By Brandon Moseley
Alabama Political Reporter
On Wednesday, March 12 the House Way and Means for Education Committee approved an education budget without the 2% pay raise that Governor Robert Bentley had included in his budget request, which has been rejected by the Senate and now by the House Ways and Means Committee.
The teachers had been asking for a 5% pay raise. The Governor has threatened to veto the education budget if the legislature sends him an education budget without the requested pay raise. Governor Bentley said, “The Education Budget I presented is good and balanced. I’m asking the Legislature to pass my 2% pay raise for teachers and support personnel, and fully fund PEEHIP to the level requested by the PEEHIP board. If the Legislature doesn’t include that in the ETF, I will send that budget back with an Executive Amendment. Our teachers work hard and deserve this pay raise.”
The State of Alabama’s Public Employees Health Insurance Plan (PEEHIP) is facing a projected shortfall of as high as $220+ million shortfall in the 2014/2015 budget year which goes into effect on October 1. Legislators blame rising PEEHIP costs due to the onerous regulations under the Patient Protection and Affordable Care Act of 2010, popularly referred to as “Obamacare.” The House Education funded PEEHIP, but at the price of the teacher pay raise. Also gone is a proposed 1% bonus pay for teachers that perform above expectations.
House Ways and Means Education Committee Chairman Bill Poole said, “Forced implementation of Obamacare mandates is causing insurance costs for teachers and public education support staff to skyrocket by nearly $75 million and will prevent pay raises from being awarded to public school educators this year.”
According to information from ‘The Alabama School Journal’ If the PEEHIP shortfall were passed on to the education employees and retirees then it will mean an average increase in out of pocket costs of up to $750 per educator and retiree, eating up much of the 2% raise which teachers and education support personnel received in the 2014 fiscal year budget that began last October. The retirees did not get any raise in the current budget year and have seen their pensions stagnate over the last five years so they would be especially hard hit.
PEEHIP has been level funded for the last three years saving the state $118.8 million year in what the state contributes towards teacher and state employees’ healthcare benefits. After the legislature determines how much money to allocate to PEEHIP for the next fiscal year, the TRS/PEEHIP Board of Control will meet in May to determine how to address the remaining shortfall.
Historically in a growing, healthy economy inflation is two to three percent and state government revenues increase as wages increase and people pay higher state income taxes as a result (Alabama has a 5% state income tax). They also spend more so the state collects more in sales taxes. A working population drives more so gas tax revenue increases. From World War II to 2008 property values increased at ~7% a year and a growing population meant more and more homes being built so property tax revenues increased over time. When revenue is growing at a 4-8% pace, teachers and state employees received annual raises, the state cut its teacher to pupil ratios, staffs increased, government programs, boards, commissions, and offices increased.
When the economy went into the Great Recession in 2008, suddenly employment dropped, wages stopped increasing, new home construction plummeted, home values declined, Alabamians who had lost jobs had less money to spend, and revenues flowing into the state from personal income taxes, corporate income taxes, sales taxes, and even property taxes plummeted. The administration of Gov. Bob Riley (R) and the then Democrat legislative majorities were able to operate anyway as if nothing was happening by tapping the state’s reserves and accepting $hundreds of millions in stimulus dollars from the administration of President Barack H. Obama (D).
Governor Bentley entered office in January 2010 and immediately had to prorate the wildly optimistic fiscal year 2010 budget that he had inherited. The 2011 and 2012 budgets that the Republican super majorities and Bentley wrote dramatically downsized state government. Programs were cut, consolidated, and downsized. Teachers and state employees got no pay raises and actually saw their take home decrease as they were forced to pay more towards their retirement. Even with that reform and two good years of investment performance the Retirement Systems of Alabama (RSA) needs more dollars from the state to meet its obligations which include PEEHIP.
The Alabama Constitution makes a Governor’s veto very easy for the legislature to override with a simple majority vote.
After a 10 to 4 vote to come out of committee the $5.9 billion budget now goes to the full House. Democrats attempt to include a 4% raise for teachers was defeated in the committee.
The budget hires 400 additional middle school teachers which the Department of Education had requested (double the number in the Senate version) and also doubles funding for pre-K from $19 million to $38 million so there will be more teaching jobs, albeit with wages that have not kept up with inflation, but still less than the number that the state had before the Great Recession.