Finance director explains tax plan

Published 12:00 am Wednesday, August 20, 2003

Alabama’s State Finance Director Drayton Nabers made a trip to the Greenville Kiwanis Club meeting on August 12 to explain to the attendees the many facets of the governor’s proposed tax plan.

Nabers, a Birmingham native, took the State Finance Office’s head position in January at the request of Gov. Riley.

Nabers had retired last year from Protective Life Insurance Company, where he served as chairman of the board and president.

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The finance director said Riley’s plan will solve the financial crisis that the he inherited when he took office in January.

&uot;We need more than anything else to convince the people of this state that we have a very serious [financial] crisis,&uot; Nabers said. &uot;In financial terms, we have the deepest and most profound crisis that we have had since the Great Depression, probably in the history of this state.&uot;

The budget deficit, he explained, is a multi-faceted problem, beginning with the fact that the state is unique in that it has two budgets: the General Fund and the Education Trust Fund.

&uot;The education budget, which is used to run the education system, is a little more than $4 billion,&uot; he said. &uot;The rest of the state government is run out of the General Fund, which is approximately $1 billion.&uot;

Here is where the shortfall occurs:

n $220 million in nonrecurring revenue is currently funding ongoing programs. That money will not be there next year.

n Medicaid needs a budget increase of $50 million to offset increasing costs, especially pharmaceutical costs.

n The prison system has to increase its budget by $50 million to address federally mandated upgrades to the system.

n The state is currently borrowing $185,000 for the education budget to prevent program cutbacks and teacher layoffs. That money will have to be found for next year; it cannot be borrowed from the Oil and Gas Trust Fund any more.

n The state also will have to pay back money borrowed from the Oil and Gas Trust Fund in previous years – the tab for that is $35 million per year.

NThe state teachers’ health plan’s cost is increasing by 13 to 14 percent each year. The budget will need an additional $100 million to cover that cost.

NThe teacher’s pension fund will need $40 or $50 million in increased funding.

Nabers said the governor has been reducing unnecessary expenditures as rapidly as possible.

&uot;We’ve identified more than $220 million in opportunities to cut costs,&uot; he said. &uot;But some of those cuts have no relation to the General Fund or Education Trust Fund.&uot;

He said that many of the cuts that had taken place so far were in the Highway Fund, which mostly is made up of federal dollars.

&uot;Ninety-five cents out of every dollar spent on our roads comes from the federal government,&uot; he said. &uot;We’ve discovered that there’s no way to cover the defecit simply by cutting the budget. So the governor decided to present this package to the state on Sept. 9.&uot;

The finance director said that the package addresses key elements in the state’s operational systems that need reforming, such as teachers’ tenure; &uot;pass-through-pork,&uot; which is money that is secretly diverted through a budgeted organization to be used in a legislator’s or senator’s district, circumventing the legislative approval process; and the school systems’ lack of financial accountability to the State Board of Education.

Nabers closed out his speech with a plea to Alabama’s voters.

&uot;We have a government that is saying, ‘Let’s have hope in the promise of this state,&uot; he said. &uot;In a very real sense the ballots cast on Sept. 9 will be a vote between hope and fear.

He referred to a Christmas carol that includes the phrase &uot;The hopes and fears of all the years are met in Thee tonight.&uot;

&uot;The hopes and fears of years and years of Alabama history will meet on Sept.9,&uot; Nabers said. &uot;Take the time to read about the tax package and understand it better. Then go out and vote your conscience.&uot;