The Priorities of Alabama Voters

In 2018, Alabamians will elect a governor and five other statewide executive branch officers, 140 legislators, and scores of local officials. Those elected will lead Alabama for the next four years. These leaders should be responsive to the concerns of those they represent but also willing to help citizens understand critical, but perhaps less obvious, public policy issues. Such leadership requires understanding what issues most concern voters and what issues voters may not fully appreciate.

In this election year, PARCA surveyed Alabama voters to determine their thoughts about the general direction of the state and the issues that most concern them. We found broad agreement on the critical issues facing the state. Based on voter response, PARCA identified and ranked voters’ top 10 critical issues. Alabama Priorities explores this issue.

The Priorities

Alabama voters are eager to see improvement in K – 12 education, with 70% indicating they are very concerned about the state’s education system. Voters are worried about healthcare , particularly access and cost. With the recent resignations of a Governor, a Speaker of the House, and a state Supreme Court Justice, it should come as no surprise that voters are concerned about corruption and ethics. For many voters, mental health and substance abuse are not just theoretical problems—56% of Alabamians indicate they are very concerned about the issue. The poor and homeless have not been forgotten.

These issues, along with jobs and the economy, crime and public safety, job training and work force development, the state’s image, and tax reform comprise the top 10 list of Alabama’s priorities.

Perhaps this list should not come as a surprise. Previous polling by PARCA and other organizations have found similar results.

What is perhaps more surprising, however, is the extent to which these are shared priorities. We found few significant differences between Republicans and Democrats, liberals and conservatives, blacks and whites, or other groups. While differences exist, Alabama voters are not polarized.

Alabama Priorities

1. K-12 Education
2. Healthcare
3. Government Corruption and Ethics
4. Mental Health and Substance Abuse
5. Poverty and Homelessness
6. Jobs and the Economy
7. Crime and Public Safety
8. Job Training and Workforce Development
9. Improving the State's Image
10. Tax Reform

Experts and Voters: Differing Priorities

At the same time, while the data suggests broad agreement among voters, there is an area where significant gaps exist. PARCA surveyed business, civic, and nonprofit leaders, journalists, and academics. The differences between the priorities of these experts and voters were noticeable.

Four top 10 issues for voters fell outside the top 10 for experts:

  • Mental health and substance abuse
  • Poverty and homelessness
  • Job training and workforce development
  • Improving the state’s image

Conversely, experts identified four issues that did not register high on voters’ list of concerns:

  • Infrastructure and transportation
  • Prison and sentencing reform
  • Funding state government
  • Civil rights

Possible explanations as to why some issues are more important to voters and others more important to experts are offered in the “Differences Between Experts and Voters” section of the report. three implications are suggested.


The data suggest four implications.

  1. Voters are not polarized along traditional political, ideological, racial or generational lines.
  2. There is a significant gap between the priorities of experts and the priorities of voters.
  3. Policymakers have a two-fold opportunity to inform and educate voters on critical and systemic challenges facing the state.
  4. Policymakers have an opportunity to respond to immediate, often highly personal issues that concern voters.

This research suggests that elected officials and candidates have an opportunity to show leadership and to build broad coalitions to address Alabama’s most pressing challenges.

Read the full report here.
























PARCA Gubernatorial Candidate Forum Brings Leaders Together to Discuss Alabama Priorities

This past Wednesday, May 16th, PARCA held a 2018 Gubernatorial Candidate Forum at Woodrow Hall in Birmingham. The event was hosted by the PARCA Roundtable, PARCA’s young professionals’ group of 28 to 45-year-old civic and business leaders. It was a great opportunity for Democrat and Republican candidates to come together and express ideas in a nonpartisan environment prior to the June 5th primary election.

Participating candidates included Tommy Battle, Sue Bell Cobb, Scott Dawson, James Fields, Bill Hightower and Walt Maddox.

The forum featured one-on-one conversations with each candidate. The six conversations were led by PARCA Roundtable members Victoria Hollis, Peter Jones, and Kendra Key, young professional civic leaders Anthony Hood and Bridgett King, and WBHM News Director Gigi Douban.

A number of the questions specifically addressed the concerns of young professionals. Candidates were also asked about many of the issues most important to voters, as reported in PARCA’s recent Alabama Priorities. At the end of the event, all six candidates came to the stage for questions from the audience of around 135.

Some of the main ideas expressed throughout the evening focused on education, taxes, workforce development, the correctional system and the state’s image.

A collegiality emerged between the candidates throughout the evening, and for a few moments, there were no political parties, only public servants interested in improving the state of Alabama.


Alabama Priorities makes its debut

What issues most concern Alabamians? What options do policy makers have to address these issues? These are the questions behind Alabama Priorities – a new initiative of the Public Affairs Research Council of Alabama. We unveiled the initiative at PARCA’s 2018 Annual Meeting last Friday. The presentation can be viewed here.

Step 1: Identify Alabama Issues

In partnership with Samford University, PARCA conducted an open-ended survey of Alabama-based academics, journalists, and civic, business, and nonprofit leaders to create a list of the most serious issues facing Alabama in 2018. More than 150 experts participated, producing a list of 17 issues.

Civil RightsHealthcareK-12 Education
Constitutional ReformHigher EducationMental Health and Substance Abuse
Crime and Public SafetyImproving the State's ImagePoverty and Homelessness
Environmental ProtectionInfrastructure and TransportationPrison and Sentencing Reform
Funding State GovernmentJob Training and Workforce DevelopmentTax Reform
Government Corruption and EthicsJobs and the Economy

Step 2: Rank Alabama Issues

With issues identified, PARCA again collaborated with Samford University to design a random digit dial telephone (50% landline and 50% mobile) survey of registered voters. The poll was conducted by the USA Polling Group at the University of South Alabama in December 2017. The survey collected 468 responses with a margin of error of 4.5%. Responses were weighted for race, gender, education, and age. Below are the top ten issue determined by Alabama voters.


Alabama Priorities

1. K-12 Education
2. Healthcare
3. Government Corruption and Ethics
4. Mental Health and Substance Abuse
5. Poverty and Homelessness
6. Jobs and the Economy
7. Crime and Public Safety
8. Job Training and Workforce Development
9. Improving the State's Image
10. Tax Reform

Step 3: Reveal Alabama Priorities
PARCA revealed the 10 priorities, as ranked by Alabama voters, at its 2018 Annual Meeting: The 21st Century Governor, on February 2, 2018. A full report and analysis of the data is forthcoming.

Step 4: Share Alabama Priorities

PARCA will publish a series of policy briefs on each of the top ten priorities in the weeks leading to the general election in November 2018. The briefs will be short, easy-to-understand, nonpartisan descriptions of the priority and will answer four questions.

What is the issue?

Why does it matter?

How does Alabama compare?

What options does Alabama have?

Better Revenue in 2017 Means Easier Budgeting in the New Year

As the Alabama Legislature returns to Montgomery today, it faces an unusual situation: a relatively stable financial picture.

Both the state’s main checking accounts, the General Fund and the Education Trust Fund (ETF), grew at a relatively healthy pace in FY 2017, both up about 4 percent over FY 2016. The traditionally anemic General Fund ended with an $80 million surplus, significantly exceeding estimates. The ETF met estimates and ended with a $1 million surplus.

Since the current year budget (FY 2018) set spending levels at virtually the same level as 2017, budget writers can anticipate additional surplus funds by the end of 2018, creating a favorable climate for writing the 2019 General Fund budget.

On the spending side, Medicaid finished FY 2017 with lower than anticipated costs. Rolling that surplus forward into the FY 2018 budget also should make budgeting for 2019 easier.

And while the implications are yet to be calculated, the tax cut at the federal level will also be good for revenue collection in Alabama. When federal taxes are cut, Alabama tax revenue goes up. That’s because federal income taxes are deductible when calculating Alabama taxes. Thus the money individuals and corporations won’t be sending to Washington will be taxable at the state level, increasing revenue.

While the Legislature won’t be facing a budget crisis this year, there will be struggles. Unless Congress restores federal funding for the Children’s Health Insurance Program, lawmakers will have to scramble to find money to pay for the program or curtail insurance coverage for the 77,000 low-income children enrolled in the program.

Also, the perennial problem of funding for prisons will be front and center. The Alabama Department of Corrections has requested a $90 million increase in funding to help it comply with court-ordered improvements to mental health services as well as paying for basic improvements to facilities and increases in operating costs.

A Closer Look at the Final Numbers for 2017

Traditionally, the ETF has grown faster than the General Fund, since it draws on income and sales taxes. Those taxes tend to grow when the economy is healthy. The General Fund relies on a hodgepodge of other taxes, which haven’t tended to grow with the economy. However, in recent years, legislators have shifted some sales and use taxes into the General Fund, allowing that fund to benefit from growth.

Legislators can take cheer in the fact that changes they’ve made in recent years to shift growth taxes into the General Fund helped that fund grow at a rate about even with the education budget.

However, some of the 2017 increases are not likely to be sustained over time. For example, a new tax, the Simplified Sellers Use Tax, a voluntary 8 percent tax on sales paid by Internet retailers without a physical presence in the state, was a new revenue source. Overall, for 2017, the tax, referred to the “Amazon tax,” brought in $25 million to the state in its first year of collection. Of that total, 75 percent, or almost $19 million, went to the General Fund, while the remaining 25 percent, or $6 million, went to the ETF.

That $25 million actually represents half of what the tax brought in. The other half of the tax is distributed to cities and counties, 25 percent to cities and 25 percent to counties, based on population. The tax will likely continue to grow but won’t grow as fast since the increase this year results from the fact that it is a new tax.

The shift of some of those growth taxes away from the ETF has led to slower growth in that fund. In comparison to other states, Alabama has lost ground on per-pupil spending on K-12 education in recent years.


Education Fund

Receipts to the ETF in 2017 were up by 4.19 percent compared to 2016. But that increase comes with a caveat. In 2016, $34 million was deducted from overall sales tax receipts and diverted to the Alabama Prepaid College Tuition Program (PACT). In 2017, there will be no diversion and the allocation to PACT will be paid out of the ETF. Accounting for that difference, the actual growth in the revenue flowing to the ETF is more like 3.6 percent.

While the bulk of the increase in the ETF was provided by income and sales tax growth, the addition of the Simplified Sellers Use Tax provided a $6.5 million boost to the ETF. The Mobile Telecom Tax continued a multi-year decline as cell phone companies categorize a greater portion of billing to data services rather than calling. Data plans aren’t subject to the tax.

Revenue SourceFY 2016FY 2017Change% Change
Income Tax$3,722,129,992$3,892,525,501$170,395,5094.58%
Sales Tax$1,744,468,414$1,811,657,811$67,189,3973.85%
Utility Tax$376,625,096$387,966,309$11,341,2133.01%
Simplified Sellers Use Tax$0$6,545,297$6,545,297NA
Use Tax - Remote$4,985,996$6,913,726$1,927,73038.66%
Transfers & Reversions$402,865$404,672$1,8070.45%
Insurance Premium Tax$30,993,346$30,993,296-$500.00%
Privilege License Tax$129,773$112,337-$17,436-13.44%
Hydroelectric KWH Tax$508,723$473,797-$34,926-6.87%
Use Tax$152,082,201$151,598,885-$483,317-0.32%
Beer Tax$22,909,170$22,231,590-$677,580-2.96%
Mobile Telecom Tax$17,700,484$15,904,023-$1,796,461-10.15%

Income Tax Detail

Looking more closely at the details of income tax collections, individual income tax gross receipts were up 3.31 percent, or $135 million. Corporate income taxes were up more than 10 percent, or $42 million. When refunds are factored in the net receipts to the ETF from income taxes were up 4.58 percent, or $170 million.

Income Tax DetailFY 2016FY 2017Change% Change
Individual Receipts$4,071,791,983$4,206,538,511$134,746,5283.31%
Corporate Receipts$416,975,401$459,875,408$42,900,00710.29%
Total Receipts$4,488,767,384$4,666,413,918$177,646,5343.96%
Individual Refunds$582,735,210$594,871,933$12,136,7232.08%
Corporate Refunds$84,470,852$78,221,972-$6,248,880-7.40%
Total Refunds$667,206,062$673,093,905$5,887,8430.88%
Revenue Dept Admin$49,046,548$49,046,547-$10.00%
Property Tax Relief$50,384,782$51,705,847$1,321,0652.62%
Political Party Contributions$0$42,118$42,118
Total Deductions$99,431,330$100,794,512$1,363,1821.37%
Net Income Tax to ETF$3,722,129,992$3,892,525,501$170,395,5094.58%

Sales Tax Detail

Gross receipts from the sales tax were up just 1.84 percent, but the net distribution of the sales tax to the ETF was up 3.85 percent over 2016. That higher net distribution is due mainly to two factors. First is the change to how that PACT money is accounted for. The second is a reduction in the amount refunded to the Department of Human Resources for sales taxes paid by the Supplemental Nutrition Assistance Program (SNAP). Since less was spent on SNAP this year, the state refunded $5 million less to DHR.

Sales Tax DetailFY 2016FY 2017Change% Change
Gross Receipts$2,230,184,536$2,271,145,936$40,961,4001.84%
Revenue Dept Admin$61,445,499$67,731,645$6,286,14610.23%
County Payments$378,000$378,000$00.00%
PSCA Debt Service$202,832,582$204,735,005$1,902,4230.94%
Auto Sales - SGF$96,478,391$100,823,695$4,345,3044.50%
GF Excess Discount$11,526,149$12,032,478$506,3294.39%
SGF Parks Bonds$8,206,200$8,206,200$00.00%
AAC School Tax Credits$374,704$356,394-$18,310-4.89%
PACT Sales Tax$33,952,000$0-$33,952,000-100.00%
Total Deductions$485,716,122$459,488,125-$26,227,997-5.40%
Net Sales Tax to ETF$1,744,468,414$1,811,657,811$67,189,3973.85%

General Fund

The biggest contributor to the gains in the General Fund in 2017 was the tax on insurance company licenses. According to budget analysts, this revenue source saw a drop during the Great Recession indicating that in tight financial times, people were forgoing life insurance coverage. In FY 2017, it appears that incomes had recovered enough that more people were restoring coverage. Also, premiums on property insurance have increased due to natural disasters.

The corporation tax, which is levied on out-of-state businesses licensed to do business in Alabama, saw a $19 million increase. That’s thanks not only to an increase in corporate profits but also to the dwindling amount paid out in funds from the tax set aside to pay claims on a business privilege tax that was ruled unconstitutional. With those claims mostly paid out, the full proceeds of the tax are available.

The $7 million increase in proceeds from the unclaimed property fund results from efforts by the Alabama Treasurer’s office to disperse excess money built up in that fund. The growth in the proceeds from this source is unlikely to continue.

The Use Tax, paid by companies buying materials from out-of-state, also increased with the pick up in economic activity. Bank profits appear to be up, producing a boost in the Financial Institutions Excise tax. Taxes on oil and gas production were up as prices rose. Auto sales taxes continued healthy growth, as did the lodging tax, spurred by growth in tourism. As the Federal Reserve increased interest rates, interest income on state deposits also increased.

The biggest loss in revenue came in the miscellaneous category. In 2016 that category was inflated due to settlements from TransOcean and BP related to the BP Oil spill. In 2017, a $50 million payout from BP made up most of the miscellaneous revenue. In 2018, that miscellaneous revenue will drop further because the remaining payouts from BP starting in 2018 are pledged to pay off bonds. Also affecting the bottom line, in 2017, the Legislature chose to decrease the amount transferred into the General Fund through transfers and diversions. During tougher budget years, the Legislature required some agencies to transfer fees and other revenue collected by the agency into the General Fund. In 2017, the Legislature decreased those required transfers by about $13 million dollars.

 FY 2016FY 2017Change% Change
Insurance Company Licenses$293,534,706$319,814,875$26,280,1708.95%
Simplified Sellers Use Tax$841,382$19,635,891$18,794,5092,233.77%
Corporation Tax$56,831,934$75,499,764$18,667,83032.85%
Abandoned Property$45,000,000$52,000,000$7,000,00015.56%
Use Tax$178,951,918$184,790,861$5,838,9433.26%
Use Tax - Remote$14,958,062$20,741,255$5,783,19338.66%
Financial Institution Excise Tax$22,246,274$27,633,823$5,387,54924.22%
Oil and Gas Production$29,481,805$33,943,406$4,461,60115.13%
Sales Tax$97,844,307$102,230,663$4,386,3574.48%
Interest on State Deposits$9,533,292$13,550,218$4,016,92642.14%
Ad Valorem Tax$150,853,517$154,429,888$3,576,3712.37%
Lodgings Tax$46,869,544$49,851,286$2,981,7426.36%
Mortgage Tax$28,292,880$29,886,763$1,593,8835.63%
Motor Vehicle Licenses$44,210,293$45,143,979$933,6862.11%
Freight Line Equipment$4,028,577$4,749,814$721,23717.90%
Lease Tangible Personal Property$76,634,471$77,297,544$663,0730.87%
Court Costs$61,282,678$61,860,771$578,0930.94%
Sales Tax Discount-Parks Bonds$19,732,349$20,238,678$506,3292.57%
Deed Record Tax$9,478,709$9,978,359$499,6505.27%
Tobacco Tax$8,739,383$9,220,768$481,3855.51%
Oil Company Licenses$8,026,984$8,383,195$356,2114.44%
Use Tax Discount$2,940,282$3,216,163$275,8819.38%
Vapor Products$1,147,675$1,361,915$214,23918.67%
Auto Title Tax$23,026,791$23,116,469$89,6780.39%
Tobacco Settlement$2,004,710$2,070,858$66,1483.30%
Securities Commission$9,420,790$9,457,109$36,3190.39%
Public Safety$17,561,609$17,587,450$25,8410.15%
Judicial Administration$102,779$99,655-$3,123-3.04%
Manufactured Homes Registration Fee$553,107$544,840-$8,267-1.49%
Privilege Licences$5,067,963$4,955,113-$112,850-2.23%
Pari-Mutuel Betting$1,400,662$1,226,025-$174,637-12.47%
Hazardous Waste$208,997$34,219-$174,778-83.63%
ABC Board$100,816,514$100,623,508-$193,006-0.19%
Driver License$17,443,036$16,642,064-$800,972-4.59%
Public Utility$24,169,859$23,198,681-$971,178-4.02%
Cigarette Tax$164,746,858$163,313,105-$1,433,753-0.87%
Mobile Telecommunications Tax$30,900,967$27,308,041-$3,592,926-11.63%
Interest Alabama Trust$103,310,045$98,040,084-$5,269,961-5.10%
Total From Tax Sources$1,787,375,258$1,875,730,902$88,355,6444.94%
Transfers and Reversions$57,951,577$44,102,869-$13,848,708-23.90%
Bottom Line Total for General Fund$1,845,326,835$1,919,833,772$74,506,9374.04%





How Alabama Taxes Compare

Since late 1988, the Public Affairs Research Council of Alabama has produced an analysis of Alabama’s tax revenues. Relying on the U.S. Census Bureau’s annual survey of state and local governments across the country, we are able to determine how Alabama taxes and revenue compare to other states. In the analysis, state and local spending are considered together, because states vary greatly in how they divide up the responsibilities for funding government services. This report considers data from 2015, the most recent year available.

Alabama’s state and local governments collect less in taxes than state and local governments in any other state in the union. This has been a basic fact of life in this state since the early the 1990s. It lies at the root of our perpetual struggles to balance state budgets. It underlies the difficulties we face when trying to provide to our citizens the level of government services enjoyed by citizens in other states.

As a bottom line, Alabama governments have less tax money available finance the operation of services like schools, roads, courts, health care, and public safety.

Explore our latest report, How Alabama Taxes Compare, and see how Alabama’s tax system fares against our southeastern neighbors, and what that means for our state. If you want to compare Alabama’s per capita taxes to those in other states, PARCA-designed interactive tables are available online. 

Together We Can – Charting a Course to Cooperation for Greater Birmingham

PARCA’s latest report, commissioned by the Community Foundation of Greater Birmingham, focuses on the fragmentation of the Birmingham region, the challenges it causes, and potential solutions exemplified by other metro areas around the country.

With the clouds of Jefferson County’s bankruptcy lifting and downtown Birmingham showing impressive signs of revival, optimism about the region’s future is high.

Considering the positive signs, it’s important to ask whether the community is prepared and positioned to capitalize on its current momentum.

In recent decades, Birmingham and its metro area have underperformed in job and population growth in comparison to comparable cities. That begs the question: Why?

Nationally, a substantial body of research indicates that metro areas with more broad-based, cooperative governmental arrangements grow faster and generate greater prosperity than metro areas that are governmentally fragmented, divided into a multitude of independent municipalities.

The region’s central city of Birmingham is surrounded by more independent suburbs than any other southern city. This pattern of fragmentation has consequences. It leads to duplication, creates intra-regional competition, concentrates economic advantage and disadvantage, and diffuses resources and leadership. It makes it difficult to arrive at consensus, pursue priorities of regional importance, or deliver services that transcend municipal boundaries. In sum, it puts the metro area at a disadvantage.

Figure 1 compares job growth since 2000 in two groups of metropolitan areas. The seven cities on the left are fragmented like Birmingham: a diminished central city ringed by a multitude of suburbs.


Figure 1

The seven metros on the right have governmental structures that unite the region. In the more unified metros, job growth since 2000 ranges from 20 percent to 50 percent. In the fragmented metros, job growth ranges from 5 percent to -12 percent.

Average annual employment in Birmingham-Hoover MSA has increased by only 0.24 percent since 2000.

The same contrast emerges when comparing median income and poverty and unemployment rates: In cities where government is fragmented, growth is slower, and social and economic problems are more concentrated.

The negative effects of fragmentation weigh not only on the center city but also on the metropolitan area as a whole. The fortunes of the central city and its suburbs are interlocked.

Fragmentation is a long-term process, a deeply ingrained pattern of development that Birmingham shares with northern cities that have a similar industrial heritage. It is not easily undone. In no instance in the post-World War II era has there been a mass political consolidation that dissolved existing cities or school districts. However, cities across the country have developed alternative approaches that promote unity and increase cooperation within their metro areas.

In 2016, the Community Foundation of Greater Birmingham commissioned the Public Affairs Research Council of Alabama (PARCA) to conduct a study of the current structure of government in Greater Birmingham, with Jefferson County as its primary focus. The study was to examine Greater Birmingham’s historic development and its current state in comparison with other cities, to describe different options other cities have pursued to overcome fragmentation, and finally, to explore how those different options might work in the Birmingham context.

This resulting report was developed with advice and review from a Strategic Advisory Group convened by the Community Foundation. Members of the Strategic Advisory Group were selected to provide a range of perspectives representing the larger Jefferson County community.

Locally, a wide range of public officials from the central city, the suburbs, and the county were also consulted, as were leaders in business and civic groups.


Fragmentation has led to a decline in Birmingham’s prominence and its ability to lead the region.

In 1950, Birmingham was the 34th largest city in the U.S. According to the latest population estimates, the city has fallen out of the top 100. Though the latest estimates indicate the city may have halted its population decline, other Alabama cities where growth is strong may eventually displace Birmingham as Alabama’s largest city.

The population of the City of Birmingham now represents only 32 percent of Jefferson County’s population compared to 60 percent in 1950. The city still holds a position of regional leadership thanks to its ability to draw taxes from businesses and commuters who come into the city to work or shop. Over 90,000 people commute into the city each day, filling more than half of the jobs in the city. According to PARCA’s analysis, city residents contribute 33 percent of city taxes, non-residents contribute 28 percent, and businesses 39 percent.

However, Birmingham’s role as chief supporter of regional assets and projects is under increasing strain, as it struggles to meet not only that role but also the needs of economically distressed neighborhoods and residents.

Fragmentation is a drag on metropolitan growth.

The Birmingham-Hoover MSA is currently the 49th largest in the U.S., but its growth in employment and population is slow compared to peer MSAs. Growth is particularly lagging in its central county, Jefferson. Recent projections estimate Jefferson County will add only 8,967 new residents by 2040, a 1.4 percent increase over the current population.

Greater Birmingham has not developed a viable alternative for regional leadership.

While Jefferson County has positioned itself to better play a regional leadership role thanks to recent improvements in its finances and management, it still lacks an executive branch. Nearly half of the large counties in the U.S. are now headed by an elected CEO, creating a strong and capable executive branch charged with the management of the county government. Jefferson County is still governed by a five-member commission elected by district. Additionally, the 26-member Jefferson County Legislative Delegation exercises substantial control over local affairs.

Greater Birmingham needs a spirit of governmental innovation.

Across the country, local governments are innovating with form and function, finding new ways to collaborate, economize, and deliver better customer service. Greater Birmingham need not be bound to traditional ways of doing things.


PARCA’s research identified four different approaches cities and metro areas take toward building and maintaining regional unity. Four cities representing the four different approaches were selected for study.

The four approaches are:

1. Functional Consolidation

Decreasing duplication and increasing efficiency through cooperative agreements between local governments.

Example Metro: Charlotte, North Carolina

2. Modernizing County Government

Structuring county government to provide regional leadership.

Example Metro: Pittsburgh, Pennsylvania

3. Cooperation Through Regional Entities

Using regional bodies to deliver services or coordinate strategy on a region-wide basis. These can be public or private, or a fusion of the two.

Example Metro: Denver, Colorado

4. Political Consolidation

Most often, the merger of the central city with the central county, creating an umbrella metro government to deliver regional level services.

Example Metro: Louisville, Kentucky

Once labeled “the most segregated city in America,” Birmingham is justly proud of its historic role in breaking down the walls of segregation that once legally separated blacks and whites.

The time is now right to re-examine the barriers to unity that were created in the past and develop a new approach that better meets the needs of all the people in the Birmingham metropolitan area—urban, suburban, and rural. No one approach rules out the others. In crafting an approach that meets its unique needs, Birmingham might borrow ideas from each.

This is not a new issue for the region, and greater Birmingham is not alone in having tried multiple times to resolve it.

Louisville and Nashville each failed twice before achieving governmental consolidation, and Charlotte created its intergovernmental cooperation strategy as an alternative to unachievable structural change. Pittsburgh took a first step to attack fragmentation by reforming county government, just as Denver did by creating special-purpose regional authorities with their own tax sources.

The question of community unity has been a recurring strain in Birmingham’s history. Greater Birmingham was catapulted to the status of major American city through a consolidation in the first decade of the 20th Century. Multiple votes from the 1940s through the 1960s presented city-suburban merger as an option but failed to garner adequate support. A different approach, the Metropolitan Area Project Strategies, was proposed in the late 1990s.

With the negative effects of fragmentation having become very clear, it is time for fresh ideas and new conversation about how Greater Birmingham can chart a new, more prosperous course. The public seems ready to engage in this conversation.

View the full report here and access additional components of the project here.


PARCA compares municipal finances in Alabama, gets mayors’ perspective

How Alabama Cities Finances Compare

How Alabama City Finances Compare is the ninth edition of PARCA’s study of Alabama city finances. This report provides basic information on municipal revenues, expenditures, and general fund balances from the most recent year available. The comparisons are in per capita amounts (dollars divided by resident population) so that cities of differing populations can be compared with one another. This edition of the report includes data on 22 cities, generally those having a population over 20,000.

The information provided can be valuable for city officials to use in benchmarking with their peers and for citizens to see how their municipality ranks financially among comparable cities within the state.

Municipal Executives Opinion Survey

In conjunction with the report on city finances, PARCA is also releasing the Municipal Executives Opinion Survey, a survey of 127 mayors and city executives from across Alabama. Responses indicate that these city leaders are generally optimistic about economic conditions and the stability of revenue sources in the coming year, although many expect increased HR costs, as well.

Despite the optimism, executives face challenges, too. There appear to be substantial demands for infrastructure improvements without a letup in expectations regarding public safety, human services, or government operations. Priorities for the coming year emphasize economic development and jobs, education, and building or repairing roads, sidewalks, and parks.


PARCA’s 2017 Public Opinion Survey Results are Here

Today, PARCA released the results of its annual public opinion survey. The poll of over 350 Alabama residents was conducted by Randolph Horn, Samford University, Professor of Political Science and Samford’s Director of Strategic and Applied Analysis. The survey addressed topics including state budget priorities, the quality of representation in state government, and in partnership with the Alabama Association of School Boards, questions about public education in Alabama.

Results from this year’s survey are consistent with previous years’ results in some important ways. Residents value state investments in education and healthcare. They believe education is inadequately funded. There is substantial evidence that respondents have limited faith in public officials. Support for earmarking revenues and keeping the education budget separate from the general fund may indicate concern that officials would misspend those resources if they were given more flexibility. Majorities think the state government does not care what they think or that they have no say in what the government does.

Public officials are in a difficult position. There is often a tension between the preferences of constituents in a district and the collective interest of a state or nation. Officials, seeing their colleagues defeated in primaries from the more extreme wing of their parties, may underestimated the scope they have when working to solve important public policy challenges. Similarly, officials may underestimate their capacity to educate their constituents on what it may take to address the problems confronting the state. Results of PARCA polls indicate many opportunities for officials to demonstrate responsiveness to public concerns and leadership in crafting public policy solutions.

Read the results and full analysis of this year’s survey here.

What is the Budget Reform Task Force Studying?

The Alabama Legislature’s Joint Legislative Task Force on Budget Reform met for a third time this week in Montgomery continuing its search for solutions to Alabama’s perennial problems with crafting budgets.

The bipartisan panel of state senators and representatives has now met three times and each time has made sure to clarify what they are and what they aren’t doing:

They are a task force studying the state’s long-running budget problems, looking for ways to improve the process. They hope to produce a report to the Legislature by the opening of its 2017 session.

They are not a legislative committee.

They are not drafting legislation.

The assurances haven’t prevented the Task Force meetings from drawing a nervous crowd. Budgets matter. Not just to government agencies, but also to non-governmental service providers, and to individuals and businesses that pay taxes and receive services.

Budgeting in Alabama has been extremely difficult in recent years due to a seemingly intractable mismatch between the level of revenue available and the amount of money agencies say they need to maintain services.

That mismatch has left the state lurching from budget crisis to budget crisis, resulting in multiple legislative special sessions.

While the solutions reached have kept the government functioning, they haven’t solved fundamental problems. As recently published year-end results for 2016 show, state finances are still under strain. The state continues to depend on non-recurring revenues to balance the budget. When that revenue disappears, the growth of expenses is likely to continue to outpace available revenue, leading to future budget crunches.

In an attempt to further understand these long-term problems and explore possible improvements, the Task Force started with the basics.

In September, the 14-member bipartisan panel of House and Senate members heard what amounted to a Budgeting 101 presentation from the Legislative Fiscal Office. The presentation explained:

1. Why we have two budgets (the General Fund and the Education Trust Fund)

2. How our tax revenues compare to other states

3. How our budget process works

4. How it compares to other states

5. Alternative approaches to budgeting other states use

6. Revenue and expenditure challenges on the horizon

7. Budget and management improvements already underway

The Task Force has formed five study groups, tasked with delving into five areas of interest:

1. Unearmarking: Alabama earmarks more of its tax revenue than any other state. When a tax is earmarked, the revenue generated from a tax can only be spent for a designated purpose. This complicates the Legislature’s job when attempting to balance its budget, limiting flexibility and interfering with the Legislature’s ability to determine whether those designated dollars are needed and being well-spent. Supporters of earmarking say the practice reflects the will of the people, assuring taxpayers that money is being spent according to the people’s priorities. Others are skeptical that eliminating earmarks is worth the effort because ultimately the problem isn’t earmarking; it’s a shortage of revenue.

2. Tax Credits/Deductions/Exemptions: This study group is tasked with studying the flip side of taxes: the multitude of tax credits, deductions, and exemptions that cut into total tax collections. This often ignored side of the tax ledger is coming in for closer examination with new reporting requirements which will require an accounting of how much these credits, deductions, and exemptions are costing and what the state is getting in return.

3. The Budgeting Process: Initially, this study group was tasked with studying biennial budgeting. Alabama adopts budgets each year, which is the practice in 30 states. The other 20 states adopt budgets that run for two years, a practice called biennial budgeting. Proponents say biennial budgeting creates a better climate for planning and would allow the Legislature to perform a more meaningful review of agency operations in the years when it was not struggling to pass a budget. Critics point to the difficulties that states face in predicting revenue from year to year. They also point to the fact that in biennial states, budgets are often revisited in the off-years, negating the expected gains in time and effort the biennial budgeting theoretically creates. At the Task Force’s November meeting, the chairman of this study group, Rep. Kyle South (R-Fayette), said his study group will not only study biennial budgeting but will also examine Alabama’s process for crafting budgets in a more general sense.

4. Agency review: This study group is seeking information from agencies to further clarify the financial position of state agencies. Because some agencies receive earmarked taxes and federal funding, legislators aren’t always clear on how budget cuts will affect an agency. At the November meeting, Phil Williams, (R-Gadsden), the study group’s chairman, presented preliminary information his office had gathered from state agencies. The agencies were asked to provide the total amount of federal funding received and the amount each agency had in reserve at the end of the budget year.

5. Tax Relief: This study group is tackling the question of whether Alabama’s current tax structure is fair, equitable, and well-designed to encourage the economic prosperity of citizens and businesses.

As the study groups generate information, PARCA will be exploring these issues as well.

At the Task Force’s October meeting, the panel heard presentations from the current chairmen of the House and Senate Budget committees about the problems they face in crafting budgets. While all welcomed the Task Force’s attention to budget matters, a good deal of skepticism was expressed about some of the approaches under review. Earmarking creates problems, the budget panel chairs acknowledged, but they expressed doubt that reform of earmarking would provide a significant change to the bottom line or would be politically feasible. While there was interest in the concept of biennial budgeting, some questioned whether, in practice, a shift to such a system would yield better results. All expressed interest in having better information on which to base budgeting decisions. They encouraged sustained attention by the Legislature and leadership from the governor’s office toward improving the budget process.

There is a lot of money at stake. In round numbers, Alabama government dispenses about $30 billion a year: about $12 billion from state sources and $18 billion from federal and other funds.

Figure 1 Source: Legislative Fiscal Office

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Lackluster 2016 Receipts to General Fund and ETF

Both the accounts that pay for state government operations, the General Fund and the Education Trust Fund (ETF), ended the 2016 Fiscal Year basically flat when compared to the previous year, a sign that the state’s struggles to balance budgets will continue in the future.

What would have been a moderately healthy year of receipts to the Education Trust Fund was dragged down by a drop in corporate income tax collections and the shifting of some revenue into the General Fund to cover anticipated shortfalls in that account. The perpetually struggling General Fund was buoyed by that revenue shift from the ETF and by the increase of tax rates on cigarettes, but was weighed down by a drop of non-recurring revenue sources and lagging collections of taxes on oil and gas production.

For the Fiscal Year that ended Sept. 30, 2016, total receipts to the ETF were $6 billion, up only slightly from 2015. Final receipts to the General Fund, $1.8 billion, were down compared to 2015.

Those basically unchanged, bottom-line numbers from the previous year mask a titanic, behind-the-scenes struggle to balance state revenues with state spending, a struggle that is certain to continue.

Approaching Fiscal Year 2016, the scene for budget problems was set. In 2015 and for two years prior, the state propped up the General Fund, which pays for most of the state’s non-educational operations, with borrowing from the Oil and Gas Trust Fund. The Oil and Gas Trust Fund is in effect the state’s savings account.

The state borrowed approximately $146 million a year for three years. This was authorized by a constitutional amendment passed in 2012. The three years of borrowing was to give the Governor and the State Legislature time to come up with a sustainable solution for a long-running problem, a General Fund that doesn’t bring in enough revenue to support the state’s non-education agencies. The General Fund is fed by a collection of tax sources that don’t grow with the economy. As the expenses of state government grow, especially on big-ticket items like Corrections and Medicaid, the General Fund can’t keep up. The main taxes that grow with the economy – the sales tax and the income tax – are deposited in the Education Trust Fund.

After contentious debate and multiple special sessions in 2015, the Legislature increased the state cigarette tax by 25 cents a pack, which in the end yielded an additional $65 million for the General Fund. The Legislature also changed the allocation of the Use tax. The Use tax is similar to the sales tax and has historically been divided between the General Fund and the Education Trust Fund. The change in the Use tax allocation yielded an additional $100 million for the General Fund, but decreased the amount that the Education Trust Fund received in 2016. While that $165 million in new money for the General Fund would seem to make up for the anticipated hole in the General Fund, there were additional factors that hampered the performance of both the General Fund and the Education Trust Fund in 2016.

The General Fund

As mentioned above, the shift of Use tax revenue and the increase in the cigarette tax boosted the General Fund collections. Also helping the General Fund bottom line were payouts resulting from litigation over the BP oil spill lawsuit. Those settlements brought in an additional $70 million in 2016.

Also, there was some healthy growth in a few of the General Fund taxes that do grow with the economy. For example, proceeds from the tax on insurance premiums rose $10 million, an increase of 3.63 percent over 2015. Sales taxes on automobiles were up by almost $9 million, up 9.8 percent over 2015.

However, there were additional factors that weighed on the General Fund. In addition to the hole caused by the end of the borrowing from the Oil and Gas Trust Fund, the 2015 General Fund was padded by another one-time source of money. For years, the state has been in litigation over its former franchise tax, a tax that was declared unconstitutional. The state had set aside money in escrow to pay claims arising from that litigation. With those lawsuits finally winding down and in the face of 2015 budget difficulties, the state decided it was safe to release most of that money from the escrow account. That one-time revenue available in 2015 was not present in 2016. As a result, the 2016 General Fund received $115 million less from that source.

The General Fund’s problems for 2016 didn’t end there. General Fund tax receipts from oil and gas production saw a $25 million drop. That drop stems from low energy prices and declining production from the state’s oil and gas reserves. In the end, the General Fund collected $13 million less in 2016 than it did in 2015, a decline of -0.70 percent.

Entering 2017, the General Fund will have some cushion thanks to the Legislature’s decision this year to convert the long-term payout of the BP oil spill settlement to up-front cash. The move will result in $85 million in 2017 and $105 million in 2018 to support the Medicaid spending in the General Fund. But once this non-recurring infusion ends, the Legislature will face the difficulty of filling that hole.

Moves in recent years to shift additional growth taxes, like the Use tax, into the General Fund should increase the General Fund’s capacity to grow. The bump generated by the cigarette tax increase helped in 2016, but in the long-term, cigarette tax collections have been trending down as tobacco use decreases. It remains doubtful that General Fund revenue growth has the ability to keep up with the rising costs of the agencies it supports.

The Education Trust Fund

Meanwhile, on the Education Trust side of the ledger, what would have been a healthy growth year turned out to be anemic.

Individual income taxes were up $144 million, a respectable 3.68 percent. Sales tax collections climbed 4 percent, $87 million more than last year. Another bonus for the ETF was the end of the multi-year effort to pay off the ETF’s debt to its Rainy Day Fund. Having completed that repayment, The ETF got to keep an additional $57.5 million that in prior years was applied to that repayment.

But dig deeper and the ETF took some significant hits. The shift of the Use tax receipts to the General Fund decreased the amount of that tax flowing to the ETF. Though overall Use tax collections were up, the net amount sent to the Education Trust Fund fell by $66 million

The biggest hit to the ETF was a decline of $150 million in corporate income tax collections. That drop effectively wiped out the increase in individual income tax collections. Some of that drop was anticipated. The 2015 corporate income tax total was padded with about $90 million in one-time receipts, resulting from audit findings from past years. However, forecasters were surprised by the additional $60 million drop in corporate income taxes and are unsure what caused it. Since much of the decline happened in the latter part of the fiscal year, it may be due to a general decline in corporate profits during that time period. Revenue officials in other states saw similar declines.

Also down were utility tax collections, dropping $25 million, a fact that may be attributable to the warmer winter of 2015-2016.

When other incremental adjustments and smaller taxes are considered, the ETF in 2016 took in just 0.4 percent more than is in 2015.

Going into 2017, the Education Trust Fund should be poised for healthier growth. It will need it. The 2017 Budget, approved earlier this year, includes a 4 percent raise for teachers. In the meantime, the weakness in corporate income tax receipts bears watching.

No doubt, the Legislature will face fiscal challenges in the upcoming session.  PARCA will continue to follow these important issues.