Alabama’s Education Trust Fund saw a 2.08% increase in tax revenues in February compared to the previous year, a welcome improvement from the -7.67% decline in January. However, revenues are still down -.75% for the year, totaling $4 billion. Income tax revenues were up 3% in February, but remain -1.93% for the year, while sales tax receipts were up 1.23% for the fifth month of the fiscal year but flat year-over-year.
The General Fund experienced 10.52% growth in February and is up 3.87% for the year, reaching $1.45 billion. However, there may have been some receipt timing issues that inflated last month’s numbers. The largest source of growth in the General Fund was the insurance premium tax, likely due to early payments. Interest on state deposits declined in February but remains slightly above the level for the year.
Despite the revenue challenges, both funds are expected to meet their 2025 spending obligations due to conservative budgeting by lawmakers. The slowing revenues will be a topic of discussion as the Legislature begins its public budget work in April.
The education budget will start its legislative journey in the Senate, with concerns raised about outstanding tax credits impacting revenues. Lawmakers are working closely to ensure that spending proposals for both the ETF and General Fund are in alignment. Governor Kay Ivey has proposed increased spending plans for 2026 based on current revenue projections.
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