By State Senator Steve Livingston

When I first ran for office in 2014, I promised to keep you up-to-date on the legislative process in Montgomery. With that in mind, I want to give you a brief rundown on the Fiscal Year 2016 (FY16) General Fund budget we passed last week (earlier this year we passed a fully-funded, $5.99 billion Education Trust Fund budget that will avoid proration and includes additional funding for school supplies, Pre-K, and transportation).

The Legislature began its deliberations in March with a $200 million expected deficit in the General Fund budget (which funds all non-education state spending) as our key challenge to solve. Governor Robert Bentley barnstormed the state calling for $541 million in new taxes on the people of Alabama to “solve the budget crisis,” while others argued that the deficit could be made up by draconian cuts alone.

But from the start, I believed a conservative blend of strategic cuts, budget reforms, and narrow-based revenue would be necessary to bridge the $200 million deficit. As a businessman, I know that when times get tough, a multi-faceted plan works best to keep your venture afloat. You can’t just raise prices or only trim costs – you have to pursue every option available to keep your business open and your employees working.

After months of negotiations, an agreement was finally reached to fully fund major state agencies like Medicaid, DHR, prisons, courts, and Mental Health, while avoiding Bentley’s massive tax increases. Funding was specifically set aside to enact the prison reform we passed earlier this year, which should avert a possible federal takeover of Alabama’s prison system and gradually reduce over-crowding in our prisons.

Other state departments were asked to make cuts ranging from 1% to 6%. I believe these targeted cuts are necessary and fiscally responsible. If conservatives are serious about limiting the growth of government, we must continue making thoughtful cuts to some state departments to provide proper funding of essential services.

But no matter how much we cut, the costs of some essential state programs are still exploding. For example, Medicaid – the foundation of health care in Alabama, especially in rural areas – consumes nearly 40% of the General Fund budget, and its costs rise every year.

Reforms were put in place – including regional care organizations (RCOs) to move to results-based care, instead of fee-based service – that will slowly bring down the cost curve of Medicaid.

But those reforms will take years to produce savings, and Medicaid needs additional funding right now or rural hospitals across the state could be forced to close. That’s why I supported a small increase in the tax on cigarettes. The revenue generated from the tax goes directly to Medicaid, and we know that smoking is a leading cause of skyrocketing health care costs. In fact, the Jefferson County Board of Health estimates the annual health care cost in Alabama caused directly by smoking is $1.88 billion, with the state Medicaid program picking up $288 million of the tab.

Part of the reason programs like Medicaid are constantly pinched is there haven’t been any growth tax revenue sources (that is, taxes like the state sales tax, whose receipts increase as the economy grows) dedicated to the General Fund. To fix that problem, $80 million of the use tax revenue was transferred from the Education Trust Fund to the General Fund. Dr. Tommy Bice, State Superintendent of Education, endorsed the transfer, since legislation was also passed that frees up more of the Education Stabilization Fund for yearly budgeting.

On a personal note, I was proud to sponsor legislation in the first special session that criminalizes the use of automated sales suppression devices on cash registers. These “phantom” devices delete records of sales transactions from cash registers, allowing their owners to skip out on sales taxes reported to local municipalities and the state. I believe the state will see an additional $10-15 million annual revenue as this tax cheating is stopped.

While not perfect, the FY16 General Fund budget is a responsible, conservative solution to the challenge of bridging a $200 million deficit. The budget is reasonable path between the two dangers of excessive cuts to programs like Medicaid, which could have spelled disaster for rural hospitals, or the Governor’s massive, half-a-billion dollar tax package.