Fiscal Accountability Key to Real Progress

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In the almost 14 years that I have been involved in public
policy in Alabama the referendum on the proposed $1.2 billion tax
increase is easily the most divisive issue I have ever seen. There are truly honest and sincere people on both sides of this issue that are
either passionately for approval or dead set against it. And both sides
have merit to their arguments.

To the surprise of many of my conservative friends and
colleagues I am of the opinion that the state needs more revenue and I
would be willing to support a tax increase, but only on the condition
that we first set in place some meaningful accountability measures.
Unfortunately, the proposal currently before the people of Alabama falls
well short of the mark.


However, to give credit where it is due, the current
proposal does have some worthwhile features such as creation of a $73
million General Fund reserve account, elimination of tenure for
principals and establishment of an arbitration process for dismissing
teachers. There is even a modest attempt to address the soaring cost of
the Public Education Employees Health Insurance Program (PEEHIP).

While these measures are laudable, they do not address the
core issues of real fiscal accountability in regard to state budgets and
spending. The Alabama Policy Institute, the organization for which I
work, has long been a proponent of requiring the state Legislature to
base its budgets on the previous year’s revenue rather than on estimates
of how much revenue might come in during the next fiscal year.

Basing the state’s budget on the previous year’s revenue
would force the state to live within its means and virtually eliminate
proration. To be clear, the proration provision in Alabama’s state
constitution forces the state to spend no more than it collects. The
problem is that many people think that having proration declared means
the state is out of money. What it really means is the state
Legislature passed budgets that were too big.

Over the last 50 years there have been only two years in
which state revenues were lower than the previous year, yet the state
has been in proration 14 times. If the state Legislature was serious
about fiscal accountability it would pass legislation that would base
budgets on the previous year’s revenue and thus be assured that funds
were available to cover the state’s expenses. Based on the last 50
years’ revenue data, the state could count on spending increases
virtually every year.

Another progressive accountability measure the state could
take would be to require performance-based budgets which would give
Alabama taxpayers greater ability to hold state government accountable
for how “our” money is spent. It is not unreasonable to require the
various departments and agencies of state government to clearly define
their objectives and provide the taxpayers with tangible evidence that
those objectives are worthwhile and being achieved in the most cost
effective manner possible.

The most critical accountability measure that the people of
Alabama should demand is passage of a Tax and Expenditure Limitation
(TEL) Amendment which would place limits on how much the state could
increase its spending each year. One proposal that has been suggested
would allow the state to increase spending by the inflation rate plus
two times the percentage increase in state population growth with a
maximum of seven percent growth in any given year. If revenues exceeded
the cap on spending, the surplus would be used to fully fund a Budget
Reserve Account which would be capped at a percentage of the combined
General Trust Fund and Education Special Trust Fund budgets. Any
surplus above this would be rebated to individual taxpayers.

A TEL amendment is perhaps the best accountability measure
the state could implement because it creates a ceiling on spending,
funds a real reserve account for fiscal emergencies and returns surplus
revenues back into the hands of Alabama families.

Passage of a TEL amendment would be a historic step forward in the
effort to overcome the public’s cynicism about state government. Unfortunately, the state Legislature rejected a TEL amendment to the tax
increase package during the special session.

The single greatest obstacle to tax reform or any other effort to raise
revenues that requires voter approval is public cynicism toward state
and local government. The public has virtually no reason to believe
that our elected officials will not waste the additional revenues,
however badly they are needed. Sadly, the current proposal does little
to change the public’s perception, but if the proposals mentioned above
were implemented it could be changed.

”’Gary Palmer is president of the Alabama Policy Institute, a non-partisan, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families, which are indispensable to a prosperous society.”’