The real story of the House’s 2020 General Fund budget is what isn’t in it

Now that the gas tax is a reality, the Alabama Legislature appears to be in a hurry to finish up essential business – and maybe even adjourn a little early. The House on Tuesday passed a General Fund (GF) budget that differed little from Gov. Kay Ivey’s recommendations.

With Alabama finally out of the worst of the recession and revenues beginning to flow again, many legislators seem to be feeling a bit like Santa Claus. But the real story is what’s not under the GF’s tree.

The House’s GF budget, which awaits Senate action, would squeeze out increases for nearly every state agency, most of which have been living through tight times for the last decade. The state’s badly cash-strapped court system would receive nearly $40 million more, hopefully reducing its dependence on fines and fees. The Department of Corrections, facing court challenges over treatment for inmates with cognitive disabilities, would get an additional $41 million. That money would allow the department to hire an additional 500 prison guards.

Helping agencies would get increases, too. Mental health would receive an additional $9 million, as would the Department of Human Resources (DHR). The small but vital Department of Senior Services would get an additional $1 million.

Even state employees, who haven’t seen a pay increase in years, would get a 2% cost of living increase. And retired state employees would receive a one-time bonus based on the number of years served.

The head-scratcher budget request came from Medicaid. For years now, Medicaid’s funding needs have challenged previous bare-bones GF budgets. Now, during a good revenue year, Medicaid Commissioner Stephanie Azar actually requested $52 million less. Azar said the agency can carry over a considerable sum from this year to maintain current services in 2020.

The investments our state isn’t making

The 2020 GF budget does indeed look pretty good at first glance. But the House plan is conspicuous for what was not included.

Perhaps most notably, the budget doesn’t fund Medicaid expansion to cover more than 300,000 Alabama adults with low incomes. The net state cost would be $164 million in the first year and about $25 million a year thereafter. The $52 million reduction in Medicaid’s budget would have made a nice down payment on expansion.

While the Department of Corrections can hire another 500 prison guards, the real need is closer to 2,000 new guards, according to a federal court order. And the budget does not include money for the new prison construction that Ivey has urged.

Lawmakers transferred ALL Kids to the education budget for 2020 to help balance the GF budget. But House GF budget committee chairman Rep. Steve Clouse, R-Ozark, said ALL Kids will move back to the GF in 2021. That move would add to the strain that the underfunded GF budget regularly faces. To draw down available federal matching money, the Children’s Health Insurance Program (CHIP) will need $98 million more from the state in 2021 than it receives today. CHIP provides health coverage for more than 173,000 Alabama children through both ALL Kids and Medicaid.

A funding solution to help everyday Alabamians

Alabama is, quite simply, in need of new revenue. And Alabama Arise has a plan to raise that revenue while giving most residents an overall tax cut.

Alabama is one of only three states that allow taxpayers to deduct all of their federal income tax (FIT) payments from their state income taxes. This tax loophole makes little (if any) difference for families with low and moderate incomes. But it saves millionaires a whopping average of $11,327 a year in state income taxes. If Alabama ended its FIT deduction, the state would bring in an additional $719 million a year.

That new money would allow Alabama to expand Medicaid and end the state grocery tax (two long-time Arise priorities). It also would ensure full CHIP funding in 2021 and leave additional money to meet other critical needs. (Because the state constitution earmarks income tax revenue for education, some of those moves would require an amendment.)

The proposed 2020 GF budget is only flush when compared with years when the state was truly in dire straits. It’s time for our lawmakers to find the political courage to address Alabama’s needs and raise the revenue required to meet them. Ending the state’s FIT deduction would be a good first step.