Gov. Kay Ivey is proposing record budgets for both the General Fund and education budgets in fiscal 2026 with increases for Medicaid, state employees and teachers retirement systems and health insurance.
But state finance officials warned lawmakers that recent revenue growth is slowing and an economic downturn may be ahead.
Ivey proposed a record $9.9 billion in regular education spending — a $600 million increase over the current year’s education budget — for the 2026 fiscal year, and $3.7 billion in spending — a $300 million increase over the current year — for the General Fund, which funds non-education entities.
‘Sugar high is over’
State Finance Director Bill Poole presented Ivey’s budget to lawmakers Wednesday (Feb. 5), telling them “the sugar high is over,” with respect to the large amounts of tax revenue Alabama has collected in recent years.
One big factor behind growth in the General Fund is unprecedented earnings from interest on state deposits. Where interest on state deposits brought in $10 million to $60 million each year between 2015 and 2022, in 2023, interest revenue jumped to $404 million and rose to $557 million in 2024.
Despite the high interest earnings, Poole warned the windfall is temporary.
“We know and have to anticipate a return to historical norms, and that is going to be a big challenge,” Poole said, cautioning lawmakers to keep that in mind as they consider future General Fund budgets.
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EDITOR’S NOTE — This story was written by Trisha Powell Crain and originally published by Alabama Daily News. It is reprinted with permission.
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