Issue: Budgets

Alabama House committee votes to lift individuals’ scholarship credit cap under Accountability Act

By M.J. Ellington

An Alabama House committee Wednesday approved a bill to erase a size limit on the state income tax credit that an individual can claim for contributions to groups that grant scholarships under the Alabama Accountability Act. HB 558, sponsored by Rep. Chad Fincher, R-Semmes, moves to the House.

The Accountability Act, enacted last year, provides state income tax credits to help parents of children in “failing” schools pay for private school tuition or a transfer to a non-failing public school. The law also provides tax credits for contributions to scholarship programs to help those students’ parents cover remaining costs.

Fincher’s bill would remove the Accountability Act’s current $7,500 annual cap on the tax credit that individuals or married couples can claim for contributions to organizations that grant scholarships under the act. Alabama still could provide a total of no more than $25 million of scholarship credits annually. Individuals and corporations also still could claim credits only for contributions up to 50 percent of their state income tax liability.

Susan Kennedy of the Alabama Education Association questioned Wednesday whether the state should pass a bill whose tax benefits would flow largely to Alabamians with extremely high incomes. Among those speaking in favor of the bill were Toby Roth, who represents an online education corporation, and Sharon Lewis, principal of the Oakwood Adventist Academy in Huntsville. Lewis said the Accountability Act has given children educational opportunities they otherwise would not have had.

Another portion of HB 558 would allow owners of S corporations and Subchapter K entities to claim tax credits for their share of the companies’ scholarship contributions. The bill also would revise the Accountability Act’s definition of “failing” schools. Click here to read the Montgomery Advertiser’s report on the committee’s action for more details.

Lawmakers will return Thursday for the 24th of 30 allowable meeting days during the 2014 regular session, which is expected to last until early April.

By M.J. Ellington, health policy analyst. Posted March 12, 2014.

Alabama Senate passes education budget; changes likely in House

By Chris Sanders

State K-12 and higher education funding next year would remain far lower than it was before the recession under the Education Trust Fund (ETF) budget that the Alabama Senate passed 21-10 Thursday. The $5.9 billion budget is identical to the version that cleared a Senate committee Wednesday, but changes likely are ahead in the House.

K-12 schools and two-year colleges would get slightly more ETF support next year under the budget, while universities would receive slightly less. The Senate plan includes money to hire more middle school teachers and give all K-12 teachers a one-time 1 percent bonus next year.

Alabama State University (ASU) would lose about one-fourth, or $10.8 million, of its ETF support next year under the budget, accounting for almost the entire overall funding cut to universities. The budget would include $10 million for ASU as a “first-priority conditional,” meaning Gov. Robert Bentley could release the money to the university if ETF revenue collections exceed budgeted spending next year.

Bentley has said he does not support the proposed ASU cut. Sen. Trip Pittman, R-Montrose, who chairs the Senate’s ETF budget committee, said after Thursday’s vote that he will work with a House colleague to restore ASU’s funding, according to AL.com.

Senators rejected a proposed amendment by Sen. Quinton Ross, D-Montgomery, to shift $3 million from state-funded teacher liability insurance to ASU. The chamber also refused a proposal by Sen. Roger Bedford, D-Russellville, to use that money to help K-12 schools buy toilet paper and paper towels instead.

Pittman said he tried not to overestimate future economic growth while working on the ETF budget. “Revenue doesn’t just happen,” Pittman said. “The reality is that we’re in a very difficult financial situation.”

Lawmakers will return Tuesday for the 20th of 30 allowable meeting days during the 2014 regular session, which is expected to last until early April.

By Chris Sanders, communications director. Posted Feb. 27, 2014.

Legacies of recession, chronic shortfalls linger in Alabama’s budgets

By Chris Sanders

State support for education and other public services under the Education Trust Fund (ETF) and General Fund (GF) next year would not come close to its pre-recession level under the budgets that advanced in the Alabama Legislature on Wednesday. Both budgets are built on the assumption that the state will see no major revenue increases next year.

One-time teacher bonus, Alabama State funding cut in Senate committee’s ETF budget

Alabama would allocate $113.9 million, or 1.9 percent, less from the ETF next year under the $5.9 billion budget that won approval Wednesday in the Senate’s ETF budget committee. (By contrast, K-12 and higher education officials had requested $474 million more support next year.) If the budget becomes law, ETF funding in 2015 would be 18.5 percent less than it was in 2008, adjusted for inflation. The full Senate could consider the plan as soon as Thursday.

K-12 teachers would receive a one-time 1 percent bonus next year under the committee’s budget. Gov. Robert Bentley had recommended a 2 percent pay raise, but committee chairman Sen. Trip Pittman, R-Montrose, said he isn’t sure revenues will grow enough to sustain that pay increase. “You can’t spend optimism,” Pittman said. The committee rejected an attempt by Sen. Hank Sanders, D-Selma, to provide a 6 percent teacher raise.

K-12 schools and two-year colleges would receive slightly more ETF money next year under the committee’s budget, while universities would receive slightly less. The budget would include money to hire more middle school teachers and increase support for the Alabama Math, Science and Technology Initiative (AMSTI). Funding for the Alabama Reading Initiative would be flat.

Alabama State University (ASU) would lose about one-fourth, or $10.8 million, of its ETF support next year under the budget, accounting for almost the entire overall funding cut to universities. The budget would include $10 million for ASU as a “first-priority conditional,” meaning Bentley could release the money to the university if ETF revenue collections exceed budgeted spending next year.

Flat funding abounds for General Fund services

The House voted 80-20 Wednesday night to approve a GF budget that would be about the same size it was last year and is little different than the one that cleared a House committee last week. The $1.8 billion budget now goes to the Senate.

Medicaid, prisons, mental health care and other public services could struggle to maintain current services at the funding levels in the House’s GF budget. Overall GF support for those and other non-education services would be 8.3 percent lower next year than it was in 2008, adjusted for inflation, despite higher costs and population growth since then.

The House budget would cut GF support for Alabama’s prison system, which operates at nearly twice its designed capacity. Rep. Steve Clouse, R-Ozark, who chairs the House’s GF budget committee, said last week that he wants to work with House and Senate leaders to find more money for corrections.

Medicaid would see an 11.4 percent GF increase, though that amount still would fall short of what State Health Officer Don Williamson said the agency needs from the GF. Williamson said Medicaid could survive next year at the House’s proposed funding level by looking for more ways to trim costs in the prescription drug program and other areas.

Mental health services would receive the same amount of GF money next year, despite the increased demand for community-based mental health services following the closure of several state mental health hospitals. State courts, which have cut hundreds of jobs in recent years, would receive far less GF funding than they requested.

ALL Kids, which insures Alabama children whose low- and middle-income families do not qualify for Medicaid, would receive 28.3 percent more from the GF to help cover higher enrollment. A $13.9 million ETF boost for the Department of Human Resources (DHR) would help the agency offset an $11.8 million GF reduction. DHR provides child welfare, child support collection and elder abuse services. The agency also administers the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF) program in Alabama.

Rep. Chris England, D-Tuscaloosa, said lawmakers have missed several opportunities to ease the burden on state budgets in recent years. Instead, England said, the Legislature has declined to increase the state cigarette tax, reform the state’s criminal sentencing system, or expand Medicaid eligibility under the Affordable Care Act.

The GF draws its revenues from a variety of sources that do not grow quickly enough to keep pace with cost increases. That leaves the budget with a structural deficit, meaning it often is strapped for cash even when the economy is doing well.

Rep. John Knight, D-Montgomery, said lawmakers eventually must solve Alabama’s perennial GF shortfalls. “At some point, we’re going to have to figure out how to say, ‘We’re going to do better,’” Knight said. “We can’t take care of the basic things we’re supposed to do.”

Time is getting shorter for the Legislature to finalize the budgets. Lawmakers will return Thursday for the 19th of 30 allowable meeting days during the 2014 regular session, which is expected to last until early April.

By Chris Sanders, communications director. Posted Feb. 26, 2014.

Medicaid, prison funding challenges remain as Alabama House committee OKs barebones General Fund budget

By Carol Gundlach

Medicaid, mental health and other human services in Alabama would face yet another year of tight funding under the General Fund (GF) budget that cleared a state House committee Wednesday. The committee’s version was virtually identical to the one that Gov. Robert Bentley recommended last month.

The committee approved next year’s proposed $1.8 billion operating budget for Medicaid, public safety and other non-education services after little discussion or debate. The budget now goes to the full House, which could consider it as soon as next week.

Big challenges ahead for Medicaid, prisons

Medicaid and state prisons would get nearly half of the GF’s money next year under the House GF budget committee’s plan, continuing the recent trend of those agencies consuming an increasingly larger share of the budget’s dollars. Medicaid would receive a $70 million, or 11.4 percent, increase, while the Department of Corrections would face a cut of $6.8 million, or 1.7 percent.

The committee’s proposed funding level could make it a challenge for Medicaid to maintain current services. Medicaid would remain $15 million short of the $700 million that State Health Officer Don Williamson said last month that it needs from the GF. The agency, which insures about one in five Alabamians, already has cut reimbursements for dental services, dialysis and services from non-primary care doctors. Williamson said the agency could survive next year by looking for more ways to trim costs in the prescription drug program and other areas.

Funding challenges also would remain for the state’s prison system. The corrections cut would come even as state prisons face a shortage of guards and run at nearly twice their designed capacity. Alabama also faces growing demands to hire more female guards, install more cameras and make other prison infrastructure improvements. Rep. Steve Clouse, R-Ozark, who chairs the House’s GF budget committee, said he wants to work with lawmakers to find more money for corrections.

Flat funding the norm for many other services

Other critical social services would receive essentially the same amount of GF money next year under the committee’s plan. The Department of Mental Health would be funded at the 2014 level despite the increased demand for community-based mental health services following the closing of several state mental health hospitals.

The Department of Senior Services, which provides Meals on Wheels nutritional assistance to the homebound elderly, was similarly level-funded. State courts, which have cut hundreds of jobs in recent years, also would get much less money than they requested.

The Department of Human Resources (DHR) would receive 16.8 percent, or $11.8 million, less from the GF next year. DHR’s allocation in Bentley’s recommended Education Trust Fund (ETF) budget would nearly double to offset that loss. Between the two budgets, Bentley recommended about a 2 percent increase for DHR. Because the ETF budget has not yet won committee approval, it remains to be seen whether the Legislature will support this increase. DHR provides child welfare, child support collection and elder abuse services. The agency also administers the Supplemental Nutrition Assistance Program (SNAP) and the Temporary Assistance for Needy Families (TANF) program in Alabama.

A children’s health insurance program would get a substantial funding boost next year to help cover higher enrollment. ALL Kids, which insures Alabama children whose low- and middle-income families do not qualify for Medicaid, would receive 28.3 percent more from the GF.

General Fund’s long-term structural deficit remains

Alabama is one of the only states with two major state operating budgets. The ETF budget funds K-12 schools, two-year colleges and public universities, as well as other state and local services related to education. The General Fund budget provides support for all other state services, including public health, public safety and child welfare.

Alabama has the highest rate of “earmarked” revenue in the nation. That earmarking forces lawmakers to spend certain tax proceeds only for very limited purposes. For example, individual income taxes and sales taxes are set aside for the ETF and can be spent only on education. Revenues from sales taxes and income taxes tend to rise and fall with the economy, allowing the education budget to make up for bad years during good years and to save some money for years when the economy is not doing as well.

The GF budget lacks this flexibility because it is funded from a variety of revenues that are not as responsive to economic changes and that do not grow quickly enough to keep pace with cost increases. That leaves the GF with a structural deficit, meaning it often is strapped for cash even when the economy is doing well. Next year’s proposed budget once again illustrates Alabama’s chronically inadequate funding for core services, ACPP executive director Kimble Forrister said.

Time is getting shorter for the Legislature to pass GF and ETF budgets for next year. Lawmakers will return Tuesday for the 17th of 30 allowable meeting days during the 2014 regular session, which is expected to last until early April.

By Carol Gundlach, policy analyst. Communications director Chris Sanders contributed to this report. Posted Feb. 20, 2014.

ETF increase not enough to restore Alabama schools to pre-recession funding

By Carol Gundlach

Alabama’s education funding is expected to increase next year, but K-12 and higher education need a far larger increase to meet students’ needs adequately, lawmakers heard Tuesday during the second day of state budget hearings in Montgomery.

Spending in the Education Trust Fund (ETF) budget will be $134 million, or 2.3 percent, higher next year, according to the Legislative Fiscal Office. But that amount is far less than the total $474 million in increases that K-12 and higher education officials have requested. It is also 18.7 percent less than Alabama spent through the ETF in 2008, adjusted for inflation. Next year’s projected gains will not come close to offsetting recession-era declines.

Poverty, hunger remain challenges for K-12 schools, superintendent says

K-12 schools need $245 million, or 6 percent, more money next year, state school Superintendent Tommy Bice said. That increase would allow the state to hire an additional 450 middle school teachers to help reduce the dropout rate by keeping students engaged in school at a critical age, Bice said. The money also would help the state address other education needs, Bice said, by boosting support for:

  • School bus services, allowing systems to replace older buses and shorten routes that have some children getting on a bus before 6 a.m.;
  • A competitive grant program to allow schools in lower-income areas to offer music and other arts programs;
  • More teachers in expanding career and technical programs;
  • Family Resource Centers that serve the families of public schoolchildren;
  • Distance learning and the Alabama Math, Science and Technology Initiative;
  • An expansion of the successful Alabama Reading Initiative beyond the third grade; and
  • Libraries, technology, counselors, school nurses and continuing education for teachers.

Poverty remains the greatest barrier to education in Alabama, Bice said. “Education is the only way to end intergenerational poverty,” he said. Nearly every local school superintendent in the state attended in support of Bice’s presentation.

Child hunger is a major problem for Alabama’s schools, Bice said, and recent reductions in federal food assistance through the Supplemental Nutrition Assistance Program (formerly known as food stamps) have made the problem even more serious. Nearly two-thirds of Alabama schoolchildren now qualify for free lunches, Bice said, a 4 percent increase in only one year. All but two school systems in the state provide breakfast, and more than four out of five children who eat breakfast at school qualify for free breakfasts, Bice said. The prevalence of hunger increasingly is leading schools to provide meals for children in the summer, as well as during the school year.

Alabama’s K-12 schools still are finding success despite chronic underfunding, Bice said. The state’s graduation rate has climbed to 80 percent for the first time ever, he said, an increase of 5 percentage points in one year. High schools also are expanding their collaborations with nearby community colleges, Bice said.

Pre-K, 2-year colleges, universities also request funding increases

Other presenters made the case Tuesday for more money for early childhood education and higher education in Alabama next year. Jenna Ross, director of the Office of School Readiness, asked for more support for the state’s highly touted pre-K programs. High-quality pre-K education closes the achievement gap for low-income students, Ross said. It also increases reading and math scores, decreases school absences, and reduces referrals to special education services, she said.

Mark Heinrich, chancellor of the state’s two-year college system, requested legislative support to expand a GED preparation program to help educate the 479,000 Alabama workers who do not have a high school degree or GED. Another priority for the system is to expand dual enrollment programs between high schools and community colleges, Heinrich said. He also urged an expansion of prison education programs, which he said have been shown to reduce recidivism rates significantly.

Lawmakers should try to restore universities to their 2008 state funding levels next year, said Robert Witt, chancellor of the University of Alabama System. Median tuition at the state’s public universities has increased sharply in recent years amid declining state funding.

The Legislature began the 2014 regular session Tuesday. Lawmakers will return Wednesday for the second meeting day of the session, which is expected to last until early April.

By Carol Gundlach, policy analyst. Communications director Chris Sanders contributed to this report. Posted Jan. 14, 2014.

More money available for education, less for General Fund services next year

By M.J. Ellington

Alabama will have more money available for education next year, but funding is expected to drop for the perennially cash-strapped General Fund (GF), the director of the Legislative Fiscal Office (LFO) said Monday during the first day of state budget hearings in Montgomery. The GF provides a sizable amount of state funding for Medicaid, mental health care, public safety and other non-education services.

It will not be possible for the Legislature to design budgets that make up the ground lost since 2008, the year before the Great Recession hammered state finances, LFO director Norris Green said. “We are out of the negative numbers but are in the low positives,” Green told lawmakers.

Costs go up, revenue stays flat: The General Fund story

Another new legislative session will bring another round of struggles for the GF budget, which helps fund Medicaid, courts, prisons and other public services. The GF will have $1.7 billion available for 2015, Green said. That amount is $83.3 million, or 4.7 percent, less than this year’s allocations. It also is nearly $287 million, or 14.4 percent, below pre-recession GF spending in 2008, adjusted for inflation.

Without significant new revenues, many services could face deep funding cuts. One-time money from a tobacco lawsuit settlement helped the GF stay afloat this year, but that money will not be available in 2015. A $145.8 million infusion from the Alabama Trust Fund (ATF) will help prevent further erosion of support for services funded under the GF next year. But additional borrowing from the ATF, which receives royalties from offshore oil and gas drilling in Alabama’s coastal waters, would require a constitutional amendment.

Green said he sees little hope for state employee raises next year, and Gov. Robert Bentley has said they are unlikely. Each 1 percent of salary increase for state employees would cost $17.5 million, the LFO estimates, with only $4.5 million of that amount coming from the GF. Almost all GF agencies get money from other sources, including the federal government, Green said.

Medicaid, other agencies: We need more money to meet current needs

Big questions once again concern how the state will address growing Medicaid costs. State Health Officer Don Williamson said Medicaid will end the current budget year on Sept. 30 without a deficit. “But we will end it flat broke,” Williamson said. Medicaid provides health coverage for about one in five Alabamians, many of them low-income children and seniors.

Medicaid needs $85 million, or 13.8 percent, more GF money next year to meet its expected needs, Williamson said. The agency already has cut reimbursements for dental services, dialysis and services from non-primary care doctors. Williamson said those cuts have raised real concerns about patients’ access to care.

Other services also need more GF money to fulfill their missions next year, agency directors told lawmakers Monday. Williamson requested an extra $10.5 million to help cover higher enrollment in ALL Kids, which insures children whose low- and middle-income families do not qualify for Medicaid. The Department of Mental Health has requested an additional $20 million – three-fourths of it from the GF – to make needed investments in community-based care.

Alabama’s overcrowded prison system asked for another $42 million next year to help fund a pay increase for corrections officers, Corrections Commissioner Kim Thomas said. State courts need an additional $26.5 million next year to help avoid dozens of layoffs and hire more juvenile probation officers, Alabama Chief Justice Roy Moore said. Nancy Buckner, commissioner of the Department of Human Resources, asked for more money to help expand adult day care and increase foster care payments.

Williamson noted that Medicaid enrollment has continued to increase despite the recent drop in Alabama’s unemployment rate. Buckner made a similar observation about enrollment for food assistance under the Supplemental Nutrition Assistance Program. Both speculated that the creation of low-wage jobs may be a factor in those trends.

ETF spending still down nearly a fifth since 2008

Alabama’s education funding is expected to increase next year, but the growth will not come close to offsetting recession-era declines. Spending in the Education Trust Fund (ETF) budget will be capped at $5.9 billion next year under the Rolling Reserve Act. That amount is $134 million, or 2.3 percent, more than this year’s appropriations. It is less than the amount that K-12 and higher education officials requested, however. It is also $1.36 billion, or 18.7 percent, less than Alabama spent through the ETF in 2008, adjusted for inflation.

The state is projected to bring in more than $6 billion in ETF revenues next year, Green said, with much of the money that exceeds the spending cap going to repay the ETF’s rainy day fund. Bentley has said he hopes to see teacher raises next year. The LFO estimates the cost of each 1 percent of salary increase for educators is between $34 million and $38 million, but debt repayment obligations may cut into the money available for raises, Green said.

K-12 and higher education leaders will elaborate on their funding needs Tuesday morning during the second day of state budget hearings. The Legislature officially will begin its 2014 regular session Tuesday at noon. State budgets will be a key issue during the session, which is expected to last until early April.

By M.J. Ellington, health policy analyst. Communications director Chris Sanders and policy analyst Carol Gundlach contributed to this report. Posted Jan. 13, 2014.

Earthquake on Goat Hill: How the Alabama Accountability Act passed and what it means

By Chris Sanders

Alabama would provide income tax credits to help subsidize private or religious school tuition for parents of children zoned for “failing schools” beginning this fall if Gov. Robert Bentley signs the plan into law. The House and Senate approved the measure, known as the Alabama Accountability Act, mere hours after it was first introduced on Feb. 28, 2013. Bentley declared his intention to sign it, but a state trial court on March 6, 2013, issued a temporary restraining order to prevent the bill from going to him.

This paper by ACPP policy analyst Chris Sanders assesses the backdrop from which the Alabama Accountability Act emerged, summarizes its main provisions and considers its impact on the state’s public education infrastructure.