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Thursday, December 17, 2009

Riley considering proration in General Fund

Gov. Bob Riley said Thursday he will decide within the next two weeks whether he should declare proration and trigger across the board cuts to the state's budget that funds Medicaid, prisons, state troopers and most other non-education functions of state government.
The chairmen of the legislative committees that help craft the General Fund budget and the director of the Legislative Fiscal Office have said Riley will need to declare proration because there is a projected $120 million shortfall in the budget for the current fiscal year.
Joyce Bigbee, director of the fiscal office, told lawmakers this week that she expects 7.6 percent proration this year in the General Fund.
"I think Joyce's assessment, from what I have seen, is fairly accurate," Riley said Thursday.
Bigbee said $1.4 billion will be available for the General Fund this year, creating a deficit of $120 million. She said decreases in gross sales tax receipts and other revenue sources fell below projections and fell far below the levels of previous recessions due to the severity of the economic downturn.
State Rep. John Knight, chairman of the House General Fund budget committee, told the Montgomery Advertiser a week ago he expected a need for Riley to declare proration.
"Unless something drastically turns around, the governor is going to have to declare proration," he said.
Knight, D-Montgomery, advised Riley to call proration as soon as possible.
Sen. Roger Bedford, Knight's counterpart in the Senate, said calling proration is up to the governor, but appears "unavoidable." He said the state has not faced this situation in the General Fund in 20 years.
Bedford, D-Russellville, said the intent of proration is to spread the cuts across agencies, but that could lead to job cuts and cuts to essential state services.
Bedford, Knight and other officials have concerns about across the board cuts to agencies such as Medicaid and corrections, which they have said need more money and cannot sustain cuts.
Bigbee said Medicaid and corrections regularly make up 50 percent of the General Fund budget.
Medicaid is the source of healthcare for many Alabama seniors and low-income residents.
The Legislature, the administration and department heads have worked together to avoid proration, Bedford said.
Due to the decreasing tax receipts coming into the state, Riley implemented a plan more than a year ago to cut costs that included a freeze on hiring and a freeze on merit pay increases.
The governor also informed state agencies that they would only receive 22 percent of their funding each of the first three quarters of the current fiscal year instead of 25 percent.
Riley would have to declare proration to be able to access a rainy day account for the General Fund.
Bigbee said about $84 million would be available from the rainy day account to help support the agencies in the General Fund.
State officials agree that Alabama has been able to avoid layoffs and more massive cuts because of the $3.2 billion in federal stimulus money that has come into the state.

-- posted by Sebastian Kitchen


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