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Committee Rejects Plan to Raid Rolling Reserve

Brandon Moseley

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By Brandon Moseley
Alabama Political Reporter

Wednesday, May 13, the Senate Finance and Taxation Education Committee voted against a controversial plan to raid the rolling reserve fund to prop up the State’s troubled General Fund Budget.

Alabama inexplicably has two budgets with different revenues earmarked for each. The Education Trust Fund (ETF) supports Alabama’s Colleges, Universities, pre-K thru 12th grade education, and two year college system. The General Fund supports Alabama’s: courts, roads, prisons, Medicaid, Commerce, Law Enforcement etc. Because Education Revenues like the income tax go up and down with the economy a portion of education dollars goes to fund the rolling reserve which is a reserve fund the state maintains for economic downturns like the Great Recession of 2008 to 2009.

Senator Paul Sanford (R-Huntsville) sponsored SB12.

Sen. Sanford told the Committee:
“What I wanted to try to do is to try to share the growth with the general fund. I realized there are some constraints with the State Constitution particularly with income taxes. 78 percent of State revenues goes to the ETF and 22 percent go to the General Fund. $6.2 billion and $1.5 billion a year respectively. I have been working on this for three years. The goal was not to reduce money in the education fund but rather to share the growth with the General Fund.”

SB12 diverts some money from the stabilization fund to the General Fund.

Sen. Gerald Dial (R-Lineville) said, “I understand what you are trying to do. We do not fund education where it needs to be…I am not for supporting a bill that will fund the general fund on the backs of the boys and the girls of this State.”

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Sen. Roger Smitherman (D-Birmingham) said, “I fully concur with the gentleman (Dial).  We have been having a problem in the general fund and we all know that.  Once things start I am ready to dig in to this one principle I want every dime of general fund spending out of education. We ain’t where we are supposed to be in education. Books are supposed to be $60 million so every child can have books and bring them home.  We have to raise enough money for the General Fund to get all the education money out of there.”

Sen. Vivian Figures (D-Mobile) asked Sanford, “What were you thinking when you decided to introduce this bill?”

Sen. Sanford said, “There is a crisis in the State of money for the General Fund. We took money out of the Trust Fund to get us past this last election. I did not support that then. This year there will be excess of $200 to $225 million diverted into the stabilization fund. The Governor is not running around the State saying that we need more taxes.  I think it is time to stabilize some things. I am trying to get some of the growth revenue into the General Fund.  Allow that to fund the general fund until we can find another solution.  We are going to cut your mental health when there is $200 million sitting in a kitty fund?

Sen. Figures said we would not be in this situation if the Governor had signed the paper to expand Medicaid.

Sen. Sanford said that other states who did expand Medicaid have had to spend $10, 20, 30, 40 million more than they anticipated.

Sen. Hank Sanders (D-Selma) asked, “Do you agree that education is not fully funded?”

Sanford said, “I am not sure what you mean by that?”

Sen. Sanders said, “Books, transportation. Sometimes you have to rob Peter to pay Paul but you are robbing Peter’s children to pay Paul.”

Sen. Quinton Ross (D-Montgomery) said, “I appreciate you bringing this piece of legislation but disagree. We should look at repealing the rolling reserve where we have this pool of money that we can’t get to but should use it to enhance education: not take from it.  We are in a pickle right now but I can’t support this.”

Sen. Sanford said, “I know the State is in financial distress right now but we aren’t broke when there is several hundred million sitting there in an account. Raising taxes is not the only way.  SB12 can’t solve all the problems in the General Fund but I got about $150 million. Mental health patients are not getting the care that they deserve and we have several hundred million in a pot you can’t touch.”

Chairman Trip Pittman (R-Montrose) said, “This is ESTIMATED money.  We have had no proration because of the discipline that the rolling reserve dictates.”

Sen. Phil Williams (R-Rainbow City) said, “I would like to speak in favor of the bill: SB12. I collect quotes. British Prime Minister Tony Blair addressing a joint session of Congress said on the war on terror, ‘Somewhere in Idaho there is a common man saying why us? Why now?  Because destiny has put you in this place.’  I am tired of playing whack a mole with the General Fund Budget.  I am tired of this every year. Put this before the body of the Senate.  I think the citizens of the state deserve to know that at the same time we are wrestling with gambling or raising taxes the state needs to know how we spend our money.”

Sen. Williams said, “I am a child of public education. My family is full of educators. My new daughter-in-law is an educator. Growth revenues are in the education fund. This does not break the rolling reserve.  Education would never be funded lower than at current levels. I think that this is a way to avoid a consolidated budget. The call will only get louder for a consolidated budget if we don’t share some of those revenues with the General Fund.”

Sen. Williams warned that voting no on SB12 could become a clarion call to combine the budgets: “That debate is already happening.  I don’t see SB12 as a raid on education.  SB12 does not do away with that budget. State troopers, roads and bridges are essential State services.  If the streets are not safe and essential programs and policies don’t continue to stay up then our education system will suffer by default.  We have fundamental opportunities to change how we do business.”

Susan Kennedy with the Alabama Education Association (AEA) told the committee, “I applaud Sen. Sanford for addressing a problem that we all know is there. People have long recognized that the General Fund has no growth taxes. People pay taxes to education in this state. The people voted to send their tax dollars to education. Banks, insurance companies and oil taxes go to the General Fund. There are some extremely large exemptions in the General Fund that the state should look at eliminating.  “When you combine the budgets you make us both broke.”

Kennedy was the only citizen who opted to speak at the public hearing.

Sen. Dial moved to indefinitely postpone any action on SB12.  It was seconded by Sen. Quinton Ross.

The motion to keep SB12 from coming to the Senate floor passed by an 8 to 5 vote.

An angry Sen. Sanford said, “I look forward to seeing 8 solutions being brought forward from this committee.”

Chairman Pittman said, “We are in a killing mood today.”

Sen. Sanders said, “We are in a protecting mood.”

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