Ivey's record budget proposals increase reserves amid 'unsustainable' revenue boom

Gov. Kay Ivey’s proposed $2.96 billion General Fund and $8.80 billion Education Trust Fund budgets for 2024 are the most ever in their current form, with increases to most state agencies after record revenues in recent years. The proposal also includes 2% pay increases for all state employees and a $400 rebate to all tax filers from the cash-rich Education Trust Fund.

But the state’s finance director is also warning that Alabama’s economy won’t be able to sustain historic revenue levels for too long.

Ivey’s proposals give big funding increases to Corrections, Public Health and the Alabama Medicaid Agency, as well as millions more for improving K-12 math education and after school care programs. But she also called for paying off some debts and placing money in reserves.

Ivey proposed putting $50 million into the General Fund’s rainy-day reserves and paying off about $40 million in debt obligations with supplemental appropriations for the current fiscal year.

Finance Director Chris Poole applauded Ivey’s budget proposals, saying they should prepare the state for sustainability in the future.

Poole said the state should look to the past to inform their spending plans. Alabama saw historic budget revenues in the years before the Great Recession in 2008, so the state should prepare in case of a potential economic downturn, Poole said.

“There are a lot of lessons to be learned from past experiences, most recently the Great Recession. We had times of historic budget revenues immediately preceding the Great Recession. We know right now, we are experiencing historic receipts levels, we know that those are not sustainable. They far exceed any measure of historic average,” Poole said.

In a statement, Ivey said the state’s conservative approach is reason for the state’s sound financial footing.

“Alabama, especially considering the state of the nation’s economy, is on sound footing. Our budgets are strong, and that is, no doubt, because of the fiscally conservative approach we have taken and continue to take. Just as every Alabama family budgets to invest, pay their debts and increase their savings, my budget proposals do just that for our state. From returning our taxpayers’ hard-earned dollars back to them to making historic investments in our students’ education, these budgets will help foster a strong Alabama today and a stronger Alabama tomorrow,” Ivey said.

The General Fund proposal increases funding to the Alabama Department of Corrections by $58 million, driven in large part by the state’s new contract with YesCare to provide prison healthcare services, Poole said.

Ivey proposed to increase funding to the Alabama Medicaid Agency because Federal Public Health Emergency Funds related to the COVID-19 pandemic are running out, Poole said.

The $400 tax rebate Ivey proposed would come out of the state’s Education Trust Fund budget for the current fiscal year and cost nearly $1 billion. The proposed rebate is part of a group of proposed supplemental appropriations totaling $2.8 billion.

The proposed 2024 budgets and bills requesting supplemental appropriations now go to the Legislature. In most years, legislators add a few million dollars to the grand total, which could put the 2024 General Fund budget above $3 billion once it’s passed.

Evan Mealins is the justice reporter for the Montgomery Advertiser. Contact him at emealins@gannett.com or follow him on Twitter @EvanMealins.

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This article originally appeared on Montgomery Advertiser: Ivey proposes record General Fund, education budgets for 2024