, level of government.”

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“The encouragement to run that I have received from every corner of the state is humbling, and the support of my fellow Alabamians is deeply appreciated,” Ainsworth continued. “Sen. Shelby has served Alabama well, and his shadow will loom large over all those who run to fill his seat. As lieutenant governor, I will continue seeking conservative solutions to the problems facing Alabama and will keep working each day to bring more jobs, hope, and opportunities to the citizens of our state.”

Lynda Blanchard is currently the only announced candidate in the 2022 U.S. Senate race.

Sean Ross is the editor of Yellowhammer News. You can follow him on Twitter @sean_yhn

1 hour ago

East Alabama’s Russel Medical receives ‘transformational’ $25M gift

Russell Medical, a hospital located in Alexander City that serves a large portion of East Alabama, announced a multi-facility expansion on Thursday that is being made possible by a $25 million gift.

Making the donation to the nonprofit hospital are Ben and Luanne Russell. Ben Russell is the CEO of Russell Lands, the company that has developed much of the area around Lake Martin. His grandfather, affectionately known as “Mr. Ben,” built the famous Russell clothing company.

The gift from the Russells is the largest in the history of Russell Medical. It will provide for the construction of a new large-scale project focused on providing care for the elderly.

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To be built on the hospital’s campus in Alexander City, the Russell Legacy Project will include 26 units of independent living single-family cottages, an assisted living facility with 32 units.

The Russells’ donation will also provide for the construction of the Benjamin Russell Center for Advanced Care, a new project for the hospital that will “provide comprehensive geriatric health care and specialty health care services,” per a release.

“Ben and Luanne’s extraordinary act of generosity reflects a caring family who are great supporters of Alexander City, the Lake Martin area, and the medical community in Alabama. The Russell Legacy Project allows us to grow services centered on the largest sector who are in need of healthcare services, those citizens 65 years and older,” stated Jim Peace, president and CEO of Russell Medical.

In addition to the new facility, the gift from the Russels will create the Benjamin Russell Endowed Chair in Geriatrics, pending approval by the University of Alabama System Board of Trustees. Russel Medical is a member of the UAB Health System.

“Each day for the next 20+ years, approximately 10,000 adults will turn 65, and with this trend, the demand for Geriatricians is expected to skyrocket,” remarked Dr. Cynthia Brown, director for the Division of Gerontology, Geriatrics, and Palliative Care at UAB.

The advanced care facility will be constructed in front of the hospital’s cancer center and will look out onto Highway 280. In addition to its primary focus on elder care, the center will house Women’s Health and other specialty clinics.

“As lifelong residents of Alexander City, Luanne and I have supported the Lake Martin area and this hospital and are pleased to be able to make this gift, honoring my grandfather, Benjamin Russell. Mr. Ben did much for this state and its people. This gift is one way Luanne and I can recognize his contributions,” said Ben Rusell.

Henry Thornton is a staff writer for Yellowhammer News. You can contact him by email: henry@yellowhammernews.com or on Twitter @HenryThornton95.

6 hours ago

7 Things: Alabama State Health Officer says to take any coronavirus vaccine, Alabama Democrats think all protesters are rioters, U.S. Capitol still faces threats and more …

7. Joe Reed: Keep straight-ticket voting in Alabama

  • Democratic Party leader Joe Reed has come out against a piece of legislation that would get rid of straight-ticket voting throughout Alabama. Reed asked that the 24 Democratic members of the House of Representatives who have decided to co-sponsor the bill remove their support.
  • Reed asked the question, “What is wrong with a person voting the straight-ticket?” He added that he doesn’t know of any “harm” straight-ticket voting does to the “Democratic process,” and he focused on how removing straight-ticket voting would ultimately hurt the Democratic Party as it would remove support from candidates with less name ID.

6. $15 minimum wage is out of the coronavirus stimulus bill

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  • Congressional Democrats’ attempts to force a minimum wage hike into a completely unrelated coronavirus stimulus bill were stymied by Elizabeth MacDonough, the Senate parliamentarian who declared the provision violated budgetary rules.
  • Democrats will now have to gain Republican support for the measure or do it by killing the filibuster, a move they probably can’t pull off. Democrats like U.S. Rep. Ro Khanna (D-CA) are not happy and expressed as such, saying, “I’m sorry — an unelected parliamentarian does not get to deprive 32 million Americans the raise they deserve. This is an advisory, not a ruling. VP Harris needs to disregard and rule a $15 minimum wage in order. We were elected to deliver for the people. It’s time we do our job.”

5. Equality Act passes in Congress, Alabama takes another path

  • With only three Republicans voting for the Equality Act, the U.S. House of Representatives passed the bill in a 224-206 vote. The bill provides protections for those in the LGBTQ+ community in a wide range, including allowing transgender people to participate in their chosen gender’s league for sports.
  • In Alabama, a bill was approved by a House committee that would forbid doctors from using puberty-blocking medications, hormones and surgeries on transgender minors.

4. Legislature taking their time with medical marijuana

  • Alabama House Speaker Mac McCutcheon (R-Monrovia) has said that in the House of Representatives, they’re going take their time with the medical marijuana bill by sending it through the Judiciary and Health Committees.
  • McCutcheon said, “We’re going to go through the bill page-by-page.” The medical marijuana bill has already passed the State Senate and has to be passed by the House before Governor Kay Ivey can sign it into law.

3. Threats against the U.S. Capitol ahead of State of the Union

  • It hasn’t been scheduled or announced when President Joe Biden will give his first State of the Union address, but acting Capitol Police Chief Yogananda Pittman has said that there are credible threats to “blow up” the U.S. Capitol during the address. Pittman said this is why it’s necessary for security measures, like National Guardsman and the barbed wire fence, to stay in place.
  • Meanwhile, U.S. Senator Tommy Tuberville (R-AL) wants a fair and balanced investigation into the riots at the U.S. Capitol. He will even testify under oath during it, and he may get it after all.

2. Bill targeting rioters is somehow aimed at peaceful protesters

  • The legislation brought by State Representative Allen Treadaway (R-Morris) that would make rioting or inciting a riot a felony has received some backlash from State Senator Rodger Smitherman (D-Birmingham), who claims that the bill will actually target peaceful protesters.
  • Smitherman said that this bill “seeks to take us back 60 years to where we were at that particular time,” referencing the 1960s and 1970s when protestors were arrested. He went on to assert that this bill would lead to those who are protesting being arrested, adding, “We can’t allow to go back 60 years in time to try to oppress people from being able to…speak out.”

1. State Health Officer: Take the coronavirus vaccine made available to you

  • State Health Officer Dr. Scott Harris is advising that people in Alabama should simply take whichever coronavirus vaccine that’s available to them. This came into question as it’s anticipated that the Johnson & Johnson vaccine will be approved by the Food and Drug Administration soon.
  • Dr. Harris stated, “This is a vaccine that prevents deaths and prevents even serious illness and hospitalization at the exact same rate as the other vaccines,” which doesn’t seem to be true.

7 hours ago

PSC President Cavanaugh: Measures implemented to protect Alabama against Texas-like widespread electric utility failures

Last week, the nation watched as Texas suffered electricity outages during an unprecedented winter storm that wreaked havoc on the Lone Star State.

Could that happen here in Alabama? Public Service Commission President Twinkle Cavanaugh said although no utility is completely invulnerable, measures have been taken to protect customers.

During an appearance on Mobile radio FM Talk 106.5’s “The Jeff Poor Show,” Cavanaugh elaborated on why Texas and Alabama are uniquely different and why Alabama may have fared differently under similar circumstances.

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“[I] did not know a whole lot about Texas until this started happening,” she said. “Since then, I have studied and tried to make sure we have covered all our bases here in Alabama, and that does not happen. Now, let me give this disclaimer — there is never 100% on any utility. Obviously, there are things utilities must do to be prepared. But there are things that can go wrong no matter how prepared you are. I always give that disclaimer.”

“However, Texas and Alabama are completely different in their setup,” Cavanaugh continued. “Alabama Power is the largest power utility in Alabama, and it is a regulated utility. The other utilities that produce electricity in Alabama are TVA, which is a federal-run utility — it is a quasi-government-run utility in North Alabama. We also have some cities that have their own system. They’re called municipals. And then, there are co-ops in some of your rural areas. In fact, I believe Baldwin County has some co-ops. And so, those are run by their members.”

“We regulate Alabama Power Company, which many of your listeners in Mobile have,” she added. “They are regulated. In Texas, 90% of their power is not regulated. In other words, they are deregulated, is what the industry calls it. And after reading this — I think the easiest way to put this is when you’re regulated, we look at everything as how do we protect the people, or how do we protect the customers. In a non-regulated arena, it is how do you protect the profits of these companies.”

According to Cavanaugh, the difference in governing utilities makes such a scenario that Texas faced less likely in Alabama.

“There’s just a completely different philosophy in the two,” she said. “And one of the things in a regulated environment like Alabama Power Company, we always want to weigh things on how it will affect customers. We do that through — is it reliable for consumers? And is it affordable? They have to present to us, I say, on a monthly basis, but it is actually a continual basis. They are audited. And we ensure they do what it takes to be able to handle the load, no matter what the load problems may be.”

Cavanaugh also explained how that given Texas is on its own grid, which covers 90% of that state, prevents it from bringing power in from other states, which is a protection that exists with Alabama’s electric utilities.

She added that there is also less of an incentive to undergo the expensive effort of winterizing in a deregulated environment like Texas.

@Jeff_Poor is a graduate of Auburn University and the University of South Alabama, the editor of Breitbart TV, a columnist for Mobile’s Lagniappe Weekly, and host of Mobile’s “The Jeff Poor Show” from 9 a.m.-12 p.m. on FM Talk 106.5.