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Tuesday, February 8, 2011

Budget officials expect cuts, layoffs

Alabama's budgets that fund education, Medicaid, prisons, public safety, and other key functions face cuts this year, but state lawmakers also will have to figure out a way to absorb significant shortfalls in fiscal 2012.
And state finance officials say that means that everything including employees and programs has to be on the table when lawmakers look for areas to cut.
Joyce Bigbee, director of the Legislative Fiscal Office, told state lawmakers Tuesday that the state's Education Trust Fund is projected to be $126 million short in fiscal 2011, and as great as a $688 million short in fiscal 2012, which starts Oct. 1.
And the news actually is worse for the General Fund.
The General Fund, which pays for the state's non-education expenditures including Medicaid and prisons, is expected to be short nearly $132 million this fiscal year and is facing a $554.2 million shortfall in fiscal 2012.
Bigbee said Medicaid and Corrections make up the largest expenditures of the state General Fund, representing 42 percent of the budget. When the cost of the state's judicial system is added in, it amounts to about 50 percent of that budget's expenses.
Bigbee told lawmakers the General Fund's revenues would need to grow by 29 percent to absorb the shortfall for 2012.
And apparently Bigbee's presentation was the optimistic version of what's to come.
David Perry, new director of the state Finance Department, projected even bigger cuts and said that layoffs for state employees paid out of the General Fund have to be on the table.
"I haven't found any options that would avoid layoffs entirely," Perry said. "At this point we don't see any way around some layoffs."
Perry pointed out that in 2012 Medicaid would need $700 million to avoid cutting services.
"Level-funding Medicaid alone would eat up nearly half of the 2012 budget," he said.
Perry said that the state's General Fund would lose about $450 million in one-time stimulus money in fiscal 2012.
Perry said his office is projecting a shortfall of at least $150 million in the General Fund and $200 million short in the Education Trust Fund for fiscal 2011. But he also said that the governor is waiting on February receipts for a better look at revenue trends before a decision is made about whether to declare across the board cuts, also know as proration, to balance the budget. He said the decision on proration would likely come in early March.
Perry said the General Fund budget and the education budget have each been cut about 20 percent in the last two years as the recession has ravaged revenue coming into the state.
He said difficult decisions must be made. With the state's fiscal condition, Perry said "everything must be on the table at this point."
Strategically, state officials should look at whether they should continue certain programs because there are some programs that the state will not be able to sustain, he said.
Perry said the General Fund is in much worse shape than the education budget, which is more likely to avoid layoffs.
Perry said they are not just looking at cuts, although that is the primary focus. He said, as Gov. Robert Bentley talked about during the campaign, they also want to try to collect taxes that are on the books that people are currently not paying, such as the use tax on web purchases.
Perry said he has been meeting with agency heads in his office about the effects of cuts on those agencies and to determine which agencies can absorb those cuts without "significant pain." After those meetings, Perry said the administration will share its recommendations with lawmakers.
"In many cases, these consequences will be severe," Perry said.
State Rep. John Knight of Montgomery, the former chairman of the House General Fund budget committee, said lawmakers knew last year that crafting a budget for 2012 would be a challenge, so he wasn't surprised by the size of the shortfalls.
He said the state is going to have to prioritize.
"There are many programs that we would love to continue, but we've got some real tough decisions to make," he said.
Knight, a Democrat, said he hoped that lawmakers would consider state employees and government services carefully as they consider where to cut.
Republican State Rep. Jay Love of Montgomery, who is the new chairman of the House education budget committee, also said that the cuts coming to education weren't unexpected. He said one of his priorities is to protect the education programs that have proven successful.
"We're going to have to effectively budget the dollars that we do have," Love said.
The Bentley administration must submit its proposed budgets for the 2012 fiscal year to lawmakers by the second day of the regular legislative session, which is March 2.

-- Markeshia Ricks and Sebastian Kitchen

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