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2008 December 15 - 12:00 am

MONEY TREE: Late Again with School Payments, Alabama Fears New Cuts

MONTGOMERY, Ala. (AP) — A shortfall in state revenue is forcing Alabama to be late again in dispersing state funds that school systems need to make their monthly payrolls.

The delayed checks are one more headache for school administrators who are likely to see their pain grow when the Legislature returns in February to write the next state education budget for the fiscal year starting Oct. 1, 2010.

That budget is expected to be less than this year’s, marking the second year in a row of budget cuts for public schools and colleges in Alabama, which has felt the impact of the national economic slowdown.

Nevertheless, the State Board of Education recently voted to seek budget increases for K-12 schools and two-year colleges, despite the state’s precarious financial situation.  Those requests are an effort to show the governor and Legislature what is needed, even though educators anticipate a shrinking budget.

 “I don’t see any way to avoid cuts — the question is how far are they going to have to cut us?” said Bradley Byrne, chancellor of Alabama’s two-year colleges and a former state senator. “This is a rapidly deteriorating economy, and we don’t know how much it will deteriorate or how long it will last.”

State Superintendent of Education Joe Morton had this advice for the State Board of Education: “Pray for our economy. We are in unusual times.”

State officials were late at the end of October in sending state checks to public schools and colleges, and late again in December.

When the first checks were late, some of Alabama’s 131 school systems had to take out short-term loans until the full amount arrived from the state. Sally Howell, executive director of the Alabama Association of School Boards, said that scenario will likely play out again this month.

State Finance Director Jim Main said the state began fiscal 2009 on Oct. 1 in much different shape than normal.

In a typical year, there is leftover education tax revenue to begin the new budget, but that wasn’t the case this time because tax collections fell short of spending in fiscal 2008.

State officials had to spend every dime collected in taxes and empty a “rainy day” savings account to balance the books when the fiscal year ended Sept. 30.

That caused state finance officials to send school systems only 75 percent of their normal amount of revenue at the end of October. The state sent the remaining 25 percent about one week into November after collecting more tax revenue.

Therefore, November started out short, and it ended the same way, because businesses could not submit tax payments during the several days when state offices were closed for Thanksgiving.

In the election Nov. 4, Alabama voters approved a constitutional amendment that will allow state officials to borrow money from a state savings account, the Alabama Trust Fund, to help make up for the revenue shortage in the education budget.

But that can’t happen until after state officials certify the election results.

Howell said school systems are concerned the amount that can be borrowed from the trust fund won’t be enough to balance the budget.

If that forecast holds true, state officials would be forced to make painful across-the-board cuts in the middle of the fiscal year.

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