Tuesday, September 28, 2004
On this day:

Money Matters in Alabama

As I mentioned a few posts back, Alabama's Special Education Trust Fund (SETF) now has a large surplus, disproving the dire predictions made at this time last year. The main reason for the increased revenue has been the significant upturn in the state's economy. According to State Finance Director Jim Main, "We are seeing significant growth in sales, utility, and income taxes."

The three taxes Mr. Main mentioned are the most lucrative of the twelve revenue sources supporting the SETF. Revenue from each of these taxes is largely dependent on overall economic performance, and as Alabama's economy has improved in the last year, all three have generated significant new revenue.

Unfortunately, the General Fund has not seen the same level of revenue growth. Like those of the SETF, General Fund revenues also come from a variety of sources. The largest of these are interest on state deposits, insurance company premium taxes, oil and gas lease and production taxes, corporate taxes, cigarette taxes, property taxes, and ABC Board profits. Governor Riley said this week, "We still expect to have a $150 to $200 million deficit in the General Fund next year."

So, while the education budget is awash with new revenues, it appears that the non-education programs funded by the General Fund may be living on lean budgets again this year. This presents a perfect opportunity for growth-oriented reforms to the state's tax and funding structures, if only the politicians will summon the courage to act.