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Alabama NewsAlabama Politics
Higher Revenues Bring Little Reason to Celebrate
By Gary Palmer
Posted on: October 18, 2005
To quote Gomer Pyle, "Surprise, surprise, surprise!" The revenue numbers for Alabama's 2004-05 fiscal year came out recently and surprise, the state's revenues hit record levels.
That is both good news and bad news. It is good news for Alabamians primarily because it vindicates at least two-thirds of them for rejecting Amendment 1 two years ago. Remember how the Alabama media shamelessly campaigned for passage of the amendment that they said was necessary to save our schools, our prisons, our nursing homes, and even our souls?
Remember too, that they said the tax increase would be $1.2 billion phased in over five years. Actually it would have been somewhere in the range of $1.5 to $1.7 billion; but then, we all know that politicians and newspaper editors are not that good at math.
Well here we are two years later and it needs to be said again, "Surprise, surprise, surprise!" Alabama's revenues have risen by $1.2 billion dollars…without the tax increase.
That's right; your eyes are not deceiving you. When the transfers and other one-time funding are subtracted from the state's revenue report for fiscal year ending September 30, 2003, then compared with the revenue for the fiscal year that ended September 30, 2005, Alabama's combined education and general fund revenues are up by $1.2 billion.
You might be thinking this is great news and everything is good.
Well, not exactly.
You see, $1.2 billion is not enough because of the way Alabama Education Association Executive Secretary Paul Hubbert controls everything in Montgomery. Here is why. Most of the growth is earmarked for education. With this year's revenue increase, the revenues for the Education Trust Fund have increased by slightly over $900 million in the last two years, which is, by the way, nine-tenths of a billion dollars. During the last legislative session the legislators had $554 million dollars more to spend than the previous year and they spent every nickel.
Even though Gov. Bob Riley put forth a fiscally responsible and sensible budget in the 2005 regular legislative session, the Hubbert controlled legislature passed an education budget that even the media criticized as irresponsible. The Governor vetoed it but the Hubbert controlled legislators immediately overturned the veto. In the upcoming 2006 legislative session they will have at least another $265 million surplus in the Education Trust Fund and it is a safe guess that Hubbert will dictate how that is spent too.
There is also good news for Alabama's General Fund. General Fund revenues have increased by over $300 million in the last two years. While this is good news, the bad news is $300 million has not been enough to meet the needs of the General Fund and because of earmarking there is no chance that any of the surplus revenue in the Education Trust Fund can be used to help cover the shortfall in the General Fund. It should be noted that the shortfall would be even worse if not for the spending cuts made by Gov. Riley.
Over 90 percent of Alabama's revenues are earmarked and almost all of it is for education. At 90 percent, Alabama has by far the highest earmarking of revenue of any state in the nation. Earmarking is defended as a means of ensuring that education is funded. But when surpluses occur, earmarking prevents the state from directing the surplus revenue to cover other critical non-education needs such as funding Medicaid.
As long as the majority of state legislators are beholden to or frightened by Paul Hubbert, there is little to no chance of eliminating or reducing the percentage of taxpayers' dollars that are earmarked nor little chance of allowing any portion of future surpluses to be used to meet critical needs in the General Fund.
So what should the taxpayers of Alabama take from the news that state revenues have increased so dramatically?
For one thing, it should be apparent that the media and the politicians in Alabama often exaggerate revenue problems while ignoring any positive evidence that is contrary to their agenda. At the time of the vote on Amendment 1 the media and the politicians had ample evidence that Alabama's economy was already in a full-scale recovery and that state revenues were going to rise substantially, which they ignored for the most part.
Alabama voters should also take note of the fact that state legislators are not interested in accountability. Moreover, the opponents of Amendment 1 that argued against giving the state another $1.2 to $1.5 billion to spend because the state legislature would not make fiscally sound decisions and because Hubbert would dictate how most of it would be spent have been proven correct…again. The last education budget is proof of that.
Finally, for those that argued that state revenues would go up substantially without the tax increase, a $1.2 billion increase in two years is sweet vindication. But with the legislature still under the control of Hubbert, there is little to celebrate.
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