Volume
1 Issue 2 - April 2001
John F. Knight, Jr.
"I am especially interested in the Legislature designating more money for economically disadvantaged areas and am happy to see that the Legislature is moving toward that objective."
By John F. Knight, Jr. Chairman, Alabama House Ways and Means General Fund Committee
The Legislature's commitment to oversight and accountability for public funds has led to several major initiatives begun in fiscal year 2000-2001, which with continued funding will affect the state in profound and positive ways in the upcoming fiscal year.
We are especially proud that Alabama was the first state in the nation to implement the Children's Health Insurance Program, a General Fund priority last year. Administered by the Department of Public Health, CHIP provides health insurance to children in families that earn too much to qualify for Medicaid. The department has enrolled 29,000 children in the "ALL KIDS" program, and 8,000 additional children have qualified for Medicaid because of the program's outreach efforts. This year and next, these outreach efforts will continue as new and innovative ways to reach uninsured children are explored.
The Legislature also appropriated an increase of $10 million from the General Fund to the Department of Corrections in FY 2001. The allocation funds, in part, an increase in the number of correctional officers by at least 25 and expands Brent Prison by at least 100 inmates and 20 staff positions. The Legislature also appropriated an increase of $1.9 million to the Department of Public Safety, with the objective of improving driver license and accident report services.
As chairman of the House Ways and Means General Fund, I am especially interested in the Legislature designating more money for economically disadvantaged areas and am happy to see that the Legislature is moving toward that objective. For example in 2001, the Legislature imposed several additional oversight and accountability requirements in the General Fund budget. The Alabama Development Office, for instance, is now required to specifically designate funds for industrial recruitment in rural areas and/or areas with high unemployment and low personal income levels. ADECA is also required to report all funds and grants expended in these targeted areas.
In a settlement that benefits Alabamians, the state expects to receive $96 million in FY 2001 and $115 million in FY 2002 from the tobacco funds. As of October 1, 2000, Alabama had received $131.7 million. With this revenue, the Legislature funded Medicaid and established the Medicaid Trust Fund. Gov. Siegelman released $20 million in conditional appropriations from the General Fund for Medicaid. And as a result, Medicaid is able to increase reimbursements to doctors and dentists providing services to Medicaid patients by approximately $26.3 million annually, beginning this year.
The tobacco funds also helped state agencies deliver services to Alabama's children through the Children First Fund, which received $50 million; the Senior Services Trust Fund, another recipient of tobacco funds, received $1.7 million.
The Legislature further demonstrated its commitment to taxpayer accountability by establishing performance-based budgeting and by funding a $5 million Rainy Day Fund in the 2001 budget. This is in addition to the $2.5 million appropriated in fiscal year 2000.
Performance-based budgeting, which requires state agencies to set priorities and justify to legislators why they need more money, includes an evaluation of expenditures by the Legislature after new money is received. Gov. Siegelman selected the departments of Mental Health, Human Resources and Youth Services, and the Legislature selected Corrections and Public Safety to develop and implement this performance-based budget and management system.
Although there is considerable work to be done in the area of accountability, we have been very prudent in managing the General Fund. As a result of the Legislature's stewardship and the concerted management effort of the administration, the state ended fiscal year 2000 with a balance of $60 million, $16 million more than anticipated.
Still several monetary issues are facing the General Fund in fiscal year 2002 and beyond that will require our diligent oversight, along with the continued cooperation of the governor and finance director to ensure that funds expended by the state agencies are used prudently.
The largest of these issues is the issue of refunding revenue to out-of-state companies that for years paid higher franchise tax rates. Information from the Revenue Department shows that the total potential refund liability could be as much as $850 million. Several companies, including CSX and BellSouth, have negotiated settlement refunds. CSX settled for $2.8 million and BellSouth settled for $40 million. The Revenue Department indicates that both will take these settlements as credits against future General Fund taxes due. Recently, the governor has favorably settled other refund cases, and the balance of refunds remaining - potentially $600 million - will hopefully be addressed in a favorable manner for the state and the General Fund.
The Legislature's goal for this year, and in the future, is to continue to improve the way we manage state government, and to manage for results that work for the taxpayers of Alabama. We will achieve our goal of good governance by implementing performance-based budgeting and through strong leadership from Gov. Don Siegelman and House Speaker Seth Hammett.
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