Legislature discusses future budget

Published 12:00 am Saturday, January 26, 2002

One of the primary responsibilities of the Alabama Legislature each year is to pass the budgets. Alabama operates from two budgets. One is called the general fund budget and the other is the education budget.

This past week the Senate Finance and Taxation General Fund Committee conducted its first public hearings on the budget for fiscal year 2002-03. Because I am the deputy chair of this Senate committee, I have been involved almost daily in the research and preparation for these hearings.

I thought it might be of interest to review some of the information and facts made available to us from which we must make important decisions about future budgeting.

Email newsletter signup

The first research we did was related to the five year history of receipts in the general fund. In 1997, the general fund collected $913 million, in 1998 the receipts were $981 million, in 1999 $1.029 billion, in the year 2000 $1.130 billion, and in the year just concluded $1.163 billion.

The largest amount of growth for receipts in the general fund occurred between 1999 and the year 2000 when the percentage of growth was 9.82 percent. The smallest amount of growth was this past year when the growth was 2.92 percent.

This is probably a pattern that is consistent with the rest of the country. All states have enjoyed an unprecedented ten-year economic expansion which ended in the last half of calendar year 2000. The economic recession has affected income into all treasuries in all states in the nation.

Alabama has been hit particularly hard because our dependence on manufacturing led Alabama's economy into a decline even prior to the national economy decline. Our unemployment rate in Alabama rose from 4.6 percent in 2000 to 5.4 percent in 2001. This was the first decline in average employment since 1990. In addition, we lost over 28,000 manufacturing jobs since March 2001.

Alabama's general fund receipts come from a variety of sources, including the following: interest income, 18 percent; oil and gas severance taxes, 7 percent; lease taxes, 5 percent; ad valorem taxes, 7 percent; alcoholic beverage taxes, 5 percent; estate taxes, 4 percent; court costs, 5 percent; sales taxes, 6 percent; insurance company taxes, 14 percent; and miscellaneous taxes, 29


In addition to the decline in revenue because of the downturn in the economy, the U.S. Congress has passed a new law phasing out the estate tax. This will result in an estimated loss of revenue in the Alabama general fund of $12.5 million.

What is the status of the general fund for the forthcoming fiscal year? This is what we are presently working on, and I can give you some insight into the budget concerns.

The state of Alabama entered the fiscal year which we are now in with a surplus in the general fund of $61,166,488. We will begin the new fiscal year, for which the budget is presently being planned, with a surplus of $16,647,471. This is a significant difference.

Department heads are requesting $134 million over and above their current budget. When you couple these requests with the known loss of revenue from the estate tax and the known losses from the downturn in the economy, the legislative fiscal office anticipates an up-front deficit of $70.3 million in the projected budget.

What this means is that a number of departments will not get the increases they are requesting nor will a number of new programs be funded. It also, in my opinion, calls for fiscal restraint in all departments of state government, including the legislative and administrative branches of government.

There is a lot more that I could share with you, and I will at a later date, but this should give you a preview of the work my committee has been doing and the anticipated budget concerns. I know some of this is boring information, but it is a very important part of legislative work.

Remember, "I'll go with you or I'll go for you" to help you solve any problem related to state government. While we are in session, you can reach me at 334-242-7883.