Government Relations NewsUnfair Education Cuts - .doc or .pdfUA System, AU say cuts will harm students, state (read by clicking document) State Budget Picture Paints Challenging Scenario On Jan. 16 the Director of the Legislative Fiscal Office presented a status report on State revenues, both for the current year FY2008 and projections for FY2009. Clearly Alabama faces serious fiscal challenges both this year and next. For a detailed summary of the presentation and a copy of the slide presentation, click on www.lfo.state,al.us. The detailed budget discussion can be found under the link Outline and the visuals under the link Slide Show. Key points include: Fiscal Year 2007 • Actual receipts to the 2007 Education Trust Fund were projected to result in a carry forward into FY2008 of about $398 million. The actual carry forward was $280 million, about $118.5 million less than appropriated in the FY2008 legislative budget. So FY2008 started $118.5 million in the red. • The two major sources of this shortfall were corporate income taxes and sales taxes. o Corporate income taxes were projected to grow 12.4% for FY2007 but in fact experienced a negative growth rate of 3.5%. o Sales tax receipts were projected to grow at a rate of 4% but in fact grew at a rate of 2.7%. Fiscal Year 2008 • For FY 2008, the projected revenue available will be $6.3 billion while the approximate appropriations for this year (FY2008) are $6.7 billion. • The Education Trust Fund would have to grow at a rate of 9.5 to 10% in FY2008 to end the year in the black. • The Legislative Fiscal Office is projecting an actual growth rate in FY2008 of 2.7% which would result in a deficit of over $400 million at the end of FY2008. • Because the State Constitution prohibits deficit spending, the FY2008 revenue projections would result in a need to tap the proration prevention account to prevent a 6% proration in the ETF for FY2008. • A withdrawal of this magnitude would leave the statutory proration prevention account with a balance of less than $10 million. Fiscal Year 2009 • The scenario outlined above would leave the FY2009 budget with a beginning balance of zero! • Estimated receipts for FY2009 reflect a projected growth rate of 3.75%. • The FY2009 available revenue would be further reduced by $83 million dollars, the first year’s debt service on the $1 billion school capital bond issue passed last year. • This would result in an available balance of $6.155 billion to appropriate for FY2009, an amount $552 million LESS than the projected expenditures for FY2008. • The total revenue remaining in the “safety net” of the statutory proration prevention fund plus the constitutional rainy day fund is projected to be slightly more than $250 million. • Requests for budget increases from entities funded from the Education Trust Fund for FY2009 total $644 million. The bottom line is that it is going to be a very challenging year for both the education budget and the general fund budget for FY2009. This very brief summary was intended only to give an overview of what the education community is facing this legislative session. For more details, please visit the Legislative Fiscal Office web site at www.lfo.state,al.us. If you have questions or need additional information, please feel free to call me at 256-824-6084 or email gsmith@uasystem.ua.edu. -- Gary Smith ------------------------------------------------------------------------------------------------------------- Current news items of interest to the higher education community will be posted at this location. Please check back for the latest news bulletins. |
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