Alabama Rainy Day Accounts, Amendment 1 (2008)

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The Alabama Rainy Day Amendment 1 was a legislatively-referred constitutional amendment to the Alabama Constitution that appeared on the November 4, 2008 ballot in Alabama, where it was approved.

Election results

Alabama Rainy Day Accounts
ResultVotesPercentage
Approveda Yes 943,361 56.8%
No717,05643.2%

Results according to Alabama Secretary of State.[1]

Changes to the Alabama Constitution

The passing of Alabama Rainy Day Accounts, Amendment 1 added Amendment 803 to the Alabama Constitution.

Background

Alabama has two main operating budgets: the General Fund and the Education Trust Fund. The state currently has two rainy day accounts for the Education Trust Fund, used to prevent proration, or across-the-board budget cuts: the Proration Prevention Account, which works like a savings account, and the Rainy Day Account, which acts like a credit line. The Proration Prevention Account is funded with tax revenues; the Rainy Day Account currently gives the state the power to temporarily transfer money from the $3.3 billion Alabama Trust Fund, funded by sales of drilling rights and oil and gas lease royalties. The state exhausted the $440 million Proration Prevention Account to cover revenue shortfalls in the fiscal 2008 budget. The state can currently transfer up to $248 million from the Alabama Trust Fund to cover Education Trust Fund shortfalls. The money must be returned to the Alabama Trust Fund within five years. There is no General Fund Rainy Day Account to protect General Fund programs and services from proration during an economic downturn.[2]

Specific Provisions

The measure enacted the following provisions:[2]:

  • Revise the existing Education Rainy Day Account by (1) Making the cap on transfers proportional in order to keep up with growth in the Education Trust Fund (ETF) and (2) Expanding the coverage of the Rainy Day Account to protect all programs and services funded from the ETF, not just schools, such as: immunizations for school children, voluntary Pre-K, and public libraries.
  • Establish a General Fund Rainy Day Account to protect General Fund services, such as law enforcement, health care, child protective services, and services for seniors from cuts in a struggling economy, without raising taxes. Alabama is one of only three states without some type of General Fund Rainy Day Account.
  • Lengthening the repayment period to six years for the Education Trust Fund, ten years for the General Fund, both under constitutional mandate.
  • Give the governor ultimate authority to withdraw money from the Alabama Trust Fund to avoid proration.

Supporters

The amendment is officially sponsored by State Senator Steve French (R-Birmingham).[2]

Arguments in Favor

Notable arguments made in support of the measure included:

  • The measure prevents cuts to educational programs and public education in general
  • The measure prevents cuts to vital state agencies and services, including health care, law enforcement, foster care, child support collection, and so on.
  • The measure disarms special interests that might use drastic cuts as an excuse to push for tax increases.
  • The measure is fiscally responsible because savings transferred from the Alabama Trust Fund must be returned within a constitutionally mandated timeframe. The repayment comes from future growth, not new taxes.
  • The measure is not a "Wall Street" type bailout because it's the state's own money. It merely facilitates a transfer from one state account to another.
  • The measure represents a proven strategy: Rainy Day savings were transfered from the Alabama Trust Fund to prevent proration in 2003. The money was put back one year early, and the Alabama Trust Fund still grew over the last 5 years by more than a billion dollars.

Opponents

Arguments in Opposition

Notable arguments made in opposition to the measure included:

  • The measure encourages irresponsible budgets
  • The measure draws down the money in the Alabama Trust Fund
  • The measure reduces interest payments from that fund to governments across the state
  • The measure breaks the commitment to protect public money

See also

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External links

References