Prior-Year Budgeting Explained in Detail
02/18/2009

Below you will see the net effect of operating our State Budget Process with a Prior-Year Revenue basis. If those drafting our State’s budget had followed this method in 2006, 2007, & 2008, we would be in a much stronger financial position than we currently are. In fact, Alabama would have plenty of savings/rainy day funds to offset the shortfall of revenues our Governor and Legislators currently anticipate.

My proposal, much like HB509, would provide a means to put excess revenues aside, into a Budgetary Surplus Savings Fund (BSSF), when the economy generates growth. The BSSF is to be tapped into only when there is a shortfall in collected revenues for a fiscal year (FY). For example, the 2010 budget using Prior-Year Budgeting would create a shortfall that would be completely covered by BSSF, as opposed to the shortfall we will experience in the current 2010 budget with no savings account to cover the difference.

Likewise, my proposal will provide the opportunity to use some of the excess revenues for prioritized needs (one-time expenses, not reoccurring expenses) across state agencies when the annual amount of money entering the BSSF exceeds 12% of the current year’s budget. At the 12% threshold, any excess revenues would be released to the Governor’s office for distribution to state agencies based on a prioritized needs list provided by the legislature as an attachment to the budget, with the final approval on fund distribution made by the Governor, not the legislative branch.

All budget figures are based on prior-year revenues and FY revenues are actual revenue numbers (PYB = Prior-Year Budgeting):

Fiscal Year 2006

PYB FY 2006 Budget		$6,872,624,254.67
FY 2006 Revenues		$8,371,414,233.31
Surplus (Shortfall)		$1,498,789,978.64
BSSF Threshold		$   824,714,910.50
Released Funds		$   674,075,067.50

 

Fiscal Year 2007

PYB FY 2007 Budget		$7,622,125,094.60
FY 2007 Revenues		$8,724,958,232.98
Surplus (Shortfall)		$1,102,833,138.38
BSSF Threshold		$   914,655,011.30
Released Funds		$   188,178,126.70

 

Fiscal Year 2008

PYB FY 2008 Budget		$8,371,414,233.31
FY 2008 Revenues		$8,962,346,085.88
Surplus (Shortfall)		$   590,931,852.57
BSSF Threshold		$1,004,569,708.00
Released Funds		No Funds Released

 

Fiscal Year 2009

PYB FY 2009 Budget		$8,724,958,232.98
FY 2009 Revenues		$8,016,000,000.00
Surplus (Shortfall)		( $726,958,232.98)
Total BSSF Funds
to Cover Shortfall		$2,743,939,630.00

 

As you can easily see, this proposed method of financial management of revenues could have made over $2.7 Billion available to cover this years expected decline in State Revenues. Instead, we will use up all of Alabama’s Rainy Day Fund to cover the expected shortfall this year. In this year’s Legislative Session our leaders will look to the Federal Government to cover the expected shortfall in FY 2010. If we used the Prior-Year Budgeting, the State of Alabama would have over $2 Billion still available in the BSSF even after this year’s $700 Million shortfall.

Obviously, I do not subscribe to the “spend it as you get it” method some other candidates prefer. The choice is clear for voters in this election: trust a small businessman’s model of fiscal management or other candidates’ desire to grow Government rather than contain Government.

What happened to conservative Republicans with the desire to limit Government rather than grow Government? My budgeting process will force the State government to become more efficient, effective, and responsive to the people of Alabama. All the State’s revenue is taxpayers’ to begin with, and I want them to keep more of it.

In conclusion, my Prior-Year Budgeting process would limit the growth of government, provide a sufficient savings account for the State, keep Alabama’s legislators accountable to those who elect them, and put more power and money back in the hands of citizens like you and me.