Budgets based on bad data

By Staff
Steve Flowers, State perspective
The 2004 Regular Session of the Legislature adjourned sine die on May 17 and both state budgets have been put to bed for the fiscal year beginning Oct. 1.
As suggested in previous columns, the legislature should base the state's budgets on the past or current year's actual revenue rather than projected revenues.
By using projected revenues, the legislature can use optimistic revenue projections. This practice of basing budgets on rosy, optimistic figures has forced Alabama into proration and economic crisis time and time again. Without prior year budgeting the State will continue to live from crisis to crisis.
During last year's tax debate and again this year as the Legislature wrestled with the state budgets, many of you asked insightful questions about our state budgeting and earmarking. It was surprising to many of you that we actually have two primary state budgets with separate state finances and functions. The General Fund budget, which takes care of all state agencies except education and the Special Education Trust Fund budget,which funds all aspects of State Education programs, K-12, and higher education.
Education takes most of the money Alabamians pay in state taxes. Fifty-six percent of all tax revenues go into the education pot. This has grown incrementally over the years as the bulk of the growth taxes such as sales and income taxes are earmarked for education.
Little did our forefathers such as Governors B.M. Miller and Bibb Graves know when they created a state income tax in the 1930s that 70 years later this new found tax revenue would lead to the Education Budget surpassing the General Fund budget.
Out of the total 100 percent State Revenue Budget, approximately 38 percent goes to K-12, 12 percent goes to four year colleges, 3 percent to two year colleges, and 3 percent to other miscellaneous education spending. This accounts for 56 percent of all state revenues.
The remaining 44 percent of state money goes into the General Fund.
Within the General Fund the largest recipient is Medicaid, which now accounts for 11.7 percent of all state tax dollars. The Department of Transportation or Highway Department gets 6.2 percent and most of their money comes from earmarked gas tax dollars. Transportation and Medicaid are both matched by generous Federal Funds. Corrections and Prisons come in third at 4.3 percent of all state dollars, followed by Mental Health at 3.4 percent. The Judicial Department under Judicial Article has grown to 2.5 percent of all state dollars. Human Resources takes 2.3 percent and Public Safety and our State Troopers only account for 1.3 percent, as does the Department of Public Health which also gets 1.2 percent. The Legislature accounts for less than one percent, as does the Governor's office. A myriad of other state agencies divides the other 10 percent of state dollars.
This should give you an idea of how your tax dollars are spent.
Alabama constitutionally cannot deficit spend their annual budget. However, this is circumvented somewhat in a left-handed manner by basing the budget on forecasted and predicted annual income rather than on the current year's income.

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