On Wednesday, the Senate Finance and Taxation Education Committee approved several fiscal year 2024 education appropriations bills, as well as a supplemental funding bill for the current year. The Senate is set to vote on the bills Thursday.
While the $8.8 billion Education Trust Fund (ETF) budget for fiscal year 2024 remained mostly in line with Gov. Kay Ivey’s recommendation, a closer look at this year’s ETF supplemental proposal indicates that the Alabama Legislature is shifting towards pursuing permanent tax relief as opposed to one-time rebate checks.
If that becomes a reality, it’s a much greater, long-term victory for taxpayers. Still, it is important to note that the Senate ETF supplemental does nothing to directly provide permanent relief. Current proposals would not begin reducing tax rates until next year, meaning that unless a new savings account is created, 2023 surplus funds could not be used to provide those cuts.
The topline for Senate Bill 87, the 2023 ETF supplemental appropriations act, totals $2.8 billion in new education spending for the current year, unchanged from the governor’s recommendation. However, a closer examination of the bill’s line-items shows a major shift in funding priorities.
Tax rebates are first on the list. Ivey previously called for approximately $967 million of the ETF’s $2.8 billion surplus to go towards $400-$800 rebate checks for Alabamians. The Senate reported version of the bill drastically reduces that amount, now setting aside $275 million of the surplus for rebates. Rebates would now total about $100 per person.
Other changes include the omission of funds for much-maligned projects, such as $25 million for economic development around a new Montgomery whitewater park, $31 million to move the location of the Mobile Airport, and $5 million towards canceling outstanding World Games debt.
Senate education budget chairman Arthur Orr (R-Decatur) previously questioned why these non-education items were included in the governor’s recommendation. The committee was right to strip those items from the proposal.
The shrinking of the tax rebates alone frees almost $700 million to be spent elsewhere. In general, much of this funding will be set aside for one-time COVID-19-related expenses and capital improvement projects at the state’s K-12, community college, and higher education institutions.
One item of note is a $30 million appropriation for the Distressed Higher Educations Schools loan program. The bill doesn’t say that this money will go towards a much talked about bailout of Birmingham Southern College (BSC) specifically, but that is clearly the intent. Last year, the school asked the legislature for $30 million in American Rescue Plan Act funds.
Earlier this week, State Sen. Jabo Waggoner (R-Vestavia Hills) introduced Senate Bill 278, establishing the higher education loan program under the State Treasurer’s office. While few would debate that BSC provides value to its students and the broader community, questions remain about the precedent and financial impacts to taxpayers that a bailout would set.
The criteria to receive a loan are broad. The bill requires that any public or private institution is eligible so long as it has been operating for over 50 years, has an impact on the community, is experiencing a financial hardship that could lead to closure, has authorized an application for the loan, and has sufficient collateral. Ultimately it would be left to the State Treasurer to decide which institutions are approved or denied loans.
If the state begins bailing out private universities, there could be pressure to do the same for struggling businesses as well.
Bailouts aside, the major takeaway from the supplemental bill is that lawmakers have significantly reduced proposed tax rebate amounts for citizens. Given that there are currently at least four bills moving through the legislature to reduce income taxes, as well as a broadly supported 2% grocery tax cut, one could conclude that lawmakers are listening to the people and are serious about enacting permanent tax cuts.
With the 2023 regular session now more than halfway over, much work remains to move those cuts beyond proposals and make them a reality. It’s time to finish the job and provide relief to all Alabamians.
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: Commentary@1819News.com.
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