Should Alabama’s state government save its historic $2.7 billion Education Trust Fund (ETF) revenue surplus for a rainy day? Some lawmakers think so.

While I will concede that putting the surplus into a savings account is better than using it to continue the record growth of state government, doing so would be a missed opportunity to provide generational tax relief to all Alabamians. What’s more, the state already has several reserve accounts that could be utilized in an economic downturn, so a new savings account is unnecessary.

The most recent lawmaker to suggest putting the funds into a savings account is Alabama Senate Majority Leader Clay Scofield (R-Guntersville), who recently told 1819 News, "I'm very conservative on this. I would like to see what the economy is going to do."

"There's too much uncertainty right now,” he continued. “I would like to hold and see what happens."

Nothing is ever certain when it comes to the economy, but a recent report from the University of Alabama’s Center for Business and Economic Research (CBER) does not foresee a major economic slowdown happening in 2023. UA economists project that Alabama’s economic output will decline by just 0.1% this year, and according to CBER executive director Ahmad Ijaz, if a recession does happen, it is expected to be mild. Ijaz is also optimistic that the Federal Reserve “will be able to engineer a soft landing as long as the consumers spending continues to grow.”

If only a mild economic slowdown is expected, why would the state need a new $2.7 billion reserve fund?

As has too often been the case in recent years, Scofield’s proposal appears to go towards the idea of protecting government if an economic recession occurs. It’s not about helping Alabamians who have struggled through the COVID-19 pandemic, battling skyrocketing inflation and record high gas prices.

In his argument for creating another reserve fund, Scofield talked about the “considerable amount” of interest that would be accrued, implying that lawmakers should not use the money to pursue permanent tax cuts because Alabama is already “one of the lowest tax states in the country,” a debatable point.

That sounds like a plan to save the current surplus, let it grow larger, and eventually use those funds to further expand state government.

This is not the first time an Alabama lawmaker has suggested using the state’s record surplus to create a new reserve account. Last fall, state Sen. Greg Albritton (R-Atmore) suggested that the best way to help Alabamians in the long run is to put the funds into a trust account, using those funds for education in the future.

Again, I would argue that a new reserve fund is not needed at this time. Both the ETF and General Fund budgets have rainy day accounts, fed by the Alabama Trust Fund (ATF). State government could draw an estimated $850 million from the ATF in 2023 alone if a revenue shortfall were to occur. At the end of FY 2022 the ATF had a balance of more than $3.3 billion. Both the ETF and General Fund have additional reserve and budget stabilization accounts that could cover a temporary revenue shortfall. Neither budget has faced proration cuts in more than a decade, even at the height of the COVID-19 pandemic.

Alabama’s government already has ample reserve funds to withstand the impacts of a typical recession, which has lasted an average of 10 months in the post-World War II era. A mild recession, if any, is what economists are predicting.

Instead of saving the state’s surplus (your tax dollars) for a rainy day, lawmakers should use it to take fewer taxes from citizens. There are several ways to achieve this goal, and the long-term benefits of permanent tax relief for citizens, job creators, and the state would be immeasurable.

Another savings account assures the future prosperity of state government.  Don’t Alabamians deserve the same assurance?

Justin Bogie serves as Fiscal and Budget Reporter for 1819 News. The views and opinions expressed here are those of the author and do not necessarily reflect the policy or position of 1819 News. To comment, please send an email with your name and contact information to: