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Is The Budget Crisis Truly Insurmountable?

Brandon Moseley

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By Brandon Moseley
Alabama Political Reporter

In the 2012 Legislative Session, the Alabama Legislature was confronted with a daunting choice: raise taxes or cut the State General Fund (SGF) budget by about $150 million a year, so that spending would be right-sized to fit income. Cut taxes or cut spending?  That was the question. 

Their answer was neither. 

The Republican supermajority chose instead to adopt a third way. Instead of downsizing government, or asking the people of Alabama to pay more for their government services, they asked the people to let them borrow $437 million from the Alabama Trust Fund. Now, this was not for something mighty like building new roads, or developing infrastructure (like schools), but rather, just to prop up the SGF’s spending for three years, and get us past the 2014 election. The belief then was that the Republican supermajority could turn the State into such a job friendly place by now, that employers would flock here.

It hasn’t actually worked as well as we hoped back then. 

Six years into the economic recovery, and too many Alabamians are still out of work, too many work part-time, and the pay wage is so low, that they cannot contribute much to the State’s economy. The government consolidations that were planned either didn’t happen, or were so poorly executed that they didn’t generate measurable savings.

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So, we are back where we started. The legislature claims that we need $198 million to cover the anticipated shortfall. The Governor was asking for another $537 million a year; but that difficult-to-explain request, is effectively dead.  For this Special Session the Governor has proposed a mix-and-match set of tax increases, totaling about $350 million a year.

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The Legislature passed some bills at the end of the Regular Session to address the shortfall. Chief among these was a controversial plan to let State agencies raise fees to generate revenue. All told, those bills may have narrowed the gap by as much as $40 million. So, let’s say the budget shortfall now is just $165 million.

Gambling advocates want to fill that gap with gaming. The Governor’s media spokespeople claim that gambling legislation can not be addressed in the Special Session simply because the Governor said that it can’t. The writers of the Alabama Constitution in 1901 never trusted any governor, so understandably, they added severe limits to the power and authority a governor could have over the Legislature. 

Any gaming legislation would have to be by a Constitutional Amendment (CA) and the Governor has no authority at all to tell the Alabama Legislature they can’t pass a CA, or change the requirements on passing a CA.  A CA needs just a three-fifths margin in each House, not the two-thirds margin Gov. Bentley claimed in the call for the Special Session. That means that gaming expansion remains an option no matter what the Governor wants people to believe. 

Alabama Jobs Foundation Executive Director, Chip Hill said in a statement: “The Alabama Jobs Foundation greatly appreciates Governor Bentley’s dedication to solving the State’s fiscal crisis. This hastily called Special Session, however, seems to ignore the will of the people to decide this issue for themselves. Research by the Alabama Jobs Foundation shows that more than 80 percent of Alabamians believe a vote of the people should determine how this budget crisis is resolved.

The Alabama Jobs Foundation believes that the plan offered by Senator Del Marsh is the best course of action, because it produces 11,000 jobs, $400 Million in revenue, and does not raise taxes. Above all, it is time to trust the people of Alabama to decide this issue.”

The Governor’s myriad allies in the media world assert that gambling is not a solution to Alabama’s so-called budget crisis because the gambling money would not be here before the October 1 beginning of the 2015 fiscal year; but that does not account for the $1 billion that the State is due in the BP settlement. 

The Alabama Media Group’s Dennis Pillion is reporting that the State could receive up to $204 million of that money within just months, not the $55.6 million a year revenue stream that we were all led to believe by the Governor’s office. That money alone is enough to fill the State’s fiscal year 2015 budget shortfall without any tax increase.  Or before considering tapping the projected $260 million surplus in the Education Trust Fund (ETF) budget as some legislators have proposed.

What about gaming? Many critics of the plan sponsored by Senate President Pro Tem Del Marsh (R-Anniston), openly dispute the $400 million a year figure. So, let’s be conservative here and bump that down to just $300 million a year in combined revenue from the new State lottery and taxes on the three Poarch Creek Indian casinos, as well as the four dog tracks in Shorter, Birmingham, Mobile, and Greene County.

The first part of those funds could come rolling in by the fourth quarter of the 2015 fiscal year. That is another $75 million in the coming fiscal year. That would bump the expected deficit down to just $90 million. It is very hard to believe that the State of Alabama can’t find $90 million in waste, outdated programs, redundancies, etc., in a $1.8 billion General Fund Budget. That would be only a five percent cut after all. But, they could eliminate even those modest cuts by borrowing it from the BP settlement dollars we already know that the State is going to receive. A very modest raise in tobacco taxes could also generate $55 million a year by itself.

Legalizing and taxing gambling may not be something the Alabama legislature wants to do, but it is a viable option. Of course the legislature could combine budgets, raid the ETF of the money, remove earmarks, and create new taxes like the Governor’s proposed beverage tax; but that is their decision, not the Governor’s.  It is ultimately up to legislators whether or not they want to raise taxes or let the voters decide if they want a lottery and to tax gambling at Alabama casinos.

But, the more that we learn about Alabama’s finances, the less this appears to be a crisis.

Brandon Moseley is a senior reporter with six and a half years at Alabama Political Reporter. You can email him at [email protected] or follow him on Facebook.

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