Does the near future hold a recession for Alabama and the country as a whole?

Fears of a coming recession or worse in the near future might throw a wrench in any plans some may have for passing major tax relief in Alabama.

State Sen. Greg Albritton (R-Atmore), chairman of the Finance and Taxation General Fund, said in an interview with 1819 News Friday that his preference is for the state to deal with retention and recruiting problems in some state agencies and fund a new trust account for education rather than "making drastic changes in the revenue stream."

"While y'all are focusing on how flush it appears that we are, I'm looking at what the problems are and how we're going to resolve them," Albritton said. "No one is talking about the recession that we are in, and no one knows where it is going to end. There's scary times out there. I'm just not comfortable with talking about making drastic changes in the revenue stream. What we're seeing here is truly an anomaly and will soon go away."

Albritton said he doesn't "see roses and puppy dogs" in the future economically and would prefer to see the "overage" in the Education Trust Fund go to a state government trust account that would generate interest annually and be used to fund education in Alabama.

"One option that hasn't been talked about a lot is take that $2 billion that we have … it's unobligated … there are no strings," Albritton said. "The best way I think to help people in the long run in perpetuity is to take that money and put it into a trust account much like the ATF that we can't get to and use the funds that would come from that for education. You can call it scholarships. You can call it training ... or even using it for school choice. That would give us $50 million at least every year that would come in in perpetuity, and we'd still have that money in the bank. That would be, I think, a good consideration for using what the taxpayer money is: this one-time money that we're never going to have again, and we can use it forever and ever if we do it that way."

Kirk Fulford, Legislative Fiscal Officer, told legislators at an informal budget hearing Thursday morning that massive revenue increases in both state budgets with less than one month left in fiscal year 2022 compared to previous years are "so far abnormal" and "reflective of the fact that all states received a mountain of federal influcture of cash over the last couple of years that not just offset downturns in the economy but provided a sugar high, so to speak, of revenues that I don't think are going to be sustainable long-term because the economy is not set up to continue the spending pattern over a long period of time.

"Most of the growth in the Education Trust Fund is always going to be income and sales [taxes]. Pay attention to that because those are the two revenue sources that also respond quickest to downturns in the economy. If there is a slowdown … a blip in the economy coming forth in the near future, we'll see it here quicker than you'll see it on the General Fund side because it'll show up in people's paychecks and what they can or cannot buy with their money at the end of the day."

According to Fulford's report to legislators Thursday, the state's General Fund budget as of Sept. 1 had a little more than $94 million in total available funds in excess of total obligations. The Education Trust Fund budget as of Sept. 1 had a little more than $1.6 billion in total available funds in excess of total obligations.

Fulford said the budget surplus and increase in state revenue was "not because you've overtaxed people" but rather due to "conservative budgeting" in 2021 and 2022.

"You were conservative in both of those budgets, and because of that, and because of the enhanced federal money that came into the states, you are going to wind up with ending balances in both budgets that are far and above greater than any you've had in quite a while," Fulford said. "Again, those are unrealistic assumptions that you're going to continue that on an ongoing basis. I consider the last two years to be unreal. It's an unreal economy."

State Sen. Arthur Orr (R-Decatur), the Senate Education Trust Fund chairman, has floated the possibility of lawmakers offering a tax rebate next year, given the current budget surplus. 

"So a rebate seems to me, is very targeted," Orr said in an interview with Mobile radio FM Talk 106.5's "The Jeff Poor Show" in August. "We know the amount we're dealing with, and it needs to be substantial. You see what other states are doing. We've got reports on other states on how they've conducted a rebate program. We need to be part of that here in Alabama, in addition to looking at additional tax cuts that make sense going forward to help the people in the state long term by putting the money back in people's hands and let them spend it how they will, not make that decision in Montgomery, spending it on more government."

House Majority Leader Nathaniel Ledbetter (R-Rainsville) said on WVNN's "The Yaffee Program" this week that he could support a one-time tax rebate for Alabamians.

Alabama's budget surplus was $1.5 billion in 2021. The surplus amount for 2022 is currently unknown but is expected to be "at least" $1 billion higher than last year, according to Justin Bogie, Senior Director of Fiscal Policy at the Alabama Policy Institute (API).

API asked Governor Kay Ivey and the Alabama Legislature yesterday to "take immediate action to enact a minimum of $750 million in permanent tax cuts "to be phased in over three years.

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