Read My Lips….

bush41“Read my lips: no new taxes” is a phrase spoken by then American presidential candidate George H. W. Bush at the 1988 Republican National Convention as he accepted the nomination. The line later hurt Bush politically. After he was elected, tax increases were proposed as a way to reduce the national budget deficit. Bush ultimately compromised with the Democrat controlled Congress in the 1990 budget agreement which increased several existing taxes. In the 1992 presidential election campaign, Democrat nominee Bill Clinton used Bush’s own words against him while questioning Bush’s trustworthiness.

An interesting parallel is currently unfolding in Alabama. Governor Bentley was re-elected last fall running a campaign based on “More Jobs, Less Government and No New Taxes.”bentley2

Modifying existing taxes are now on the table for discussion in regard to developing Alabama’s FY16 budget. Does the general public understand the difference between existing and new taxes? The Governor appears to be counting on it. His challenge now is to convince legislators that the public will understand the difference.

The difference, however, is that the Governor will not be seeking further elective office. That’s not the case with the legislature. They are nervously watching what happened in the recent special election in Baldwin County where voters overwhelmingly (70%) voted against both new and existing taxes.

Alabama Unemployment

To Governor Bentley’s credit, “More jobs” appears to be a truth. Alabama’s unemployment has dropped to 5.8% at the close of February 2015. As the graph indicates, this is great improvement since 2010. Governor Bentley has pledged throughout his tenure that he would not take a salary until Alabama reaches full employment (defined as 5.2% unemployment rate). He has kept that promise.

With growing employment, the state is seeing increased income and sales tax revenues. These taxes, however, are earmarked for the education fund and really do not help the struggling revenues attributed to the general fund agencies.  Or can they?

What about “Less Government”?

Good question. Senator Arthur Orr has proposed several initiatives to reduce government spending. Legislative interest in this effort appears to be as popular as increasing existing taxes. President Pro Tem, Senator Del Marsh has stated publicly that state government needs to be reduced by an additional 9%.

Eliminating the state’s role in the retail sales of liquor is being discussed but appears to have a difficult future. Merging state agencies have been proposed but are not being seriously considered.

“Less Government” is code for less government employees and that’s obviously a tough choice for legislators to make. The public employees union and the state agencies themselves are lobbying frantically to make the choice even more difficult.

So where is this heading?

Many political insiders are beginning to think that “other solutions” are more politically palatable. Other solutions include a compact with the Poarch Creek Indians for taxing their bingo operations, with perhaps the consideration of expanding gaming throughout the state.

Also being considered is moving the education revenue growth dollars to the general fund and this appears to be gaining momentum. Translation- Modify or do away with the Rolling Reserve Act (also referred to as the Proration Prevention Act).

This Act requires that actual revenues that come in over a “cap” must be used as savings for future downturns in the economy to protect our education funding. AFA has a clearly defined position supporting the goals of this Act and supports legislation to make the Act a part of the state’s constitution.

So the question now is do we spend savings set aside for future downturns in education funding in order to prop up general fund agencies (while protecting and maintaining public employee jobs) or do we maintain fiscal responsibility and focus on reducing the size of these agencies?

Stay tuned….

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