Budget 2006 has good and bad
Rep. Ronald Grantland/Guest Columnist
As we ring in 2005, I am already looking forward and thinking about the upcoming Regular Session that will begin Tuesday, Feb. 1. Public hearings for our two state budgets, the Education Trust Fund and the State General Fund will begin Jan. 5. I have good news and bad news on our state's financial front.
The good news is the Education Budget is in fairly good shape. Revenues from state sales taxes and income taxes are earmarked towards our education budget. These resources have seen a steady increase in the past year, which has helped education funding. But while next year's education revenues should increase, there will still be funding pressures for existing programs, such as the Alabama Reading Initiative, and for new programs like the Alabama Math/Science/Technology Initiative.
The bad news is the devastating condition of the General Fund. Its two primary income sources, interest from state revenue deposits and the Insurance Premium Tax, are revenues that have shown little if any increase in the past year. Rising expenses without new revenue is forcing a huge squeeze on state services, threatening to continue the rash of cuts our state has incurred over the past two years.
The cause for the state's dreadful General Fund budget situation is two-fold. First, we were forced to use approximately $160 million of one-time revenue to balance the current fiscal year's budget that will not be available next year. In addition, there will be nearly $20 million in tax receipt reductions and incentive credits going into effect we will have to replace.
Second, Alabama's contribution to Medicaid, the largest revenue recipient from the General Fund, is increasing in part due to the federal government shifting some of the funding burden to the state and because of inflation and ever-increasing healthcare costs. For our next fiscal year, Medicaid is requiring an additional $127 million over the $364.4 million appropriated for the agency this fiscal year.
Medicaid, which provides healthcare, prescription drug and nursing home coverage for Alabama's poorest children, seniors and families, is a federal match program. This means for every 30 cents the Legislature sends to Medicaid, the federal government matches it with 70 cents. It is more than a 2-to-1 investment of our dollars. If we reduce funding or level fund the agency, Alabama will lose a huge amount of federal money.
Then, other agency requests must be considered. Several critical agencies, including the Departments of Human Resources, Mental Health, Public Health, Public Safety, and Corrections, receive their funding from the General Fund. Each of the above entities provides public services and protection to us and our children and should therefore be safeguarded.
In summary, in order to build a balanced budget for the next fiscal year, we have to replace approximately $160 million of one-time revenue used in this fiscal year's budget, plus fill the needs of Medicaid for $127 million, and we have to make up for nearly $20 million of lost revenue. Not counting any additional agency requests, this amounts to a more than $300 million deficit in the 2006 fiscal year State General Fund Budget.
Budgeting for both the Education Trust Fund and General Fund has become a very streamlined process over the past decade. We have worked to implement performance-based budgeting techniques so agencies will be held accountable for the taxpayer money they receive and spend. We require them to set measurable goals and standards for their programs and we expect them to report on their progress at this year's budget hearings that begin next week.
As your representative, I feel it is important I convey to you my efforts to be a good steward of your tax dollars. Therefore, I plan to write several articles before and during our session about our budget and the budgeting process so you will be well informed. If you have any questions as you hear and read news reports about our state's finances, please contact me at any time.