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November 23, 2014

Governor: School fund safe from business incentive program

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Posted: Thursday, July 24, 2014 12:03 am | Updated: 6:52 pm, Thu Jul 24, 2014.

OXFORD — During a tour of the state Wednesday, Gov. Robert Bentley said he might call the Alabama Legislature into special session later this year to consider offering economic incentives to new industries.

Critics immediately panned the proposal, saying any money for incentives would likely come from the state’s school budget. Bentley denied any plan to draw money from education funds.

“That was basically somewhat misinterpreted,” Bentley said in a late-evening stop in Oxford.

At a workforce development summit in Washington County Wednesday, according to al.com, the governor said he planned to call lawmakers back to Montgomery to consider ways to find money for incentives that would attract new industries to Alabama. The state has almost tapped out the funds currently set aside for incentives, the governor later told The Star.

Lawmakers from both sides of the aisle said the governor’s statement was the first they’d heard of a special session call. Response was lukewarm at best.

“I’ve not seen enough information to warrant going into a special session,” said Sen. Del Marsh, R-Anniston, the president pro tempore of the Senate. “I’m not able to get behind this.”

House Minority Leader Rep. Craig Ford, D-Gadsden, said any incentives would likely come from the Education Trust Fund budget, the richer of the state's two budgets.

The $5.93 billion Education Trust Fund pays for schools, while the $1.84 billion General Fund pays for all other state agencies, including Medicaid and the state prison system, where costs have swelled in recent years. Income taxes, the source of most recent state tax breaks, flow mostly into the education fund.

"We're just raiding the Education Trust Fund to give out-of-state companies a tax break, when we should be funding our schools," Ford said.

On his Wednesday night stop in Oxford, Bentley said he had no intention of drawing incentive money from the education budget.

“What we are doing as far as incentives, we’re not going to ever do anything that does not improve our Education Trust Fund,” he said. “We’re not going to look at any type of incentive package unless it immediately brought money into our Education Trust Fund.”

Republicans have long maintained that incentives for business ultimately bring more money to the education budget by boosting the economy, and thereby boosting income tax revenues. Marsh, however, said that effect takes a few years to show up.

“It’s a net gain, but you have to spend some money first, to get that gain,” Marsh said.

Lawmakers next year face challenges in both budgets. The state is still paying back hundreds of millions of dollars in loans it took out of state trust funds to shore up both budgets during the recession. Flat income and sales tax revenues this year may leave little wiggle room in the Education Trust Fund budget next year. And with borrowed money running out, lawmakers may have to find more than $150 million to patch a hole in the General Fund next year.

Asked where the money for economic incentives would come from, what kinds of incentives would be offered, and what sort of industries the state was trying to attract, Bentley said it was too early to discuss such details.

 “The special session was just an option that we may look at, and we may do it in the regular session,” he said. “But we will never do anything to hurt education, and we will never hurt the trust fund.”

 

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