Alabama

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.

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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 presented here are taken from the 2020 Volcker Alliance report, Truth and Integrity in State Budgeting: The Balancing Act, which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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