Truth Rating: 2 out of 5
Summary: Bentley’s claim seems to imply that the blame for this year’s education proration can be laid at the feet of the federal stimulus program and the Legislative Fiscal Office —- the agency which does the state’s budget projections. In fact, the Legislature accepted the highest estimate offered by the LFO, against the advice of economics experts. The stimulus, on the other hand, has nothing to do with this year’s budget shortfall —- which caused Bentley to declare proration —- and everything to do with the massive drop-off in revenues projected for 2012.
Bentley’s office walked the stimulus claim back Wednesday, and said the Governor never intended to fault the LFO.
Analysis: To understand talk about proration in Alabama, it’s helpful to know that the state actually has two separate budgets.
One is the Education Trust Fund, or ETF budget, which is fueled by sales and income taxes, and pays for K-12 schools and colleges across the state. The General Fund budget, funded by an assortment of other taxes, pays for most non-school functions of state government.
Keivan Deravi, an economics professor at Auburn University Montgomery, has been involved in Alabama’s budget projection process for more than a decade. He says the LFO’s projections on the ETF budget were not far off the mark.
“A budget is just an estimate that is subject to the usual issues of statistical accuracy,” Deravi said. “The margin of error runs about plus or minus 3 percent.”
Deravi said the LFO typically presents the Legislature with a projection that includes the 3 percent margin of error —- and asks them to approve a projection that is 97 or 98 percent of the LFO’s highest projected number.
But the Legislature doesn’t have to follow that advice. And that’s what happened last year, Deravi said: lawmakers adopted the LFO’s highest projected numbers, without pulling back by the suggested 2 or 3 percent.
LFO director Joyce Bigbee confirmed that the Legislature did choose a higher number than the one the LFO suggested.
But she and Deravi both say that stimulus funding played no role in the current round of proration. Budget forecasters knew what federal money was coming their way, she said, and the money came through. Stimulus-related pain will come next year, they said.
“The problem with stimulus will come in the 2012 budget, when the stimulus goes away,” she said.
Asked about the discrepancy, Bentley’s office seemed to acknowledge that this year’s education budget shortfall was due to economics, not the stimulus.
“Economic factors are primarily responsible for proration in the FY 2011 ETF budget,” Bentley’s spokeswoman, Jennifer Ardis, said in an e-mail. “The ETF stimulus funds were received, but they artificially propped up the budget in that one time stimulus funds were used to fund operating costs, without planning for what would happen in 2012 when the stimulus funds would no longer be available.”
Bentley may simply have gotten his budget battles mixed up —- because federal funding was a factor in the problems the state is having with its other budget, the General Fund.
Bentley has said the General Fund will go into 15 percent proration this year.
Both Deravi and Bigbee say it’s often hard to make projections for the General Fund, which is drawn from several different sources of funding, including insurance premium taxes, oil and gas premium taxes and interest on a state trust fund, among others.
Still, Deravi says, the LFO presented the state with a pretty good estimate of the General Fund revenue last year. He said that somewhere in the legislative process, lawmakers bumped the official estimate up higher than the number he would have recommended. He wouldn’t speculate on who bumped up the numbers, or why.
“The legislative process is sort of like making sausage,” he said. “A pig goes in one end, and sausage comes out the other, but we don’t really know what’s happening between those points.”
Bigbee said stimulus funding for Medicaid was a big issue. Lawmakers had planned to get about $190 million, she said, from the Federal Medical Assistance Percentages program, a federal program that helps states pay for Medi-caid. Stimulus funds beefed up FMAP payments in 2009, she said, and lawmakers expected that to continue into 2010.
It didn’t happen. In a phone interview Wednesday, Bigbee estimated the actual FMAP revenues this year at around $130 million — roughly $60 million short of lawmakers’ expectations.
Bentley’s representatives on Wednesday also cited federal Medicaid assistance as a reason for the hole in the General Fund —- though they quoted the losses at $80 million.
In his Tuesday speech, Bentley said that he voted against the General Fund budget in 2010 because he disbelieved the projections behind the budget.
On Wednesday, Bentley’s spokeswoman said the governor was referring to the Legislature’s approved budget projections —- not the lower projections that came from Legislative staff.
“The Governor was not criticizing the Legislative Fiscal Office with this comment that 'our state’s General Fund budgets are based on unreliable revenue projections.’” Ardis said in an e-mail. “The Governor worked well with LFO during his tenure as a legislator and has nothing but respect for the work that they do.”
