Legislators have more money to work with

MONTGOMERY -- What do you do with nearly $23 billion?

That's what the Legislature has to decide when it meets in regular session beginning Tuesday.

The $23 billion is the projected revenue Alabama is expected to have available to spend on services and to meet obligations such as Medicaid.

Revenue is at an all-time high for the state, which has suffered through a series of proration, or budget cuts, in the past 25 years.

Deciding where that money will be spent is a constitutional requirement of the Legislature each year. Before the session ends in June, legislators must pass two budgets that will go into effect beginning at the start of the '08 fiscal year on Oct. 1. The general budget pays for government services and the Education Trust Fund budget pays for operations at public schools and colleges.

While legislators decide where the money will be spent, some hope they also will prepare for the future when the economy may not be as strong.

"We do need to look beyond this year," said state Sen. Bobby Denton, D-Muscle Shoals, a member of the Senate finance and taxation committee.

Legislators were given an update on the state's financial situation last week, and most of the news was good.

"The '07 revenues are the highest in the history of the state,'' state Finance Director Jim Main said at the pre-session budget hearing.

Denton said the budgets have seen unprecedented growth, led by double-digit increase in the Education Trust Fund. He said there are a lot of people who deserve credit.

"The governor will take a lot of credit, and he does deserve some of that credit," Denton said. "He hasn't done it alone. The Legislature has played a role, and when you plug in 10,000 or so new jobs in the automobile industry that pay $20 an hour instead of $7 or $8 an hour, you see why we have this growth. Plus, you have to take into consideration what (Retirement Systems of Alabama) has done to change our state's image and what that has meant in tourism.

"Alabama is on the way to being able to provide the kind of services we should. We're not there yet, but we're moving forward."

There could be as much as $6.7 billion to spend on public education and $1.7 billion on general government spending.

Other money, as usual, will be earmarked for specific services. For instance, the state had to reserve $4.4 billion for Medicaid expenses this year.

The amount of money available for the Legislature to spend has increased sharply in the past three years.

In the Education Trust Fund, legislators were able to appropriate $4.5 billion three years ago compared to $6.2 billion this year. That could increase by $500 million during budget year '08, which will be decided during the upcoming session.

On the General Fund side, legislators were able to appropriate $1.42 billion three years ago and $1.67 billion during this fiscal year, which ends Sept. 30. Another $300 million will be available in the upcoming budget discussions.

Main said both budgets appear to be in good shape for next year.

"Basically, the General Fund is still as robust as last year but it's not growing as much (as in previous years),'' Main said. "Education revenues basically are same as they were last year."

While writing budgets is a fancy term for deciding who gets available money, members of the House budget committees say any new money generated won't come from new taxes.

"I don't see new taxes at this time,'' said Rep. Jody Letson, D-Hillsboro, a member of the House Government Appropriations Committee.

Rep. Robert Bentley, R-Tuscaloosa, a member of the House Education Finance Committee, said the state economy is still getting a boost.

"The economy's going great," Bentley said. "Even though there are many people who don't like it, we owe it all to the tax cut that George Bush pushed through in 2003.''

There will be new demands on the General Fund.

Rep. Jack Page, D-Gadsden, vice chairman of the House Government Appropriations Committee, said a new women's prison will have to be funded next year.

"Tutwiler Prison is an accident waiting to happen,'' Page said. "We morally have to do something.''

Main said he wants to wait another month or two to determine any trends before making recommendations for the new fiscal year. Legislators have until the end of the session to pass the budgets.

Alabama's budget ace in the hole is a constitutional amendment that prohibits deficit spending. There's also a constitutional requirement to declare proration when revenues don't match appropriations.

As long as the economy remains robust, Gov. Bob Riley won't have to declare proration, which occurs every several years when state income doesn't pan out.

Proration has occurred seven times in the education fund alone since 1980. The last time proration was declared, the Legislature responded by cutting non-education entities out of the budget like money that previously went to the Alabama Music Hall of Fame.

Riley previously blamed proration, at least partly, on pay raises approved by the Legislature. The Legislature this year will be asked to pass a 7 percent pay raise for teachers and state employees.

Dana Beyerle can be reached at (334) 264-6605 or dtb12345@aol.com.