The state’s economy is strong, and tax collections are up, according to a recent joint meeting of the legislative budget committees at the Alabama State House in Montgomery.
Alabama Legislative Fiscal Office Deputy Director Kirk Fulford presented the legislators with a “current update on where we stand, and some issues coming up on the horizon.”
“Alabama’s current economic conditions are great and about as good as they have ever been,” Fulford said.
Fulford said Alabama’s labor market is “robust,” referencing new record lows in unemployment, new record highs in employment, wage and salary growth, and withholding payment increases.
“Earnings are up, so withholding payments are up,” Fulford explained. “In 2021, withholding payments grew by 7.45%. Average growth is 3.75%.”
Fulford said the state general fund (SGF) had seen strong economic growth.
“Inflation is continuing to play out in the economy, but the general fund is in good shape,” Fulford continued. “We have available $2.6 billion.”
The 2022 fiscal year net receipts to the SGF are up 7.41% from the same time last year.
“We are well above what we need,” Fulford said. “This is a great thing for the strength of the general fund.”
The state of Alabama uses a budgeting system where over 90% of the revenues are earmarked. Non-education dollars go to the SGF, and education dollars to the ETF. Many state agencies have revenues outside of the two budgets. For example, fuel taxes go to the road and bridge fund for the Department of Transportation, and the Secretary of State’s office is funded by business filing fees. The state also receives over $11 billion per year in federal matching dollars that is outside the budgeting process, and local school tax dollars spent by local boards of education also fall outside the budget.
In this fiscal year, Fulford reported, the ETF has an increase of 21.88% from this time last year and is on pace to collect over $10 billion.
“That is astronomically above what the education fund normally is,” Fulford said. “Income and sales strength is really good right now.”
The state could carry over $2.5 billion in surplus ETF dollars into the FY2023 fiscal year.
“I have a lot of concerns about where we are headed,” Fulford warned. “We are living off of a sugar high. A mountain of money is holding back a recession.”
While Fulford expressed concern about the decrease in gross domestic product and the slowing of business investments and the housing sector as signals of a recession, he stated that Alabama’s misery index is “in a better situation than other states.”
When asked about the percentage of the population in the workforce, Fulford shared that 57.2% of Alabama adults are participating in the economy.
“The national average is 62%,” he explained. “In the 80s, it was close to 70%. It has been declining at a rate of 1-to-2% every decade since. There are a lot of people that could be in the economy that are not. Full employment when I was in school was 5%. I talked to a young person in my office, and they are now saying 3.5%. During the pandemic, we experienced the ‘Great Resignation.’ Part of that is that Baby Boomers reached retirement age, and that took a lot of people out of the economy. It has been pretty consistent. We are not putting enough people in the workforce to offset that. The labor market is as tight as it could possibly get. We have to put more people into the workforce in order to fill additional jobs.”
When State Rep. Arnold Mooney (R-Indian Springs) expressed concern about next year’s budget in the face of a recession, Fulford assured him that “you need less than zero growth to support the budgets that you passed. We have reserves of a billion. We can handle it even if the economy dropped off substantially.”
“Alabama budgets are in great shape,” Fulford concluded. “We are in a better position to weather a storm than we were ten years ago.”
To connect with the author of this story, or to comment, email brandon.moseley@1819News.com.
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