Gov. Robert Bentley’s ETF proposal includes spending outside Rolling Reserve cap

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Governor Robert Bentley delivers his State of the State Address at the State Capitol Building in Montgomery, Ala. on Tuesday Jan 14, 2014. (Montgomery Advertiser, Mickey Welsh)

Governor Robert Bentley delivers his State of the State Address at the State Capitol Building in Montgomery, Ala. on Tuesday Jan 14, 2014. (Montgomery Advertiser, Mickey Welsh)

Gov. Robert Bentley’s 2015 education budget proposal raises an unusual, but not unprecedented question for lawmakers: Does the Education Trust Fund budget pay for all school funding in the state, or is it a very, very large part of a bigger picture?

The governor’s office goes with the latter. That, they say, is why the Governor’s ETF proposal, submitted to the Legislature this week, is about $92 million above a $5.89 billion spending cap imposed under the terms of the 2011 Rolling Reserve Act, aimed at bringing order to the sometimes volatile budget.

“It’s just the way we can do the things we feel are necessary, like giving the two percent pay raise (to teachers) and funding the programs we want to fund,” Bentley said.

But GOP legislative leaders, who consider the Rolling Reserve one of their major accomplishments — and will be drawing up the budgets in the coming months — are, at best, uneasy with that move. House Speaker Mike Hubbard, R-Auburn, said Thursday he personally had concerns about what the governor is doing. The Speaker said they might have to come back and “make it more clear.”

“Our goal is to make sure we don’t over-appropriate, and (that) we have the discipline not to spend every dime available,” he said.

The Education Trust Fund gets about three-fourths of its revenue from income and sales taxes. The Rolling Reserve Act sets an annual limit on what lawmakers can spend out of it, based on a 15-year average of growth in the budget’s revenues, with any money above the cap going to first pay off proration prevention accounts. After those are made whole, money goes to a budget stabilization fund that can not exceed 20 percent of the previous year’s ETF budget.

In the governor’s FY 2015 budget proposal, the Education Trust Fund appropriation is $5.89 billion, at this year’s cap. However, about $92 million of gross sales tax fund transfer are diverted straight to schools before they reach the ETF, leading to spending above the limit imposed by the Rolling Reserve Act.

Bentley said Thursday his goal was not to circumvent the Rolling Reserve cap, and noted that his office proposed — and lawmakers approved — a similar measure in the FY 2013 budget. However, the governor also said that without the move, there would be “a number of things that would be difficult to pay for,” including the two percent pay raise for teachers, and requested funding for state educators’ insurance program.

Bentley also said that lawmakers should consider amending the Rolling Reserve Act in the future, saying a budget stabilization fund that was 20 percent of ETF — which, if full today, would amount to $1.17 billion — might be too large.

“That is a lot of money that’s sitting there,” he said. “In fact, that is $1.2 billion. We don’t need that just sitting there and not being used for programs in education, because there are too many needs in education.”

Both Bentley and State Finance Director Bill Newton also argued that the gross sales tax revenue was an education funding source independent of the ETF, and therefore not subject to the terms of the Rolling Reserve Act.

“Anyone who read that law would make that conclusion. It’s not unclear,” Newton said Wednesday.

GOP lawmakers, who have said repaying the state’s Rainy Day Account will be their priority with the ETF, sounded skeptical. Senate President Pro Tem Del Marsh, R-Anniston and Senate Finance and Taxation Education chairman Trip Pittman, R-Daphne, both said they would look at Bentley’s proposal over the weekend. However, Marsh said Wednesday he does “not support a back door approach,” and added that he did not want the moves made in the FY 2013 budget to become “the norm.”

“I believe the Rolling Reserve will prevent us from going into proration, if we let it work the way it was designed to work,” he said.

Bentley Thursday said he agreed that the Rolling Reserve Act was designed to prevent proration. But he also noted that the state was getting increasingly close to repaying a Rainy Day Account in the ETF that was emptied in 2009 to offset the effects of budget cuts. The governor’s office estimates that in the current fiscal year, the state can pay up to $135 million of the $163 million still owed to the account; that would require budget makers to allocate $27.5 million in the FY 15 budget to make up the difference. The full amount must be repaid by July 2015.

Newton also said it was ultimately up to the Legislature to decide whether or not to go with the governor’s proposal.

“If the Legislature were to amend the governor’s proposal and delete this $92 million, there’s $92 million less going to K-12,” he said.

– posted by Brian Lyman

– Staff Writer Kala Kachmar contributed to this report.

One thought on “Gov. Robert Bentley’s ETF proposal includes spending outside Rolling Reserve cap

  1. There’s a reason it’s called the Education Trust Fund. That’s because education is a public duty and obligation of government, not an improperly realized profit potential.

    Hubbard and Co should have to pay back the $40 million they misappropriated for the Alabama Accountability Act. Somehow that move had no accountability or direct link to the 52 people (out of 35,000? anticipated) that used the AAA to move their children from a failing public school to a private school.

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