In the classic novel, A Tale of Two Cities, the author Charles Dickens begins his classic with the words, “It was the best of times, it was the worst of times . . .” These exact words could be used to describe the state of affairs as the 2005 Regular Session of the Legislature begins. For indeed we have a tale of two budgets in Alabama government. The Education Budget, which accounts for two-thirds of all state revenues, has an abundance. The poor General Fund Budget is broke. Therefore, for education it is the best of times, but for the other functions of state government it is the worst of times.

This saga is not new. It has been this way for decades. The growth taxes, sales and income are earmarked for education. So they enjoy the incremental growth in revenue, which has been significant this year. In fact, the Education Budget finished the fiscal year on September 30th with a $150 million surplus. Tax collections were up over 8%. There will be a giant temptation to spend this surplus. However, the wisest move would be to put the surplus funds in a rainy day savings account.

The biggest dilemma facing the Legislature as the Session begins is what to do with the beleaguered General Fund Budget. It has been patched and bandaged so much that it really is on its last leg. This year may be the year that the shell game and one year quick fixes come to an end.

There have been back-to-back cuts to the General Fund Budget over the past two years totaling 25%. So in essence most agencies and departments are operating on 75% of the amount of money they were two years ago, while basic expenses are rising. Some agencies which are considered critical have received special treatment and have not received the draconian cuts. The Departments of Mental Health, Public Health, and Human Resources have been spared to a certain extent, but this has created financial havoc for other General Fund agencies like Public Safety and Corrections.

The largest gap or problem in the General Fund is Medicaid. It is the giant. Medicaid received $364 million out of the General Fund this year. However, we receive more than a 2 to 1 match from the federal government. For every 30 cents the Legislature sends to Medicaid, the federal government matched it with 70 cents. So if Alabama reduces the Medicare Budget, we lose a huge amount of federal money.

Medicaid is a social program started during the 1960s which is considered a sacred right. It provides healthcare, prescription drugs, and nursing home care for Alabama’s poorest children and most of our senior citizens.

This giant money eating agency now accounts for about 30% of the General Fund Budget and 11% of all Alabama tax dollars. Because the federal government is interpreting the funding standards more strictly and shifting some funding to the states, along with the increasing costs of healthcare, there is a real shortage in the behemoth Medicaid budget. The short fall is projected to be in the area of $125 million.

The question to be answered in the Session is, “Where does the money come from to salvage the General Fund Budget?”

Legislators will not try to divert money from the Education Fund Budget. Dr. Paul Hubbert will not allow this to happen. George Wallace in is heyday over 30 years ago tried to divert education dollars to the General Fund, but a young Paul Hubbert defeated Wallace’s attempt. If you think Dr. Hubbert was masterful then, he is at least ten times more powerful today. The General Fund will not be rescued on the backs of the Education Fund.

It will be an interesting session.