Alabama Squabble Stalls BP Spill Reimbursement

Oil that washed up along the beaches of Dauphin Island, Ala., and elsewhere in the Gulf of Mexico after April’s offshore leak hurt the tourist trade and sales-tax revenue, pressuring state budgets.

—John David Mercer/Press-Register/AP

By Alyson Klein

Alabama school districts are bracing for a cut in state aid, as the governor and attorney general clash over the best way for Alabama to quickly get reimbursements from a $20 billion fund set up by the White House and BP to compensate victims of the energy company’s massive oil leak in the Gulf of Mexico.

In August, Alabama Gov. Bob Riley, a Republican, filed an initial $148 million claim with BP to help restore revenue that the state says was lost because of the spill. Tourists who typically visit Alabama’s beaches in droves over the summer stayed away this year, leading to a significant drop in sales tax revenue, the governor’s office contends.

Most of that money—$112 million—would have gone to the state’s Education Trust Fund, Gov. Riley...