News & Updates

November 8, 2011

Education Budget 2012 Synopsis

Date: November 8, 2011
To: Marshall County Educators
From: Rep. Wes Long
Re: Education Budget 2012 Synopsis

The most money ever appropriated for education in Alabama was $6.8 billion in 2007-08 Fiscal Year.  The budget which started October 1, 2011 was $5.59 billion or down almost $1.3 billion from the highpoint.  The extra money from the stimulus should have been used to slowly cut back the costs of government.  However it was not and created a disastrous shortfall in our budgeting process last year.  The education budget is comprised of 83% employee’s salaries and benefits. 

The smaller budget is due to two main reasons.

    1. The Economy; Great Recession
    2. No more Stimulus money.  Since 2009 the state has received $1.2 billion annually from the
          Federal government to help shore up our state budgets.  $600 million of this went to
          education and the money is no longer available.  It STOPPED with the last fiscal year.

          •  The Constitution of Alabama says we must balance the budget and we cannot borrow
              money to balance it.

          •  We could have raised taxes but I believe that would have been the absolute worst thing
              to do in this economy and is not the answer right now.

The AEA said we should have closed so called tax loop holes on BIG corporations.  The problem is when you close them on the BIG corporations you close them on small business.  We actually did close $40 million in loop holes but most of the ones they wanted us to close would have been job killers such as eliminating accelerated depreciation.  It is also strange to note that they were not closed over the past legislative sessions and the ones we closed in the last session have been around for decades.

To make the budget balance we had to do a number of things and one was to increase the employee retirement contribution from 5 to 7.5 per cent.

Why Did We Do This?

The law says the state (taxpayers) must contribute to the retirement fund whatever is necessary for it to be solvent. The system is backed by the full faith and credit of the State of Alabama. RSA is only
meeting 70 per cent of its cash flow needs.  The state contribution has steadily risen in recent years from the traditional six per cent to 12.5 per cent.  When we raised the employee contribution by 2.5 per cent, it was the first time since 1975, and it was across the board for teachers, state employees, and Judges. This reduced the state contribution to 10 per cent and as a result saved $89 million, and we used that money to save 1,500 education jobs.
Here is something that is not told to educators.  If the state contribution had not risen to the point it has and had remained at 6 per cent there would have been enough money to raise teacher salaries by 20 percent.  That is why there are several issues at RSA that need to be addressed.  RSA does not have adequate cash to make its retirement contributions on an annual basis and cost the taxpayers last year 1 billion to fund it.

We also eliminated DROP which saved roughly $35 million in education dollars and saved another 500 jobs.  The first 20 pages of DROP were administration employees, not classroom teachers.
We also did not fund a little over 1,100 teachers who normally retire within the year.

The only thing that was done that will adversely affect teachers is the increase in retirement contribution.  This is an investment in your retirement not a pay cut.  Remember you will be using this money when you retire to pay your benefits.  A pay cut is money lost forever, not an increased investment in your future.

We balanced the budget without layoffs, without reducing salaries, without increasing the divisor, provided money for classroom supplies and increases in other vital programs and there is no indication we will have proration for the 2012 budget.

Under the circumstances we provided as good an Education Budget as could be provided.  I do not think there is any question, it is better than the one just concluded.


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