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December 20, 2014

Alabama Legislature Tuesday's primary winners may win big problem

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Posted: Saturday, May 31, 2014 5:54 pm | Updated: 11:09 pm, Sat May 31, 2014.

Sen. Del Marsh, R-Anniston, is hoping for a windfall to patch the hole in Alabama's budget next year.

Steven Guede wants to jail lawmakers if they don't quickly come up with a way to balance the budget.

And there’s little will to raise taxes to fill the budget hole.

Alabama residents go to the polls Tuesday to select Republican and Democratic nominees for the Alabama House and Senate, the first vote in the quadrennial elections that will replace or re-approve each of the 140 members of the Legislature.

Candidates have been on the campaign trail for weeks, debating each other on school standards and ethics reform. Yet there's been little talk about one issue that's almost certain to become a crisis for the next Legislature.

Alabama's General Fund budget faces a shortfall of more than $100 million next year, as the state runs out of money it took from the Alabama Trust Fund two years ago.

During this year's legislative session, lawmakers grew increasingly worried about the gap, but seemed stumped by the search for solutions. After weeks of campaigning, few candidates — incumbent or challenger — seem to have detailed plans to fill the budget hole.

"I'm praying about it," said Rep. Steve Hurst, R-Munford.

Rising costs

The state’s looming budget problem is a simple one. Come October 2015, the state won’t have enough money to pay for the services it’s providing this year.

How the state got here, though, is complicated.

To start with, the state runs on two budgets, one for education institutions and another, known as the General Fund, for all other agencies.

When Alabamians pay sales tax, or file their income tax, the lion's share of the money goes to schools. The General Fund, meanwhile gets its money from a seemingly random assortment of other taxes — taxes on oil and gas drilling, taxes on insurance policies, and so on. The money from those taxes often doesn't grow as fast as sales taxes and income taxes do.

So the General Fund, which will spend $1.8 billion this year, will probably have roughly the same amount to spend next year. But the General Fund pays for prisons and Medicaid, two programs that continue to grow in cost every year.

In 2012, that problem hit the crisis level. Facing a massive budget gap, lawmakers drafted an amendment that would take $437 million from a state trust fund and use it to plug the budget hole for the next three years.

That three years is almost up. When lawmakers meet again in 2015, they'll have to craft a 2016 budget without the trust fund money — while prison costs and Medicaid enrollment continue to rise.

Cuts to come

Many of the area's incumbents hold out hope that the state will find money to plug the budget gap between now and next year.

"Your choices are very few," said Marsh, the Anniston senator who is now president pro tempore of the Senate. "You have to hope that the revenue situation will get better. If not, you have to raise taxes or cut, and I am absolutely not going to raise taxes."

Marsh, like other incumbents who spoke to The Star, said the problem could be solved quickly if Congress passed a law allowing states to collect sales tax on items purchased across state lines via the Internet. The Legislature has already passed a bill that would send most of that money — if it comes — to the General Fund.

Barring that sort of windfall, Marsh said, the state would have to cut the budget.

Exactly where those cuts would come from is unclear. Lawmakers have already trimmed 11 percent of state workers from the rolls in the past four years. The Legislature also approved a plan by Marsh to merge the state's law enforcement agencies under a single department.

"I think there's still room to make consolidations in departments that have similar roles," Marsh said. He didn’t cite specific agencies.

Marsh's Republican primary opponent, Steven Guede, said he'd be willing to cut whole departments from the state government in order to balance the books. Guede said he believed the state should maintain police and fire departments, and should fix the roads. Other functions, he said, are negotiable.

"You fill the gap with cuts to all the unnecessary spending," Guede said.

Guede said the cuts could be made if the Legislature made passing the budget a priority, instead of spending time passing other bills that ultimately draw down on state funds. The Legislature would be required to handle the budget first, he said.

"You make the budget the first piece," Guede said.

Guede said he favored criminal penalties for lawmakers who stand in the way of the quick passage of the budget.

"If the Senate pro tem or the speaker or the lieutenant governor refuses to bring the budget to the floor, it should be turned over to the attorney general," he said.

Into the bone

Hurst, the Munford Republican lawmaker, said there's not much more that can realistically be cut from the budget.

"We're past trimming the fat," Hurst said. "If we keep cutting, we're getting into the bone."

Like Marsh, Hurst said he was hoping for an uptick in General Fund receipts through another source.

Hurst's Republican primary opponent, Steve Dean, said in an email to The Star that economic growth is the solution to the problem.

"We need to grow our economy and get back to work, not raise tax rates," he said.

In one local race, the Republican primary candidates seemed relatively upbeat about the budget gap. Sen. Jerry Fielding, R-Sylacauga, said he believed a settlement from BP, in a lawsuit over the 2010 Gulf oil spill, could save the state from the budget crisis.

"If that happens, we'll be in good shape," he said. When settlement funds come through, he said, they could add up to billions for the state.

“A lot of that will go to the coastal communities, but the governor said some of it will go to the General Fund," Fielding said.

If there's no windfall from BP or an Internet sales tax, Fielding said, the state will have to consider reducing its prison population.

"Instead of sending people to penitentiaries, we could send them to other locations where they're in the facility at night, but out working during the day," he said.

Fielding's primary opponent, Rep. Jim McClendon, R-Springville, said he wasn't sure the $437 million loan from the Alabama Trust Fund was really the cause of the problems in the General Fund.

"We're already close to paying that back, and we're ahead of schedule," he said.

Years before the vote to raid the Alabama Trust Fund, lawmakers voted to borrow an identical amount — $437 million — from another state fund to bolster the education budget. That debt is almost paid off. It wasn't clear, late last week, whether McClendon was confusing one debt with the other.

Up in smoke

Back in 2012, before the vote to raid the Alabama Trust Fund, a few Democrats offered an alternative solution: raise Alabama's cigarette tax by about $1 per pack and generate more than $200 million to bolster the General Fund.

The state now has some of the lowest cigarette taxes in the nation, and the dollar-per-pack tax would put Alabama’s cigarette tax just below the 50-state average.

The proposal went nowhere. In the run-up to the election, even Democrats may not be willing to repeat the proposal.

"Like everyone else, I'm not looking to increasing taxes," said Ted Copland, a Democratic candidate in the race for House District 40, the only local legislative race with a Democratic primary.

Like many of the Republicans in the race, Copland said budget cuts and economic growth were the answer to the budget gap.

"We're wasting money, there's no question about that." he said.

Copland’s Democratic primary opponent, Lindsay Ford, said she’d accept an increase to the cigarette tax, under the right conditions.

“Increasing the cigarette tax would certainly increase funding,” she said in an e-mail. “But I would only support such an increase if it were earmarked specifically for health expenses.”

   Both Democrats laid the blame for the crisis on the Legislature's tendency to piece together one-time funding to make ends meet.

"Even if we do what we did in the past and find a quick fix for it, that doesn't solve the problem for the future years," he said. "We can put a band-aid on it, but it's going to bleed right through."

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