CullmanTimes.com - Cullman, Alabama

December 19, 2012

‘Fiscal cliff’ could cost local education funding

Coleman: ‘It will have an impact’

By Trent Moore
The Cullman Time

CULLMAN — With the debate over the “fiscal cliff” raging at the federal level, Alabama schools stand to lose thousands of jobs and millions in funding if the federal budget actually does go over the precipice. Needless to say, Cullman County educators are watching the situation closely.

If President Barack Obama and Congress fail to reach an agreement in Washington, Republican Gov. Robert Bentley said research by the National Governors Association estimated that higher taxes and reduced federal spending could cause Alabama to lose 24,000 total jobs. That’s slightly more than 1 percent of the people currently working in Alabama. That would push Alabama’s unemployment rate from 8.1 percent to more than 9 percent.

“There will be cuts in everything,” Bentley told the Associated Press.

The state could see a loss of approximately $145 million annually in state income taxes, said Curtis Stewart, director of tax policy and research for the state Revenue Department. That $145 million represents a 4 percent drop from what Alabamians paid in individual income taxes last year.

Alabama uses its income taxes to support public education. The $145 million equals nearly half of what Alabama allocates for operating its two-year college system.

Deputy state school superintendent Craig Pouncey said Alabama schools get nearly $1 billion annually from Washington, and they will lose $80 million to $100 million of that. He said the money primarily goes to special-needs students and school lunch programs.

Pouncey doesn’t expect the cuts to appear until July 2013 because of the way the money flows from Washington, but he predicted Alabama would see fewer teacher aides for disabled students and remedial and after-school programs for struggling students.

Cullman County Board of Education Superintendent Billy Coleman said cuts caused by the budget standoff could mean between a 8-9 percent loss in federal funding — which would drain a reserve the system has managed to accrue in recent years.

“We do a pretty good job of holding onto some of those funds, as much as we can with the limits, so we always try to plan ahead into the next year,” he said. “What it would probably do is make an impact on what we could hold back. We saw this coming and tried to hold back as much as we could legally hold back, so we could be as prepared as possible.”

Though the budget could be insulated for about a year, Coleman said long-term cuts could eventually mean a reduction in services connected to the federal funds.

“If it did happen, we wouldn’t be able to hold any back for the next year,” he said. “It would hurt the amount of money the Title schools receive, because a lot of that goes to our Title schools. After a while, you’d have to start looking at the services you provide, because sooner or later it will have an impact.”

Cullman City Schools finance director Russell Raney said the system would likely supplement any funds cut from special education, even if it meant dipping into the system’s reserve funds.

“Currently federal special education funding encompasses half of the total funding we spend on special education, be it teachers, aides, or equipment,” Raney said. “A lot of those are tied back to each students individualized instructional program that goes with the student, such as physical therapy and other services. If it was reduced for special education we’d end up subsidizing or moving more over from the general fund to continue meeting the needs of those students.”

Any potential food program cuts get a little more complicated, as Raney explained that regulations require the programs to be self-sustaining. So, if funding is cut, the only option could be to raise lunch prices.

“In the past the general fund hasn’t been able to pay salaries or anything for that, so if those mandates stayed in place with the reduced funding, you’d see lunch price increases as the only option,” he said. “That would be the last resort, because you wouldn’t want to place that additional burden on families, but if that mandate remained in place it would be the only option.”



Other effects

Bentley told the Associated Press he would like to see the national dilemma resolved through spending cuts and elimination of some tax deductions, rather than a change in anyone’s tax rates.

“I think everyone’s taxes are probably going to go up. But you cannot solve it unless you cut spending,” Bentley said.

Any reduction in federal spending would have a big impact on Alabama because more than 38 percent of the revenue spent by state programs in Alabama comes from the federal government.

That includes everything from helping the poor with winter heating bills to school lunch programs. Education officials said the most immediate impact would be on federal funds for low-income schools and for special education programs.

A study by the Pew Center on the States found that Alabama would feel budget cuts more than most states. Federal spending in Alabama on procurement and salaries accounted for 8.9 of the state’s gross domestic product in 2010. The national average was 5.3 percent.

The bulk of federal spending in Alabama was related to defense, and it provided stable economies around large military bases and aerospace companies in Huntsville, Mobile, Ozark and Montgomery. Defense spending accounted for 7.0 percent of Alabama’s GDP. That’s twice the national average. In 2010, defense procurement contracts in Alabama totaled $10.4 billion.

A study that George Mason’s Center for Regional Analysis did for the Aerospace Industries Association estimates that Alabama could lose 26,845 defense-related job and 11,933 other jobs for a total of 38,778.

As federal officials look for a solution, Alabamians know that most people don’t like budget cuts. At the request of the governor and Legislature, Alabama voters decided by a 2-to-1 margin on Sept. 18 that state officials could take $437 million out of state savings account over a three-year period to alleviate further cuts in state services.

For the federal government, there’s no similar cookie jar to raid.

“We need to be honest with the American people. This is going to take sacrifice, and it’s going to take sacrifice on everybody’s part,” the governor said.



The Associated Press contributed to this story



Trent Moore can be reached by e-mail at trentm@cullmantimes.com, or by telephone at 734-2131, ext. 220.