2014 legislative update: More money available for education, less for General Fund services next year

Alabama will have more money available for education next year, but funding is expected to drop for the perennially cash-strapped General Fund (GF), the director of the Legislative Fiscal Office (LFO) said Monday during the first day of state budget hearings in Montgomery. The GF provides a sizable amount of state funding for Medicaid, mental health care, public safety and other non-education services.

It will not be possible for the Legislature to design budgets that make up the ground lost since 2008, the year before the Great Recession hammered state finances, LFO director Norris Green said. “We are out of the negative numbers but are in the low positives,” Green told lawmakers.

Costs go up, revenue stays flat: The General Fund story

Another new legislative session will bring another round of struggles for the GF budget, which helps fund Medicaid, courts, prisons and other public services. The GF will have $1.7 billion available for 2015, Green said. That amount is $83.3 million, or 4.7 percent, less than this year’s allocations. It also is nearly $287 million, or 14.4 percent, below pre-recession GF spending in 2008, adjusted for inflation.

Without significant new revenues, many services could face deep funding cuts. One-time money from a tobacco lawsuit settlement helped the GF stay afloat this year, but that money will not be available in 2015. A $145.8 million infusion from the Alabama Trust Fund (ATF) will help prevent further erosion of support for services funded under the GF next year. But additional borrowing from the ATF, which receives royalties from offshore oil and gas drilling in Alabama’s coastal waters, would require a constitutional amendment.

Green said he sees little hope for state employee raises next year, and Gov. Robert Bentley has said they are unlikely. Each 1 percent of salary increase for state employees would cost $17.5 million, the LFO estimates, with only $4.5 million of that amount coming from the GF. Almost all GF agencies get money from other sources, including the federal government, Green said.

Medicaid, other agencies: We need more money to meet current needs

Big questions once again concern how the state will address growing Medicaid costs. State Health Officer Don Williamson said Medicaid will end the current budget year on Sept. 30 without a deficit. “But we will end it flat broke,” Williamson said. Medicaid provides health coverage for about one in five Alabamians, many of them low-income children and seniors.

Medicaid needs $85 million, or 13.8 percent, more GF money next year to meet its expected needs, Williamson said. The agency already has cut reimbursements for dental services, dialysis and services from non-primary care doctors. Williamson said those cuts have raised real concerns about patients’ access to care.

Other services also need more GF money to fulfill their missions next year, agency directors told lawmakers Monday. Williamson requested an extra $10.5 million to help cover higher enrollment in ALL Kids, which insures children whose low- and middle-income families do not qualify for Medicaid. The Department of Mental Health has requested an additional $20 million – three-fourths of it from the GF – to make needed investments in community-based care.

Alabama’s overcrowded prison system asked for another $42 million next year to help fund a pay increase for corrections officers, Corrections Commissioner Kim Thomas said. State courts need an additional $26.5 million next year to help avoid dozens of layoffs and hire more juvenile probation officers, Alabama Chief Justice Roy Moore said. Nancy Buckner, commissioner of the Department of Human Resources, asked for more money to help expand adult day care and increase foster care payments.

Williamson noted that Medicaid enrollment has continued to increase despite the recent drop in Alabama’s unemployment rate. Buckner made a similar observation about enrollment for food assistance under the Supplemental Nutrition Assistance Program. Both speculated that the creation of low-wage jobs may be a factor in those trends.

ETF spending still down nearly a fifth since 2008

Alabama’s education funding is expected to increase next year, but the growth will not come close to offsetting recession-era declines. Spending in the Education Trust Fund (ETF) budget will be capped at $5.9 billion next year under the Rolling Reserve Act. That amount is $134 million, or 2.3 percent, more than this year’s appropriations. It is less than the amount that K-12 and higher education officials requested, however. It is also $1.36 billion, or 18.7 percent, less than Alabama spent through the ETF in 2008, adjusted for inflation.

The state is projected to bring in more than $6 billion in ETF revenues next year, Green said, with much of the money that exceeds the spending cap going to repay the ETF’s rainy day fund. Bentley has said he hopes to see teacher raises next year. The LFO estimates the cost of each 1 percent of salary increase for educators is between $34 million and $38 million, but debt repayment obligations may cut into the money available for raises, Green said.

K-12 and higher education leaders will elaborate on their funding needs Tuesday morning during the second day of state budget hearings. The Legislature officially will begin its 2014 regular session Tuesday at noon. State budgets will be a key issue during the session, which is expected to last until early April.

By M.J. Ellington, health policy analyst. Communications director Chris Sanders and policy analyst Carol Gundlach contributed to this report. Posted Jan. 13, 2014.

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