About Alabama: State Budget Reform Is a Must

The 2015 legislative session ended without a balanced budget for the coming fiscal year. Two months remain to complete this requirement, but the problem is that right now the state’s leaders don’t agree on the direction to take.

Next year’s revenues in the state’s General Fund are expected to fall $250 million or more short of the current spending level. Another $140 million is needed to cover immediate requirements for corrections and Medicaid that are considered unavoidable, and there are other obligations incurred in the past few years of shrinking budgets.

Comparisons

The governor believes the budget cannot be pared further and he has proposed tax increases. Interstate comparisons tend to back him up. In 2012, the most recent year available, Alabama ranked last among all states in terms of state and local tax collections per capita.

Governmental services are similar from state to state, and Alabama’s public sector is providing a relatively standard package to its population with only two-thirds of the tax dollars available on average.

Take the programs that are at the heart of the current budget crisis for example. All states have a Medicaid program that provides health services to the indigent. In 2011, the most recent year available, Alabama’s expenditures per enrollee ranked 48th and were 71 percent of the national average. Likewise all states have corrections programs. Alabama ranked 44th in per capita spending in 2012 and was at 65 percent of the national average.

However, many legislators doubt that increases in state taxes are needed in today’s crisis. Clearly there are areas in which state spending might be made more efficient or economical.

The State House of Representatives identified $11 million of reductions in its budget proposal, and eliminating the state’s alcoholic beverage operations to save as much as $19 million has been proposed. The leaders of both houses of the Legislature are proposing to have their members look into these and other issues related to the cost and efficiency of state services.

The question is, “Why are we just now getting to the examination of budget alternatives? Shouldn’t this analysis have occurred months, even years, earlier?”

The state’s General Fund budget crisis is not a new occurrence but rather re-appears every few years.

Model Budget Management Act

Believe it or not, Alabama has a model Budget Management Act that has been on the books for many years. It calls for the governor and Legislature to spell out the services the state will provide, create a budget based on their costs, analyze alternatives and monitor performance regularly.

This is not how you would describe the actual budget process in Alabama today. But we should insist on implementation of a performance-based budgeting system as part of the solution to the current budget crisis.

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