CullmanTimes.com - Cullman, Alabama

February 11, 2013

Fiscal cliff settlement costs Ala. schools $70 million

By PHILLIP RAWLS
Associated Press

MONTGOMERY — Financial experts say the fiscal cliff agreement in Washington will cut funding for Alabama’s public schools and colleges by at least $70 million annually.

The fiscal cliff settlement affects Alabama differently than most other states. That’s because Alabama is one of the few states that provides its citizens with a state income tax deduction for the federal taxes paid. The federal settlement allowed a temporary reduction in payroll taxes for Social Security and Medicare to expire. It also raised the tax rates on the wealthiest 1 percent of Americans.

The director of the Legislative Fiscal Office, Norris Green, says the two changes should reduce Alabama’s income tax collections by $70 million to $75 million annually.

The impact is on education because Alabama sets aside its income tax receipts for education.