State Budget Practice Report Cards and Budget Resource Guide
Alabama was one of a trio of states receiving an average of D-minus, the lowest possible grade, in budget forecasting for fiscal 2016 through 2018. Along with Missouri and North Dakota, Alabama failed to produce any of the building blocks of a robust forecasting system. These include binding revenue projections based at least on inputs from the governor and legislature; multiyear expenditure and revenue estimates; and a detailed rationale to support revenue growth estimates.
The state also fell short in the category of budget maneuvers. They include one-time solutions for balancing a single year’s budget, such as shifting cash between funds and pushing recurring expenditures into the future. Although it received an overall grade of B in the category, Alabama was one of eight states to fund recurring expenses with debt in 2018.
Alabama’s use of debt stemmed from a $20.8 billion federal court settlement with BP, Anadarko Petroleum, Transocean Ltd., and Halliburton that provided cleanup funds to five Gulf Coast states following the Deepwater Horizon oil spill in 2010. After securitizing its share of the settlement and collecting $624 million in bond proceeds, Alabama used $120 million for Medicaid expenses—$15 million in 2017 and $105 million in 2018.
Partially offsetting its use of debt in the budget maneuvers category, Alabama avoided deferring recurring expenditures into future years in 2018.
Alabama earned a B average in transparency. Its grade suffered only from the state’s failure to disclose deferred infrastructure replacement costs, a weakness shared with forty-five other states.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2016 through 2018. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.