Alabama’s state revenue from interest on deposits has reached record levels in recent years, with a significant increase of $404 million in 2023 and a further rise to $419.9 million through June of fiscal 2024. This boost in revenue has contributed to a 10% increase in General Fund revenues, totaling $2.5 billion so far this year.
However, concerns have arisen regarding potential future Fed rate cuts and their impact on the General Fund growth. Deputy Director Kirk Fulford of the Legislative Services Agency warned that rate cuts could have a significant effect on state revenues, as seen in the past when rates were reduced by a total of 150 basis points.
In the Education Trust Fund, revenues have also seen growth, with a $115.9 million increase in June compared to the previous year. Online sales tax revenue has been a particularly strong area of growth, increasing by more than 15% year-over-year.
Despite this positive growth, concerns linger about the impact of tax cut legislation on school funding. Approved legislation is projected to have a negative impact on education funding in fiscal 2025 and 2026. However, lawmakers have taken steps to mitigate this impact, with Rep. Danny Garrett emphasizing the presence of reserve accounts and spending limits to ensure financial stability.
Overall, Alabama’s budget for the current fiscal year stands at $8.8 billion for education and $3 billion for the General Fund. Lawmakers have approved budgets of $9.3 billion and $3.4 billion for fiscal 2025, taking into account potential revenue fluctuations and planning accordingly.
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