Breaking into the state’s piggy bank

By By Bob Martin, The Alabama Scene
Nearly a quarter century ago we established a piggy bank in which to place the money from royalties paid by oil and gas companies for the right to drill for gas off our coast. But ever since the Alabama Trust Fund (ATF) was established there have been groups and politicians poised with hammers trying to break that piggy bank open.
In 2000 state voters permitted the first crack in that piggy bank, adopting a constitutional amendment to siphon off 28 percent of the royalty funds into an entity called the Capital Improvement Trust Fund (CITF) to pay for industrial incentives and construction projects; seven percent to go to cities and counties; and one percent to the State Conservation Department.
Then last year the voters approved another constitutional amendment to up the CITF’s borrowing limit from $350 million to $750 million. This allowed the state to lure the German steel manufacturer ThyssenKrupp with $225 million in incentives to help build its facilities just north of Mobile. The legislature also took $80 million to refurbish the State Docks in Mobile.
The CITF was also used to attract Hyundai to Montgomery in 2002 and aided in smaller industrial recruits. Today the CITF balance is down to $140 million with $70 million of that committed to Northrop Grumman-EADS if the European airplane manufacturer is finally successful in winning the war to build a new U. S. Air Force tanker refueling fleet against Boeing, a situation which could take up to a year.
This commitment leaves the CITF’s bond issue borrowing capacity at about $70 million, an amount insufficient to provide the anticipated several hundred million in incentives that will be required should Volkswagen select a site in Limestone County for its new U. S. manufacturing plant.
If the VT plant becomes a reality Gov. Bob Riley has said he will call the legislature into a special session to propose another constitutional amendment to fund the incentives, expected to be in the quarter-million range. State Finance Director Jim Main told The Birmingham News last week that he would propose taking a lump sum directly from the ATF instead of borrowing. Another way would be to again increase the borrowing cap on the CITF, but both would take a constitutional amendment and a vote on Nov. 4.
The ATF piggy bank, which has a balance of $3.25 billion, is also taking other hits. Last year $122 million had to be put in the state’s general fund and this year it will be raided for over $200 million to keep the general fund solvent.
The rainy day fraud
The words “rainy day account” ring votes to a politician’s ears, so most of them want to either create one or cast a vote for one. But what if one rainy day account raids another, is that a good thing?
On Nov. 4, we are being asked to vote for a constitutional amendment to create a rainy day account for the state’s general fund budget, which could equal ten percent of each prior year’s general fund budget which could grow to $185 million next year. The proposed amendment for education would expand by up to $437 million next year for the rainy day account for the education budget, which now has a cap of $248 million.
Where will these rainy day accounts get funded? You guessed it…by driving a sledge hammer into the ATF piggy bank and allowing the politicians in Montgomery decide how the money gets distributed. It is an all-out raid on the ATF piggy bank.
This is what some call “fiscal irresponsibility” and I concur.
Instead of having the fortitude to increase Alabama’s tax base to fund state services, what we get is a political easy answer… creating an illusion of responsible government by creating rainy day funds the politicians can control by raiding the state’s real rainy day account.
There are some who see through this illusion and question breaking into the ATF piggy bank to fund the general expenditures of state government. One is State Treasurer Kay Ivey who told the News: “That’s just another example of how we continue to erode the savings account of the people of Alabama.”
There are, I believe, valid reasons to provide limited incentives for good manufacturing companies to locate in our state. But there is absolutely no justification for politicians to hide behind illusions to provide funding for the general services of state government and education from our savings account for the future.
Bob Martin is editor and publisher of The Montgomery Independent. E-mail him at: bob@montgomeryindependent.com.