Alabama tax revenues up in first six months of year, coronavirus “drop” coming

Alabama tax revenues up in first six months of year, coronavirus “drop” coming

By MARY SELL, Alabama Daily News

Tax revenues for Alabama’s two operating budgets were higher at the end of March than they were the previous year with no significant coronavirus-caused declines yet visible, but state officials on Thursday told Alabama Daily News it could be into May before the true impact of the public health crisis is known.

“We know the dip is coming,” said Rep. Steve Clouse, R-Ozark, chairman of the House General Fund budget committee.

“Not dips, but a drop off the cliff edge,” said Sen. Greg Albritton, R-Range. “You’ve seen the unemployment numbers?”

Nearly 81,000 Alabamians filed for unemployment benefits last week, the Alabama Department of Labor said Thursday. Most of the recently jobless are the result of efforts, including businesses closures, to keep people home and slow the spread of the coronavirus.  Nearly 11,000 filed for unemployment the week prior, a huge increase over earlier in March.

Less employed people means less income taxes collected, that’s one of the main revenue sources for the state’s education budget.

“We don’t know where the bottom is or where the side of the wall is yet,” Albritton said.

Many state revenues are collected in arrears — March payments equal taxes due from February — Kirk Fulford, deputy director of the Legislative Services Agency, said.

“I expect April to reflect the first indications of revenue impacts; however, that too will be skewed because the fallout began about half way through the month of March,” Fulford said. “May receipts could very well be the first full month of revenue impacts.”

The state is now halfway through the 2020 fiscal year. Year-to-date revenue growth to the Education Trust Fund is 7.5% over fiscal 2019. Year-to-date growth in General Fund is 10.5% over fiscal 2019. Monthly revenues for March to the Education Trust Fund were up 4.9% compared to March 2019, mostly from income taxes. Monthly growth in March for the General Fund was about 3%, Fulford said.

Two months ago, revenue projections for fiscal 2021, which begins in October, were welcome news to lawmakers as they began the legislative session and crafting 2021 budgets. Now, their session is on hold and potential budget increases may have vanished.

Senate President Pro Tem Del Marsh, R-Anniston, said government agencies should expect the same funding levels as the current year. 

“I think you’ll see them passed pretty much like they were last year,” he said Thursday.

Lawmakers are expected to return to Montgomery in late April for a rapid-fire end to their session. Marsh and others have said they will likely approve “bare bones” budgets. While some have said legislators could return in the summer or early fall for a special session once the revenue picture is clearer — and possibly there’s more money to distribute — Marsh said he doesn’t think that’s required.

“I don’t see the need unless the governor thinks it’s necessary,” he said. Only the governor can call a special session.

Marsh said there may be an increase for the Alabama Department of Mental Health — more money for it was a priority going into the session — but that’s about it.

The Alabama Department of Corrections, facing federal directives to hire more staff and improve inmate care — may not see the more than $40 million funding increase it requested.

“I just don’t see a lot more money being poured into it right now,” Marsh said.

Albritton also suggested lawmakers could “look at a different balance” in how tax revenues are distributed between the General Fund and ETF. 

“Or should we even have two funds?” Alabama is one of just a few states with separate budgets for education and the rest of government.

While he hopes the virus-forced business closures are short lived, Albritton said businesses that have closed, even temporarily, don’t simply open again overnight at the same production or hiring levels. Getting back on track could take months.

“I think we’re going to come out of this, I think we’re going to be OK,” he said. “It’s a matter of when.

“But people should know, Alabama government is working its fool tail off to try to find a path out of this difficult time.”