Viewpoints

And The Winner Is...
Published: March 20, 2009 - Printer Friendly Article Printer Friendly Article - Email Article Send This Article To A Friend
By Michael Ciamarra
 
With the 2009 legislative session nearly half over, the early award to the most innovative and thoughtful reform proposal has to go to the Rolling Reserve Budget Act sponsored by Rep. Greg Canfield. If adopted, it would dramatically change the way the state's education dollars are budgeted, save taxpayers money, ensure quality educational outcomes, meet future capital needs for construction and renovation of schools and be a simple end to proration.
 
Spend a few moments with state Rep. Greg Canfield of Vestavia Hills and you’ll quickly realize this is a man on a mission.  His contagious enthusiasm for seeking real solutions sets him apart from many others in public life. As a freshmen legislator, he works tirelessly for reforming the state's budgeting process; his knowledge of the true fiscal condition of the state is remarkable. Tough, real-world fiscal insights make him even more formidable for the opponents of real change as well as those who have rigged the rules for special interests.
 
Rep. Canfield comes from a world of numbers, finances, and actuarial tables (his background is in financial services and insurance) and he went to Montgomery to change an inefficient budgeting process which has become dependent on income and sales taxes. As Rep. Canfield points out, proration and budget reform aren’t abstract policy discussion points. This issue profoundly touches the lives of children in public schools and higher education.
 
To protect current and future taxpayers, proration is a measure which forces the state to make budget cuts rather than spend more money than it has -- unlike the federal government which just this year started with $3.6 trillion and added from there. Over the last 30 years, proration has been declared nine times. That's almost one in three budgets that are cut in the middle of a school year.
 
According to a recent report, in the first five months of this fiscal year, tax collections for the state's Education Trust Fund are down $173.1 million, or 7.3 percent, as compared to last year.   This would require budget cuts, or proration, of 12 percent. Gov. Riley mitigated this year’s tough cuts by moving $221 million from a rainy day account to boost education funding to about $5.7 billion. This move reduced the proration rate to 9 percent. However, having to reduce state spending by 9 percent on education will leave many classrooms in need.
 
That’s real money, even in Montgomery. It should be clear to everyone that our current Education Trust Fund budget process needs an energetic overhaul for these volatile times.
 
The current budget process is based on projecting the annual change in Education Trust Fund (ETF) revenues. The revenues directed to fund the ETF are subject to changes in the economy and the range of total revenue varies widely from year to year making such projections not as secure as it should be.
 
Rolling Reserve Budgeting is based on averaging the growth rate in the ETF revenues over a 15 -year period of time. The revenues that fund education are in the economy and annual revenue growth rates. As Rep. Canfield points out, revenues can vary as much as -3.1 percent reported in Fiscal Year (FY) 1982 to +13.7 percent reported in FY 1983. There’s no question, as many reformers over the years have observed, these extreme revenue fluctuations make forecasting ETF revenues difficult on a yearly basis.
 
Rep. Canfield's idea would be to model Rolling Reserve Budgeting from FY 1996 through FY 2009. His model shows that the Rolling Reserve would have produced annual ETF revenues that would have grown in a range of 4.2 percent to almost 7 percent while setting aside built-in reserves and ensuring proration did not occur.
 
As Rep. Canfield explains, each year modeled in his new budget process grew funding at a rate that consistently beat inflation. And it gets better. Rep. Canfield’s Rolling Reserve Budget Act would also sets aside funds to pay towards the $17.1 billion worth of unfunded liabilities which are related to securing the future of the Teachers’ Retirement System and the health insurance plan for retired educators.
 
As Rep. Canfield quickly points out, it is time to come to the rescue of our schools, our teachers and Alabama’s public education system. I should also add that it is time for legislative budget chairs to become more responsive to the realities of change and adopt the Rolling Reserve Budget Act.
 
The Rolling Reserve Budget doesn’t address all budget and spending ills in Montgomery. For example, the state's General Fund, which will be cut by 10 percent this year, still needs much attention to move it from perpetual budget shortfalls to predictable and steady revenue. That is another battle for another day, hopefully soon.
 
Moreover, rational education budgeting is one reform of the many needed to create an education system for the 21st century. The recent Report Card on American Education, published by the bi-partisan legislative group the American Legislative Exchange Council, ranks Alabama 47th in the nation in terms of educational inputs versus educational results.
 
Rolling Reserve will maximize accuracy, sustain long-term growth in education funding and eliminate proration in the future. If we don’t act soon, Montgomery budget writers will effectively fall behind in adopting the pro-growth solutions necessary to meet the extreme fiscal challenges confronting the nation and Alabama.
 
Rep. Canfield exudes the entrepreneurial, innovative and optimistic motto of Rear Admiral Eugene Fluckey of WWII fame who said "we don't have problems, just solutions." Viewing the world, even at the state legislative level, in terms of solutions that are achievable and not in terms of problems, is what makes Rep. Canfield’s Rolling Reserve Budget up to that challenge.
 
So, first place for the 2009 Alabama Legislature Reform Award goes to House Bill 509. We need more leaders like Rep. Canfield who can make us all believe that “we don’t have problems, just solutions.”
 
Michael Ciamarra is a vice president of the Alabama Policy Institute and Alabama chair of American Solutions. He can be reached at michaelc@alabamapolicy.org.  Read his blog on Alabama's Legislature, policy and politics. You can also follow Michael on Twitter @MichaelCiamarra
 
Note: This column is a copyrighted feature distributed free of charge by the Alabama Policy Institute. Permission to reprint in whole or in part is hereby granted, provided that the author and API are properly cited. For information or comments contact: David Sawyer, API Director of Communications, 402 Office Park Drive, Suite 300, Birmingham, Alabama 35223, (205) 870-9900, e-mail davids@alabamapolicy.org. To subscribe or unsubscribe to this column, please e-mail joannel@alabamapolicy.org.
 
Alabama Policy Institute presents Sound Science Regional Luncheons
Is environmental policy based on sound science or hysteria?  Be our guest for lunch where Sound Science Project Director David Sawyer will have the issue addressed. Luncheons will be from 11:30am until 1pm at The Club, in Birmingham, on Monday April 6th and at The Heritage Club, in Huntsville, on Wednesday April 8th. Seating is limited. Make your reservation by contacting Jo Anne Lindley at joannl@alabamapolicy.org or by calling 205.870.9900 extension 124.
 
 

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