Alabama

FUNDING PRIORITIES FOR P-12 AND/OR HIGHER EDUCATION

Alabama's Education Trust Fund (ETF), one of two state budgets, continued to increase as revenue dedicated to public education spending demonstrated slow but steady growth. Alabama earmarks revenue directly to the ETF rather than allow discretion to the legislature to decide how to distribute revenue amongst other state expenditures. Alabama has operated with two state budgets – one for education (the Education Trust Fund) and one for everything else (the General Fund) – since the 1940s. Alabama citizens have a long history of distrust of the state legislature in part because the 1901 Alabama Constitution, which is commonly believed to be the longest constitution in the world and is amended almost on an annual basis, was designed to prohibit local control or "home rule" by counties and municipalities. Citizens have traditionally only approved tax increases that are earmarked, or directly linked, to a specific expenditure. While education in Alabama is funded at a much lower level than in the majority of other states, it has fared much better in generating public support in Alabama than prisons, roads, mental health, Medicare, and many other government services funded through the General Budget. Those who defend the two state budget anomaly are quick to point out that education would be in a much more difficult predicament without having its own earmarked stream of dedicated revenue. Each year the pressure on the state legislature to do more with limited resources provides a challenge as the two state budgets are passed.

PRESSING STATE ISSUES AFFECTING P-12 AND/OR HIGHER EDUCATION FUNDING

Two issues greatly impacting P-12 and higher education funding in Alabama are insurance and retirement funding for employees. Alabama provides the Public Education Employee's Health Insurance Plan (PEEHIP) that covers all employees of P-12, community colleges, certain four-year colleges, and all education retirees. As in most of the country, health care costs are increasing due to a variety of factors including increased expenses for pharmaceuticals and health care services, increased utilization of health care, and longer life expectancies. PEEHIP consumes a large portion of the ETF and consistently grows at a rate faster than ETF revenue. In 2008 the cost of PEEHIP coverage was $936 million but has grown to almost $1.5 billion in 2017 – an increase of over 50%.¹ In 2017, the legislature allocated $800 per month per employee to fund PEEHIP. This is in addition to the premiums and copays of participants. In 2017 the PEEHIP Board, which is responsible for establishing premiums and ensuring the financial solvency of the plan, implemented "spousal surcharge" of $100 per month to include a spouse on a family plan. This was a painful hit on the pocketbooks of employees since it was, essentially, a $1,200 annual rate increase on family policy premiums for those with a spouse. Education employees earning under $75,000 per year were granted a 4% pay increase – the first one for many since the 2008 financial recession. The premium increase left many with a decline in take-home pay even after the raise. The Alabama Education Association (AEA) attempted to block the increase by filing a lawsuit against the PEEHIP Board arguing that the board had violated the state's Open Meetings Act. The trial judge granted summary judgement to AEA and instructed that the $100 per month spousal surcharge be refunded to PEEHIP members. However, the PEEHIP board, which is composed of 15 members including 12 elected by PEEHIP participants, is currently appealing the case to the Alabama Supreme Court. The Court has put a hold on returning the premiums until the time they review the district court ruling. The PEEHIP board argues that the increase is necessary to keep the PEEHIP solvent.²

Participation in Alabama's Teachers' Retirement System, whose name is misleading because it is the state-managed retirement system for all public education employees, is mandatory for all public education employees. Employees are required by state law to contribute 7.5% of their income to the plan, and the legislature determines the state contributions to the plan based on...