2014 Education Trust Fund Performance


While the looming shortfall in Alabama’s ailing General Fund has received much attention, the state’s Education Trust Fund (ETF) isn’t exactly enjoying robust growth, according the recently published year-end report on receipts to the fund.

The ETF, which pays for public K-12 and higher education plus an assortment of other smaller agencies, grew just 2.1 percent over 2013. And revenue from Alabama’s income tax was practically flat in FY 2014 as compared to 2013.

The income tax provided 60 percent of the Education Trust Fund’s $5.8 billion in revenue in 2014. Sales and use taxes provided another 32 percent. A public utility tax provided 7 percent of the total. A handful of other taxes made up the remaining 3 percent.

Since it contains the income tax and most proceeds from the state sales tax, the ETF tends to grow with the economy. For example, sales tax receipts to the Education Trust Fund increased by 5 percent.

However, that number is somewhat inflated. In 2013, lawmakers sent $52 million straight to K-12 schools rather than depositing it in the Education Trust Fund first. This year, that $52 million drops into the ETF, creating the appearance of extra growth. Growth in sales tax collections were more like 2 percent.

According to analysts, this year’s income tax receipts, at least as they compare to 2013, are also skewed. Income tax collections jumped more than expected in 2013, thanks to some selling of stocks and the end of 2012. Those moves, made in anticipation of higher tax rates, produced a one-time jump in revenues in 2013. Looking at wage income alone, taxes collected through withholding increased about 2 percent in 2014 over 2013. But thanks to the inflated 2013 number, overall income receipts to the General Fund increased just 0.8 percent.

During the current fiscal year, the state is anticipated to make its final repayment of the $437 million borrowed for education from the Rainy Day Fund during the economic downtown. The state still owes $92 million that is due by Sept. 15, 2015.

All in all, the Education Trust Fund has still not recovered enough to provide the level of funding for schools it provided in 2008, before the Great Recession. The final repayment and a pickup in job growth in recent months should allow for some improvement in the 2016 budget year.