Gov. Bob Riley on Monday announced a Deficit Prevention Plan that includes a hiring freeze on state workers, a freeze on state employee merit pay raises, stopping the purchase of new state vehicles and other measures.

The Deficit Prevention Plan includes cuts of 10 percent in the current fiscal year to state agencies and – with the withdrawal of half of the amount available from the Rainy Day Fund for education – an effective proration rate of nine percent in the education budget.

“Because of the national economic slowdown, if we remain on our current course Alabama will finish this fiscal year with a budget deficit. That is unacceptable, not only because the state has a legal obligation to operate with a balanced budget, we also have a moral obligation to put Alabama’s fiscal house in order.”

The plan includes three key elements:

Reduce agency spending: The Governor will use his authority under the Budget Management Act to reduce state spending by 10 percent in state agencies funded out of the General Fund. This will reduce spending in these agencies by about $200 million in the current fiscal year.

It is expected that the hiring freeze will reduce the number of state employees by about 3,000 over the next year. That would bring the state government’s workforce down to about the size it was at the end of fiscal year 2004, when it stood at a little more than 36,000.

The Governor also said he would allow for flexibility in some agencies if the spending cuts could have a harmful impact on public safety.

Proration in education: The Governor declared proration in the education budget of 12.5 percent. Proration is the process of cutting spending when revenues fall short of expectations. However, the amount of proration will be lessened with the use of some of the Rainy Day Fund for education.

Limit proration with Rainy Day Fund: The Governor is withdrawing $218 million from the education Rainy Day Fund to lessen the impact of proration. The use of the $218 million will result in an effective proration rate of nine percent.

Governor Riley noted that the current economic challenges facing Alabama are not unfamiliar to the state and that he is confident the state will pull them through.

“Now the global economy has brought some of these challenges back. So we’re going to have to do what we know works: fiscal discipline, an aggressive economic development strategy, and more accountability in government. We turned our economy around before and we can and will do it again,” Governor Riley said.

The Governor also used the occasion to discuss what he said are bright spots in Alabama’s economy, including several new and expanding industries that are hiring such as the ThyssenKrupp steel facility on the Mobile County-Washington County line, the Steelcase plant in Athens, and a sign company in Dothan.