Published: January 11, 2006 12:20 am            

Riley proposes school construction, tax cut, pay raises

MONTGOMERY — Gov. Bob Riley, who began his term by proposing a record tax increase, wants to end it with a big tax cut, as well as a massive school building program and back-to-back raises for public employees.

Riley used his State of the State address Tuesday night to outline a lengthy legislative agenda that is being fueled by record low unemployment and a robust economic recovery that has boosted state tax collections faster than fiscal experts had forecast.

"Alabama's success was not a matter of chance. It was a matter of choice. Now, at the start of a new session and a new year, we must make the right choices and keep moving Alabama forward," Riley told state legislators gathered on the first day of their 3 1/2-month-long session.

Riley began his administration in 2003 with the state's economy in a downturn and state government facing a $675 million budget deficit — the biggest since the Great Depression. Riley proposed a record $1.2 billion tax hike, which voters rejected in a referendum in September 2003, and then had to work with the Legislature to cut state spending, including basic items like textbook purchases.

Now, with thousands of new jobs and a strong economy, he wants to cut taxes for all Alabamians by raising Alabama's threshold for levying state income taxes, which is the lowest of any state.

"I want everybody who pays income taxes in this state to get a tax cut," Riley said as the audience responded with a standing ovation.

Riley would cut income taxes by reviving part of his old tax plan, including raising deductions and exemptions over five years so that a family of four would start paying the state income tax at $15,000 of adjusted gross income, rather than the current $4,600. That would cost the state $214 million per year when fully implemented, and unlike Riley's 2003 plan, it would not be accompanied by any tax hikes.

"My enthusiasm for a fair tax code is nothing new. It's something that I've said we needed to do for years, and it's something I've fought very hard for. But this year, in this session — with my budget — we can and we should make it a reality," said Riley, who is running for a second term.

Senate President Pro Tem Lowell Barron, D-Fyffe, said Riley's proposal created much interest among legislators. "There is a great deal of support for trying to help those people on the lower rungs of the economic ladder," Barron said.

Income tax collections are dedicated to public education. AEA Executive Secretary Paul Hubbert said the Legislature should looks at ways to make up losses resulting from the proposed tax cut.

Riley also proposed spending $500 million in the current year on school and college construction projects. It would be the biggest school building program since the Legislature approved a $550 million bond issue in 1998 — another election year for the governor and Legislature.

The chairman of the Senate's education budget committee, Hank Sanders, D-Selma, said the state should be cautious about spending so much at one time.

"We must keep in mind that our economy has made revenue predictions unpredictable. We had four lean years and one good year," Sanders said Tuesday.

Democratic Lt. Gov. Lucy Baxley, who is running for governor, also urged caution. "In the education budget, considering four out of the last five years have had problems, we need to go slow in a year when it's flush," she said.

House Minority Leader Mike Hubbard, R-Auburn, said he supports Riley's tax cut and school spending plan, but passing them in the Legislature won't be easy. "Keep in mind the Democrats control both houses," he said.

        

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