State’s General Fund, ETF revenues up; officials look at inflation impact

State’s General Fund, ETF revenues up; officials look at inflation impact

By MARY SELL, Alabama Daily News

Revenues in both the state’s General Fund and Education Trust Fund are up significantly year-over-year — $143 million and $1.24 billion, respectively.

At the end of May, revenue totals in the General Fund were $1.79 billion. The ETF totals were $6.88 billion.

Budget leaders say that growth won’t last, but they’re comfortable about where revenues are for the fiscal year that ends in September. For the 2022 fiscal year, the General Fund and ETF budgets are $2.69 billion and $7.67 billion.

What officials are watching now is inflation.

“Our concern right now is on the spending side,” Rep. Steve Clouse, R-Ozark, chairman of the House General Fund budget committee, said. Inflation hit a 40-year high in the spring and as it impacts families, it also hurts state agencies that have fleets of vehicles and spend millions of dollars on goods each year.

He said the House and Senate General Fund committees will start a series of budget hearings June 16 to ask agency leaders specifically about increases in expenses. The Bureau of Pardons and Parole and the Alabama Medicaid agency will be up first.

“(We want to know) how inflationary pressures are hitting agencies and to see how they’re handling it,” Clouse said. 

Lawmakers passed the 2023 budgets in the spring and Clouse said they need to know if those allocations will hold up under inflation.

Sen. Greg Albritton, R-Range, the Senate General Fund budget committee chairman, said state revenues are still benefiting from Federal COVID-19 relief funds. 

“That money is going to run out and my concern is that inflation continues to rise, prices continue to rise, what happens when the revenues shrink?” Albritton said.

He said lawmakers need information on how agencies are and can weather the rising prices now. The 2023 legislative session does not begin until March of next year, nearly six months into the fiscal year.

“We need to have a better plan (for agencies) than just asking for more money,” Albritton said.

Budget leaders have been cautious in their COVID-era spending. 

“We were very conservative with expenditures for this budget due to uncertainties regarding COVID-19 as well as the long-term impact of the massive amount of federal assistance provided to the state and businesses,” Kirk Fulford, deputy director of the Legislative Services Agency’s Fiscal Division, told Alabama Daily News.

As of the end of May, the General Fund had grown 8.69% year over year. In the ETF, growth is 21.85%.

Total net income tax receipts are up by $1.1 billion for the year in the ETF, Fulford said. Gross sales tax revenue is up by 8.5% for the year, which is also well above our normal trend, Fulford said.

“Some of that growth is being driven by increases in the price of goods sold — inflation — but also by the consumer’s continued willingness to spend,” he said.

“The biggest thing to know is that revenue growth trends will return to ‘normal’ at some point,” Fulford said. “We have been wise to pass budgets taking that into consideration. In other words, we have not passed budgets requiring huge revenue growth and have used extra growth to fund many one-time expenses, like fully funding reserve funds, paying off debts and capital projects.”