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In 2021, more state revenues flowed into Alabama than ever before. An extra $1.2 billion compared to 2020. And there is more money on the way.
In March, Congress passed the American Rescue Plan Act (ARPA), into law. Alabama has already received half of its $2.1 billion in ARPA funds, with the second half on the way next year. Another $1.7 billion is going to county and municipal governments.
Just last month, Congress passed another massive bill that will pump nearly $7 billion into state transportation and infrastructure programs over the next five years, the Infrastructure Investment and Jobs Act (IIJA).
These are just the latest examples of the federal government handing billions of dollars to state and local governments. Last year Alabama received $1.8 billion in federal stimulus funding through the Coronavirus Aid, Relief and Economic Stimulus Act. That money is long gone, with much of it being reinvested into government, not to help individuals and businesses impacted by the pandemic.
On top of the two massive stimulus bills, and the infrastructure package, Alabama has received another $4.5 billion in federal dollars for education.
You get the picture. Alabama is swimming in cash. On top of record state revenues, the federal government continues to pump billions more into Alabama’s government. So far Alabamians have benefited little from that cash infusion.
But there are still opportunities to change that. As lawmakers gear up for the 2022 legislative session, they are pondering how to use ARPA and IIJA funds - what’s left of them anyway.
Alabama has already dedicated about a quarter of its ARPA funds to prison construction, hospitals, and nursing homes. But there is still more than $1.5 billion left.
Earlier this month, members of the Alabama Senate and House budget committees convened a joint meeting to discuss the status of both stimulus and infrastructure funds and begin looking at how to spend them.
The key is to do something that will benefit all Alabamians, like taking fewer tax dollars from them.
State Senator Greg Albritton said that “We have $580 million we need to appropriate as soon as we get into session,” but there’s really no rush. The state has until the end of 2024 to allocate the money and two more years to spend it. Spending it the right way is more important than spending it quickly.
So what did lawmakers discuss at their joint budget meeting?
They seemed to mostly focus on barriers to spending the money. They spoke of the strings attached and “onerous” reporting requirements. Matching funds were another hot topic. The IIJA requires that the state provide a 10% match to receive most of the infrastructure funds. However, with the 2021 surplus and 2022 revenues already exceeding projections, finding matching funds should not be a problem.
A potentially good option that was discussed is broadband expansion. According to the Legislative Service Agency, there are pots of both ARPA and IIJA money that could be used to expand broadband capabilities in Alabama. Alabama ranks 47th in the nation in broadband connectivity with 70% of residents not having access to an affordable plan. Stimulus and infrastructure dollars would be a good start towards fixing the problem.
Unfortunately, one idea that didn’t come up at the joint budget meeting was taking less from citizens by cutting taxes. There was originally a restriction in ARPA that barred states from using stimulus funds to implement tax cuts, though a November federal court ruling appeared to clear the way for tax cuts to come about if Governor Ivey and the Legislature choose to do so. Again, budget surpluses could also serve as a means to lower taxes.
The lack of a tax cut discussion makes little sense considering that 12 states enacted income tax rate reductions for individuals, businesses, or both in 2021. These states are in a similar position as Alabama, but their elected officials chose to leverage better-than-expected state revenues and federal stimulus money into lower tax bills for citizens.
Eliminating the state sales tax on groceries also didn’t come up, though at least two Alabama House members are reportedly working on bills to “axe the food tax.” Getting rid of the grocery tax would help all citizens. It is past time that it be repealed.
Most Alabamians identify as conservative. They would probably all agree that the federal government is spending too much money. The growth of federal spending in the last two years, but really over the past few decades, is irresponsible and taxpayers will ultimately pay the price when the bill comes due.
Regardless though, these laws have already been passed. The money is here, and more is on the way. The citizens of Alabama must reject the default position of our lawmakers to put that money back into government. This is an unprecedented opportunity for our state government to take less from the people as well as undertake projects that will benefit all Alabamians for decades to come. It’s up to all of us to hold lawmakers accountable and make sure they do just that.Justin Bogie serves as Senior Director of Fiscal Policy at the Alabama Policy Institute. 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: Commentary@1819News.com.