- Associated Press - Wednesday, February 3, 2016

MONTGOMERY, Ala. (AP) - Alabama Gov. Robert Bentley on Wednesday proposed a mix of budget cuts and a shift of education funds to address a general fund shortfall, but high-ranking senators said they doubted legislators will go along with a diversion of the education dollars.

Bentley proposed shifting $181 million - $150 million from the use tax collections and $31 million in insurance premium taxes - from the Education Trust Fund to the state’s general fund. He is simultaneously seeking to tap $181 million from an education savings account, called the stabilization fund, so there’s no net loss to education spending in the next fiscal year.

Acting Finance Director Bill Newton, said just like family finances, there are three choices in a budget shortfall: raise more revenue, cut spending, or tap savings.

“In the end they have no choice but to balance the general fund budget. As I see it, they’ve got to pick one, two or three of those options to get there,” Newton said of legislators.

Bentley’s transfer proposal comes after being largely unsuccessful when he pushed lawmakers to raise taxes last year. The governor is not proposing any tax increases this year.

The cash-strapped general fund is one of the largest challenges before lawmakers this year. The Legislative Fiscal Office predicted the $1.8 billion fund will have $95 million fewer dollars available next year, while also facing increased needs in Medicaid, prisons and other functions of government.

While the transfer will exhaust the stabilization fund, Newton said the state will still have a “major safety net” for education of $400-500 million in a second savings account called the rainy day fund.

Several high-ranking legislators expressed doubts about the idea of transferring education dollars.

“My intuition is that it won’t be very well-received by the Legislature,” said Sen. Arthur Orr, the chairman of the Senate Finance and Taxation Education Committee.

Lawmakers moved some use tax dollars last year to the general fund last year as they grappled with a larger shortfall.

“It was pretty much a ladies’ and gentlemen’s agreement last year that we weren’t coming back to education to solve this problem again. I would be very surprised to see those dollars coming from education,” Senate President Pro Tem Del Marsh said.

The stabilization fund under current law can only be tapped to avoid proration, spending reductions that happen when revenue projections fall short of what was budgeted. Newton said the governor will seek legislation to allow the one-time transfer.

Other highlights of the governor’s proposed budget include:



The governor is seeking a 2 percent raise for teachers, school employees and state workers. State workers last had a raise in 2008 because of the state’s frequent problems in the general fund.



The governor has proposed a $100 million funding increase for Medicaid. The figure is short of the $150 million Medicaid Commissioner Stephanie Azar told lawmakers the agency needed to maintain services. However, Newton said the governor is confident that the $100 million will be enough to continue the department’s shift to regional managed care, an approach the state hopes will eventually tap down on Medicaid cost increases.



A few large agencies, particularly those that provide direct services, would receive modest increases, under Bentley’s spending plan. The Department of Corrections would get a $10 million increase. The Department of Human Resources would see a $5 million increase.



Most state agencies would see cuts or, at best, the same amount of money they are currently getting this year. The Alabama Law Enforcement Agency and the Department of Mental Health receive level funding. The Alabama Department of Environmental Management, which was largely eliminated from the general fund, would be zeroed out under Bentley’s proposal. ADEM receives much of its money from permit fees and federal dollars. The ADEM commission in December raised fees by 20 percent because of the state funding decrease.

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