Riley Budget Cuts Worse Than Expected

MONTGOMERY, Ala. (AP) - Gov. Bob Riley has declared the state
education budget in proration in the amount of 12.5 percent - a
rate higher than education officials had expected.
The budget cuts announced Monday will mean across-the-board
reductions in spending on grades K-12 and higher education.
Education officials had braced for about a 7 percent cut.
Riley said Monday he will use $218 million from the state's
"rainy day" fund to lessen the proration effects. Alabama has
$437 million in a "rainy day" fund that was approved by voters in
November.
Riley also announced a state hiring freeze.
State law prohibits deficit spending. When tax collections fall
below appropriations, state law requires the governor to declare
"proration" and announce spending cuts.

The Governor's plan includes three key elements:

1. Reduce agency spending: The Governor will use his authority under the Budget Management Act to reduce state spending by 10 percent in state agencies funded out of the General Fund. This will reduce spending in these agencies by about $200 million in the current fiscal year.
It is expected that the hiring freeze will reduce the number of state employees by about 3,000 over the next year. That would bring the state government’s workforce down to about the size it was at the end of fiscal year 2004, when it stood at a little more than 36,000.
The Governor also said he would allow for flexibility in some agencies if the spending cuts could have a harmful impact on public safety.

2. Proration in education: The Governor declared proration in the education budget of 12.5 percent. Proration is the process of cutting spending when revenues fall short of expectations. However, the amount of proration will be lessened with the use of some of the Rainy Day Fund for education.

3. Limit proration with Rainy Day Fund: The Governor is withdrawing $218 million from the education Rainy Day Fund to lessen the impact of proration. The use of the $218 million will result in an effective proration rate of nine percent.