Recently the Alabama state senate held a meeting to decide how to handle a $200 million deficit in the general fund.

The state has two major pots of money the General Fund (GF) and the Education Trust Fund (ETF). The General Fund pays for things like prisons, courts, and state troopers. The Education Trust Fund pays for prek-12 schools along with 2 and 4 year colleges.

Due to years of dividing and distributing the ETF has two savings accounts, the budget stabilization fund, which will grow until it reaches 20% of that years budget and the Rainy Day fund which has already reached its goal of $437M.

The state has a tax called the Use Tax which is a sales tax placed on items purchased outside of Alabama and brought into it. Until now the revenues from the Use Tax were divided 75% for the ETF and 25% for the GF.

Dr. Dee Fowler, the Madison City Schools superintendent said “The GF and the ETF have seen cuts and reductions since 2008 when the recession hit…In an attempt to fund the GF, many of the GF’s expenditures, i.e. portions of the Commerce Dept. and the Mental Health Dept., have been transferred and funded by the ETF.”

During the State Senate meeting many decisions had to be made in order to fill the general fund deficit. The Use Tax will be changed with 53% going to the GF and 47% going to the ETF, which is an $80M loss for the Education Trust Fund. A new tobacco tax also passed that will bring in $70M worth of revenue for the GF. The Budget Stabilization Act went from requiring 20% ($1.2B) of the budget to be placed aside to 7.5% ($450M).

There were also many new revenue bills passed that will generate money for education. The estimates for revenue generated range from low $21M, moderate $37M, high $46M. This revenue will go to the ETF to replace some of the money lost from the Use Tax.

There are many mixed feelings on this decision, when asked his thoughts Jordan Cozby said “The legislature’s continuing inability to prioritize public education is hurting students across Alabama. We need leaders who will stand up for our schools and stop the education cuts.”

Teachers also realize that this decision will affect themselves as well as their students. Mr. Elegante said “There will be less money available in lean years which means students will have to do without technology upgrades, school supplies, etc.  For the students now they really won’t feel it very much.  Also, without the ability to give teachers, good teachers, a competitive wage the students may not get the best teacher possible.  A lot of teachers move into other fields because of the paucity of pay.”

Overall the money transfer will not have much of a short term effect but the decision to take money from an emergency saving accounts for education could cause serious repercussions during leaner years for the ETF.

Go HERE to see the full info-graphic.