The Cullman Times
Over the last few weeks, numerous people have asked me about the Constitutional Amendment that we will vote on this Tuesday, Sept. 18. As with most constitutional amendments, very little is known about its specifics.
Alabama’s Constitution of 1901 requires the state have a balanced budget. Each year the Legislature passes two budgets—the Education Trust Fund (“ETF”) and the General Fund (“GF”). The ETF funds education and the GF funds everything else, from prisons to Medicaid. Approximately 80% of ETF funding comes from sales and income taxes—taxes that have the potential to grow each year. The GF is funded by a hodgepodge of taxes and fees that do not grow as fast as the ETF. The anemic GF causes great challenges for the Legislature each year.
This year the Legislature was especially challenged as costs were going up and revenue has been going down. The GF was in proration, but a balanced budget had to be passed. What would lawmakers do? They had three basic choices: (1) They could drastically cut funding for things like health care for our children, nursing home care for our seniors, prisons to keep convicted felons locked up so we could remain safe, and maintenance and construction of roads and bridges; (2) they could enact budgetary/tax reforms; or (3) they could do neither and pass the decision onto the voters by placing a constitutional amendment before the people that would fund the items from Alabama’s savings account.
The Legislature almost unanimously chose option 3, which places the Amendment on the ballot on Tuesday, Sept. 18. Not one Senator voted against it, and only five out of 135 House members opposed it. You may ask why the Legislature scheduled a special election instead of waiting until November’s general election? Because the State’s fiscal year ends September 30 and the 2013 budget begins Oct. 1, 2012. If the amendment passes then the GF budget will be balanced. If it fails, there will be as much as a $200 million dollar hole in the GF causing devastating cuts that could put seniors out of nursing homes, cut basic health care for children, force prisoners to be released, and much more.
The “Alabama saving’s account” I mention above is the Alabama Trust Fund (“ATF”). In the late ‘70s and early ‘80s, the Gulf States were receiving unanticipated new revenue from oil and gas leases. Most states spent this new money as fast as it came in, however, Alabama was different. The Alabama Legislature showed amazing restraint and foresight by setting up savings accounts for this windfall. In 1982, Alabama voters approved an amendment to the Alabama constitution creating The Heritage Trust Fund into which $333,583,680 was deposited. Then again in 1985, the voters approved another constitutional amendment creating the ATF into which $467,000,000 was deposited. The Heritage Trust Fund merged into the ATF in 2001.
Since it was created, oil and gas royalty payments have continued to come into the State, the money invested by a board of trustees and the income earned spent by the State for capital improvement projects, pay debt service on bonds, spent in the GF on essential state services and gone to things Forever Wild and Senior Services. Over the years the voters have approved changes to the ATF in seven separate constitutional amendments based upon changing needs in state government. Two of those constitutional amendments allowed the state to borrow money from the ATF to lessen the impact of proration. The money borrowed must be repaid within certain time periods. A 2002 amendment diverted approximately 35 percent of royalty payments to state, county and municipal trust funds for economic development purposes. That money has been used to create thousands of jobs.
What does the Amendment that we will vote on this Sept. 18 do? It does two major things with two minor tweaks to make the ATF function better. First, it creates a new spending policy that bases annual distributions from the Alabama Trust on historical numbers so that the Legislature will be better able to enact the GF budget each year. Second, it adds an additional $145.7 million disbursement to the GF each year for three years. The amendment, unlike the two that were passed and enacted by the voters during my tenure in the Alabama Senate, does not include a requirement that the money be paid back. However, the Governor and Legislature have pledged to pay this money back, and there is no reason not to believe them.
Today, there is more than $2.6 billion in the ATF. Oil and gas royalty payments continue to come in each year, the investments continue to make money, and the State is paying back the money it has borrowed because of proration. Alabama continues to use this savings account just as it was intended by the Legislature when it was created, which is not unlike Alabama citizens who also use a savings account when rainy days come.
Should the Legislature address tax and budget reform? Yes. Should we vote against this amendment to force them to do so? No. At this time, we cannot afford to “throw the baby out with the bath water.” While the Amendment is not perfect, it is the option that the Legislature gave us. Supporting it will protect us from the harmful cuts that will come if it fails.
‰ Zeb Little served as Senate Majority leader in the Alabama Legislature and resides in Cullman.