Lindsey: Budget troubles on the horizon

Staff Reports

CENTRE — Dist. 39 Rep. Richard Lindsey, D-Centre, addressed a gathering of retired teachers last week in Centre and warned of declining state revenues and the possibility of budget shortfalls when the Alabama Legislature returns to work Feb. 5.

“The session will be not unlike others in recent years,” Lindsey said. “There will be lots of excitement.”

Lindsey said early economic projections from Fiscal Year 2007 indicate that revenues from tax collections, which fund the state's education and General Fund budgets, will be down for the past year, which could mean funding cuts for a host of state programs.

“We'll have to have economic growth of around 9.6 percent to meet the funding needs we have, and projections seem to show there will be a several hundred million dollar shortfall in collections because growth may not even reach 5 percent for '07,” he said. “That's a big difference from the years 2004 through 2006, which saw unprecedented growth of around 10 percent a year in the Education Trust Fund (ETF).”

Lindsey said growth in the ETF began to slip into decline “late last spring.”

On Thursday, Legislative Fiscal Officer Joyce Bigbee released a statement in which she estimated the state may face a shortfall of up to $800 million. She estimated the ETF, which funds public schools and colleges, will drop by as much as $574 million, 8.5 percent by the 2009 fiscal year.

She also estimated that the General Fund would have around $232.3 million (12.6 percent) less to spend.

During his meeting with retirees, Lindsey said legislators can dip into a proration prevention account established in the recent past to prevent budget cuts in the upcoming school year.

“I've seen projections that we may need to use as much as $400 million from that account, which has about $450 million in it right now,” he said. “In the past, we would have immediately gone into proration, but at least we have this savings account we can use for now.”

Turning to woes in the General Fund, Lindsey warned that legislators must come up with a way to raise money in order to fund state agencies, prisons and Medicaid.

“The General Fund has been in serious trouble for a long time,” Lindsey said. “Even though it usually grows by 1 to 3 percent each year, we all know health care costs rise much faster and that means there's going to be a shortage of funding.”
Lindsey said he expects Alabama's Medicaid shortfall to reach at least $199 million this year.

“We don't know yet because some of the programs and regulations have changed and we aren't yet sure what everything is going to cost,” he explained.

Lindsey also told the retired teachers that, despite the solid performance of the Retirement Systems of Alabama, which funds the accounts that serve as the primary source of income for many of those at the meeting, a recession could cause funding problems there, too.

“It's going to be hard to fund any increases for a while, because of increased salaries, the number of retirees in the system, and the slowing national economy,” he said.