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.

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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 2018 Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis 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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