Bentley declares proration

The day before his first State of the State address, Gov. Robert Bentley declared proration in the state's education budget effective immediately and announced plans to declare double-digit proration in the General Fund budget.

Bentley, on Monday afternoon, declared 3 percent proration in the education budget for the current fiscal year, which lasts until Sept. 30.

The governor announced plans to declare 15 percent proration in the General Fund after working with legislators on supplemental appropriations to protect agencies that are deemed a priority and provide necessary and critical services.

The General Fund provides money for most non-education functions of state government including Medicaid, prisons, and public safety.

"Both our Education Trust Fund and our state's General Fund budgets are based on unreliable revenue projections," Bentley said. "Now, five months into the 2011 fiscal year, it is clear that there is not enough revenue to sustain either budget. Proration is necessary to balance the budgets."

Bentley and most other officials had hoped to avoid proration in the education budget, but were certain proration would be necessary in the General Fund. Bentley and Finance Director David Perry now project that there will not be enough income to meet budgeted spending levels.

Without federal stimulus money, which helped prop up state budgets in recent years, Alabama has to fill several hundred million-dollar holes in both budgets.

The current Education Trust Fund budget has a $165 million shortfall while the current General Fund budget has a $110 million shortfall, according to Bentley's office.

"The taxpayers expect us to live within our means just as families and businesses are forced to do," Perry said. "No one is pleased that we have a revenue shortfall which requires proration in the budgets that were passed last year, but mid-year cuts are necessary for Alabama to meet its constitutional obligation for a balanced budget."

-- posted by Sebastian Kitchen

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

Lawmakers Learn Bentley Administration Budget Principles

David Perry, Gov. Robert Bentley's new finance director, outlined Tuesday during a budget hearing the governor's principles for budgeting in what is could be multiple years of difficult budget decisions.

Here's what Perry had to say about the Bentley administration budget principles:

1) Conservative budgeting.
"We must take a more conservative and responsible approach to the process of the budget," Perry said. "We can’t afford to continue to put our schools through this budgeting process. Proration cannot always be entirely avoided, but it can be minimized. It can be reduced."

2) A better job of allocating resources.

"We cannot continue to fund programs at the same level and proportion as we have in the past," Perry said.

3) Prioritizing people over projects.

"You’re going to have some very difficult decision in the next few years and particularly in the next four months," Perry told lawmakers. "Our job will be to help you understand what the consequences will be of the budget decisions we’ll make over the next few months.

4) Working with Legislature on the front end of budgeting process

5) Structural long-term reform

"We can’t grow our way out of a hole this big," he said of the deficits the state is facing, particularly in the General Fund. "What we really have to look at is the fundamental realignment and restructuring of state government."

Perry said the governor's Commission to Improve State Government would play a crucial role in the kind of restructuring that will be necessary to reduce costs.

6) Everything is on the table
"In our judgment, based on the severity of the shortfalls, everything has to be on the table," Perry said. "We’re not only looking at cuts, we’re also looking at opportunities for revenue. "

Perry pointed out Bentley's desire on the campaign trail to look at finding a way to collect lost sales tax revenue from online sales.

-- posted by Markeshia Ricks

State finance chief: expect cuts, layoffs

The new state finance director said he does not see a way to avoid laying off state employees in the 2012 fiscal year, which begins Oct. 1.
"I haven't found any options that would avoid layoffs entirely," finance director David Perry said to legislators.
Lawmakers are hearing from state budget officials and agency heads this week as they begin to look at shaping budgets for the 2012 fiscal year. Legislators begin crafting the budget for the 2012 fiscal year when they convene on March 1.
Perry and Joyce Bigbee, director of the Legislative Fiscal Office, also talked about the likely need for cuts this year to ensure the budget is balanced.
Perry and Bigbee said the economy is improving, but they foresee a tough 2011 and a tougher 2012, especially without the infusion of billions in federal stimulus funding that has helped balance the budgets in the last two years.
Medicaid, corrections and the state court system account for more than half of the money in the current general fund, Perry said. And the court system, through a vote of the Alabama Supreme Court, has protected itself from many cuts, he said.
Level-funding Medicaid alone would eat up more than half of the 2012 general fund budget, Perry said.
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 they will not be able to sustain, he said.
Perry said the general fund, which is the budget for most non-education entities, is in much worse shape than the education budget, which is more likely to avoid layoffs.
Perry, the finance director for new Gov. Robert Bentley, said they are not just looking at cuts, although that is the primary focus. He said, as 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.


--posted by Sebastian Kitchen