State Budget Practice Report Cards and Budget Resource Guide
Alabama earned a three-year D-minus average in budget forecasting for fiscal 2017 through 2019, the lowest possible grade and one shared in the category by only three other states. Poor forecasting practices compromise these states’ ability to plan for budgetary needs.
Alabama forgoes consensus revenue estimates in favor of forecasts provided by the executive branch. It also lacks multiyear forecasts for expenditures or revenues. Instead, it projects revenues for only one year and does not explain the economic assumptions used to estimate growth.
In legacy costs, which include public worker pensions and other postemployment benefits (OPEB), principally health care, the state received a C average. In 2018, pension liabilities were funded at 72 percent, 2 percentage points above the total for all states. While Alabama made annual pension contributions in line with actuarial requirements for each year of the evaluation, the same was not true for OPEB. The state faces a $9.6 billion OPEB liability, 15 percent greater than its annual revenues.
Alabama did not earn a top A average in any category but achieved B averages in transparency, reserve funds, and budget maneuvers. In the last category, the state improved during the period, with its annual score rising to an A in 2019 from C in 2017. The improvement in 2018 resulted from a lack of one-time transfers to the general fund for recurring expenditures. In 2019, the state ceased paying recurring expenditures with debt, as it had in 2017 and 2018.
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 2017 through 2019. 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.