Education Funding

Alabama OKs Bond Sale to Dull Pain Of Education Cuts

By Erik W. Robelen — May 30, 2001 5 min read
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Alabama’s governor sought last week to soften the blow of midyear education spending cuts by signing a bill that lets the state borrow up to $110 million.

Gov. Donald Siegelman praised the legislature for taking action on the plan, which he said would help schools and universities “at a time when they critically need it.”

That need arose after the Democratic governor announced in February that, because of a shortfall in tax revenues, the state’s $4.3 billion education budget for the current fiscal year would have to be reduced by about 6 percent.

But Lt. Gov. Steve Windom, a Republican, is among those who view the plan as both shortsighted and wrongheaded, said his spokesman, Ragan Ingram.

“We feel like this was probably the most irresponsible fiscal action in the history of the state,” Mr. Ingram said. “The governor has taken out a $110 million mortgage to pay off the light bill.”

Under the new law, the state could issue bonds of up to $110 million, to be repaid over the next 20 years through money from the state’s Education Trust Fund. With interest, Mr. Ingram said, the cost could be as high as $200 million, though the governor’s office has estimated it would be about $180 million.

The legislation is aimed at relieving some of the pain from the $266 million in spending cuts for this year that kicked in when tax revenues fell short, under a process that state officials call proration. The Education Trust Fund is fed by state sales- and income-tax revenues.

Gov. Siegelman’s approach to proration has weighed more heavily on the state’s universities and two-year colleges than on K-12 schools, largely because precollegiate salaries were excluded from the cuts. Higher education institutions have seen decreases of about 11 percent, while school district budgets have been trimmed by nearly 4 percent.

Disputes over the governor’s approach have led to legal action pitting precollegiate and higher education representatives against one another. A case is now before the Alabama Supreme Court. (“In Ala. Budget Crisis, It’s Schools vs. Colleges,” March 7, 2001.)

Cushioning the Blow

Under the new law, the distribution of the state bond funds would vary, depending on which side loses in court.

The measure, which the governor signed into law on May 25, is designed to make sure that both education sectors effectively lose 3.76 percent of their funding for the current fiscal year—the amount that the public schools are currently losing under the governor’s plan.

That means that if the supreme court upholds Gov. Siegelman’s approach, higher education institutions would receive roughly $80 million from the bond-sale proceeds, and K-12 schools would get no extra aid, according to an analysis by the Alabama Association of School Boards. If the court orders an across-the-board cut of 6.2 percent, the schools would receive $68 million and universities would receive $27 million, the association said. The plan allows up to $110 million in bond authority in case revenues fall further below projections and further cuts are required.

The money could be used to pay off debts or cover capital expenses, such as construction or equipment purchases. While state law does not allow bonds to cover operating costs, such as salaries or utility bills, some supporters suggest that other funds could be freed up for those purposes.

The school bond legislation has drawn a mixed response within the state’s education community. For example, a coalition of the state’s four-year public universities came out strongly against it.

“This sends the message that, “Oh, we don’t really have a problem; we can just sell another bond,’ ” said A. Gordon Stone, the executive director of the Higher Education Partnership.

Even those who backed the plan did so with some reluctance.

“It’s bad public policy, but it was something that was desperately needed at this time,” said Paul R. Hubbert, the executive secretary of the Alabama Education Association, an affiliate of the National Education Association.

“It’s a Band-Aid, and we’re going to pay for that Band- Aid for 20 years,” said Sandra Sims deGraffenreid, the executive director of the Alabama Association of School Boards, which did not take an official position on the bond bill.

Meanwhile, the legislature has approved a $4.1 billion education budget for the coming fiscal year. The spending plan, which the governor signed on May 21, is lower than the original budget for the current year, but about $100 million more than that budget after the $266 million cuts were imposed.

The legislature also has stipulated that a three- member panel, composed of the state finance director and the chairmen of the committees that oversee the education budget in the House and the Senate, would have the authority to cut next year’s budget by 1 percent by Aug. 31 if tax revenues are falling short.

John C. Draper, the executive director of the Council for Leaders in Alabama Schools, which represents school administrators, said that while the bond issue will be helpful, it does not address what he believes to be a flawed tax system in the state. He argues that the heavy reliance on sales and income taxes to pay for education is risky.

“The slightest souring of the economy impacts schools immediately and tremendously,” he said.

Meanwhile, in Mobile County, where the school system has felt hard- pressed by the state’s fiscal troubles, the public schools will see an increase in their budget after local taxpayers voted this month to raise taxes. Stephen E. Pryor, a spokesman for the 65,000-student district, said the state budget cuts were an important factor in building support for the local tax hikes.

In response to the state cuts, district Superintendent Harold W. Dodge had declared earlier this year that Mobile County would have to cut such programs as the high school band and the football program. With the new money, though, the district is not planning such drastic measures.

While some parts of the county will see only property-tax increases, the cities of Pritchard and Mobile opted to combine a smaller property-tax increase with a slight sales-tax increase. Repeated attempts in previous years to enact such tax hikes have been rejected by voters.

The district, Mr. Pryor said, “really has not been funded adequately at the local level for many years.”

A version of this article appeared in the May 30, 2001 edition of Education Week as Alabama OKs Bond Sale to Dull Pain Of Education Cuts

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