Unused school tax credit money won't go back to schools: Rest of $40 million will pay down Rainy Day Fund debt
by Tim Lockette
tlockette@annistonstar.com
Oct 01, 2013 | 3376 views |  0 comments | 50 50 recommendations | email to a friend | print
MONTGOMERY — Alabama residents will claim only a fraction of $40 million set aside for school tax credits in the 2013-14 school year, lawmakers said Tuesday — but the unused money won't go back into the school system.

Instead, the state will use the money to pay down its debt to itself.

"The satisfaction of our remaining debt repayment is statutorily required," said state Rep. Bill Poole, R-Tuscaloosa, chairman of the House committee that oversees the education budget.

Poole and Senate education budget chairman Sen. Trip Pittman, R-Daphne, held a press conference in the Statehouse on Tuesday, the first day of the 2014 fiscal year, to note that the state has paid back a significant portion of its debt to the Education Trust Fund Rainy Day Account.

Technically, legislators aren't allowed to pass an unbalanced budget. In reality, the state's coffers include several trust funds and earmarked streams of money that lawmakers can tap when revenues fall short.

In 2009, a Legislature controlled by Democrats borrowed $437 million from one of those funds, the Rainy Day Account, to make up for revenue lost to the recession. In 2012, A Republican-dominated Legislature voted to raid the same amount — $437 million — from the Alabama Trust Fund, a fund for oil and gas taxes, to pay fill a gap in funding for non-education agencies. Lawmakers say the similarity between the two amounts is coincidental.

By law, the state has until 2015 to pay off the Education Trust Fund debt. At the press conference, Pittman and Poole said the state had paid $260 million of the debt so far, and was on track to pay the rest by 2015. Both praised the fiscal discipline of the Legislature, which has been GOP-led since 2010, and criticized the earlier Legislature for resorting to borrowing.

"The previous leadership failed to make the cuts it needed to make," he said.

Alabama runs two budgets — one for education and one for most other functions — with the education budget funded largely by sales and income taxes. Pittman said he expected economic growth to leave the education budget with as much as $5.9 billion in 2015, up from $5.77 billion this year. The first priority for that new money, he said, was paying back the debt to the Rainy Day Fund.

Earlier this year, lawmakers approved a 1 percent pay raise for teachers, less than the 2.5 percent Gov. Robert Bentley had asked for. Pittman said he didn't see room for another pay raise in the 2015 budget.

Poole was less sure.

"I think it's too early to say anything will be on or off the table," he said.

In preparing this year's budget, lawmakers trimmed their revenue estimates by $40 million to account for tax credits available under the Alabama Accountability Act, a new law that gives families zoned for "failing" schools the option of transferring to other schools, with a tax credit of up to $3,500 if the school is a private school.

At the beginning of the school year, the state Department of Education announced that only 52 children had transferred to private schools under the program.

Poole said the actual cost of the Accountability Act in 2014 would be "substantially less than $40 million." The actual number wouldn't be known, he said, until tax returns are filed next year.

The unused portion of that $40 million, Poole said, would go back to paying the Rainy Day Fund Debt.

Last month, Rep. Craig Ford, D-Gadsden, called for the Legislature to repeal the Accountability Act and return $40 million to the education budget. He said the money could be spent to expand the Alabama Math, Science and Technology Initiative, a much-lauded state program, to all the state's schools.

Ford re-issued that call Tuesday.

"They need to put this into programs that are proven to work," Ford said.

Ford said he plans to introduce a bill to create a lottery in the next Legislative session. A lottery, he said would raise $262 million for education.

Because it's funded by sales and income taxes, Alabama's education budget has often been subject to major fluctuations as the economy rose and fell. It has never fully recovered from the 2008 recession.

This year, the education system has $5.77 billion to spend. In 2008, it had $6.8 billion.

Capitol & statewide correspondent Tim Lockette: 256-294-4193. On Twitter @TLockette_Star.

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