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Alabama revenues grew despite COVID pandemic, analysis shows

Tax revenue into the state’s General Fund was 7 percent higher this year the Education Trust Fund brought in an additional $209 million in 2020 compared to 2019. 

(STOCK PHOTO)

Alabama’s strong economy going into the COVID-19 pandemic, and billions in federal aid to address the health and economic crisis, has helped the state’s two largest budget funds to grow this year, according to a study released Thursday. 

According to an analysis by the Public Affairs Research Council of Alabama, tax revenue into the state’s General Fund was 7 percent higher this year than it was in 2019, and Alabama’s Education Trust Fund brought in an additional $209 million in 2020 compared to 2019. 

“According to Finance Department officials, Alabama ended 2020 with $330 million balance in the ETF and a $315 million balance in the General Fund,” wrote PARCA’s Tom Spencer in the report. “That was result both of revenues that exceeded the budgeted amounts and expenditures that were lower than what was appropriated.”

The growth came despite the spike in unemployment that began in March and hasn’t yet abated, and despite mandatory business closures in March and April and the restrictions still in place to protect against the spread of the coronavirus. 

The author of the report said the growth is due in part to the state’s strong economy before the pandemic hit. Unemployment was at a historic low between October and March, and prior to the pandemic, income tax receipts were up approximately 7 percent over the same period in 2019. 

Additionally, $4.1 billion in federal COVID-19 aid has been committed to individuals and municipalities in Alabama, and consumer spending shifted but didn’t stop, the author notes. 

The federal Paycheck Protection Program preserved payrolls, and unemployed workers received $600 per week in a supplement to unemployment insurance, which both helped prevent the state’s tax revenue from taking a bigger hit. 

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“Sales taxes dropped, then recovered and have been up and down in the months since. At the same time though, tax on internet purchases surged, offsetting the erosion in sales tax. Unlike some other states, Alabama’s sales taxes apply to groceries and medicine and thus it tends to be more stable,” Spencer wrote in the report. 

Several sectors of Alabama’s economy have done well during the pandemic, including the state’s Alcohol Beverage Control Board, which contributed an additional $17 million to the General Fund, an increase of 14 percent. 

But still other sectors suffered, including lodging tax. The tax on hotels and vacation rentals was down 15 percent for the year, and collected almost $9 million less for the General Fund.

“For the current fiscal year, FY 2021, Finance officials are relatively confident that revenues will more than cover the budgets. Lawmaker scaled back spending plans in light of the pandemic,” Spencer wrote in the report. “As long as there aren’t additional unforeseen shocks to the economic system, the Alabama economy should generate the revenue needed to make the budgets as adopted this spring.”

If the state’s economy were to take a larger hit, Spencer noted, the state still has rainy day funds for both funds. 

RESERVE FUND BALANCES

  • ETF Budget Stabilization Fund – $373,269,077
  • ETF Rainy Day Account – $465,421,670
  • GF Budget Stabilization Fund – $27,297,483
  • GF Budget Rainy Day Account – $232,939,781
Eddie Burkhalter
Written By

Eddie Burkhalter is a reporter at the Alabama Political Reporter. You can email him at [email protected] or reach him via Twitter.

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