Alabama public school students improved their performance on statewide standardized tests in 2023, with the percentage of students testing proficient rising across most of the tested grades (3-8) and subjects (English Language Arts (ELA), math, and science).

Printable PDF version available here.

Figure 1. Trends in Proficiency by Subject

Just over half of Alabama students, 52%, were proficient in English Language Arts across all grades, and only 31% demonstrated grade-level proficiency in math. Fourth and eighth graders were tested in science, with 41% scoring proficient.

Figure 2. Trends by Subject and Grade Level

English Language Arts

The broad-based improvement comes as a relief since earlier this summer, a subset of the test, 3rd-grade reading results, showed a decline in the percentage of students reading on grade level. Those third graders also showed a slight decline on the broader test of English Language Arts, with the percentage of students proficient declining from 54% to 53%. Eighth graders’ ELA proficiency rates declined by almost 3%, to 50%. However, for students in grades 4-7, the percentage of students scoring proficient in ELA improved. The 2023 ELA test was adjusted to reflect updates to the ELA course of study. It is unclear how those changes might have impacted scores.

But across all grades in English Language Arts, a curious pattern is present. The percentage of students scoring at the highest level of proficiency is growing but the percentage of students scoring at the lowest level of proficiency is also growing.

The test groups students into four levels:

• Level 1: Minimal understanding of grade-level standards
• Level 2: Partial understanding of grade-level standards
• Level 3 Strong understanding of grade-level standards
• Level 4: Advanced understanding of grade-level standards

Figure 3. ELA Results, by Percentage of Students at Each Level of Proficiency

Across all grades on the ELA test, more students are testing at Level 4, while at the same time, more students are scoring at Level 1, the lowest level.

Math

The math results are different. Math proficiency has long been Alabama’s Achilles heel, with our students scoring consistently at or near the bottom on national tests. While proficiency is still low overall, math results on the ACAP are improving. As in ELA, more students are testing at Level 4 in math. But unlike ELA, the percentage of students scoring at the lowest level is also shrinking.

Figure 4. Math Results, by Percentage of Students at Each Level of Proficiency

In math, students in every grade improved their proficiency rates. However, another long-running problem for Alabama’s math proficiency is that it declines steeply as children move into middle school. In 3rd grade, 44% of students are proficient, but by 8th grade, only 21% are.

The Challenge of Poverty

One constant about standardized test scores is that the socioeconomic composition of a school correlates with performance on standardized tests like the ACAP. In schools and systems where rates of economic disadvantage are low, a higher percentage of students achieve proficiency. Schools and systems where economic disadvantage is concentrated, standardized test performance is lower.

Figure 5 allows the presentation of both factors at the school system level. Systems in dark red and on the left of the chart have higher concentrations of economic disadvantage. Systems that are dark green are on the right side of the chart. Systems high on the chart have high rates of student proficiency. Systems lower on the chart have lower rates of proficiency. The line slopes up and to the right to reveal the pattern in the data: a lower percentage of students in poverty, the higher the percentage of students achieving proficiency.

Figure 5. Percent of Economically Disadvantaged Students vs. Proficiency Percentage

A similar array, but looking at performance at the school level, is also available. While this pattern recurs across datasets, these charts highlight the fact that some schools with high levels of economic disadvantage outperform peer schools with similar levels of poverty.

Another encouraging note is that the widespread improvement observed in the results, across grades and subjects, was not restricted to one race or ethnicity, or to a socioeconomic subgroup. Performance gaps between groups remain. But almost all economic and demographic subgroups improved their overall rates of proficiency in the three subjects. In both 4^th and 8^th grade, the declines in English Language Arts proficiency declines were also distributed across all subgroups.  

Figure 6. Trends among Student Subgroups

Alabama students and faculty continue to recover from time and learning lost during the Covid 19 pandemic. Results indicate that teachers are becoming more successful at teaching learning standards, and students are mastering those standards at higher rates. On all fronts, Alabama has a long way to go if it is going to provide a nationally competitive education. Proficiency in math is a long-running concern; in nearly 20 districts, 10% or less of students are scoring proficient. In English Language Arts, the rising percentage of students scoring at the highest level is a cause for celebration. However, the growing number of students scoring at the lowest level is a particular concern as Alabama emphasizes literacy.

Record education budgets, supplemented by pandemic-related federal aid, have allowed for higher levels of education spending than ever. The Legislature has invested in more systematic approaches to literacy and math instruction. It is imperative that schools, systems, the state, the Legislature, the Governor, and the general public identify money being spent that is producing positive results. Successful approaches should be maintained when the inevitable constriction of revenue arrives. Ineffective spending should also be identified and reprogrammed.

About one-quarter of Alabama third graders were not reading on grade level by the end of third grade, leaving them vulnerable to academic struggles as they progress in school, according to data from the reading subsection of the Alabama Comprehensive Assessment Program released Thursday.

Printable PDF version available here.

Among second graders, 11,622 or 22% of students statewide were below grade level at the end of second grade. Parents and educators have a year to get those struggling readers caught up to grade level. Next year, the final piece of the Literacy Act is set to go into effect. Third graders who haven’t caught up to grade level by next spring could be vulnerable to being held back.

Since the Literacy Act was passed in 2019, the State Legislature has provided major increases in funding for reading instruction and services, re-energizing the Alabama Reading Initiative (ARI) and school-based reading coaches. Teachers from Kindergarten to third grade across the state have received intensive professional development designed to improve the teaching of reading, an instructional approach based in the science of reading.

ARI has deployed extra support to high-needs schools. Alabama’s Literacy Act was based on similar legislation in Mississippi and Florida. Both those states have seen significant gains in early grades literacy after implementing reforms.

This year, 24% of Alabama third graders tested below grade level. That’s up from 22% in 2022. State Education officials pointed out that the 2023 test was updated to reflect the state’s new course of study and differed from the 2022 test. (See information from the Department). Also, this year’s third graders were in kindergarten when schools closed in Spring of 2020 due to the Covid-19 pandemic. Their first-grade year was, in many cases, disrupted by continuing complications of the pandemic, including remote learning during a critical period for their reading instruction.

Not all students reading below grade level would be retained under the act. The Literacy Act contains good cause exceptions for students who are receiving services for diagnosed learning disabilities. The Act also provides alternative methods of measuring a child’s literacy level. However, the goal of the Act is to encourage parents and schools to identify struggling readers early and provide needed interventions so they are ready for the educational pivot that occurs in fourth grade.

Alabama Reading Initiative Director Bonnie Short told State Board of Education members Thursday that initial analysis indicates systems where more teachers were trained in and fully implemented the research-based approaches to instruction gains in reading performance were higher.

By fourth grade, students are expected to know how to read and to use reading to learn. According to research:

• A child not reading proficiently by the end of 3rd grade is four times more likely to fail to graduate from high school. Among students who failed to complete high school, 2/3 were not reading on grade level by the end of third grade.
• A struggling reader who is also poor is three times more likely to fail to graduate than a struggling reader who isn’t living in poverty.
  • Source: Jeopardy: How Third Grade Reading Skills and Poverty Influence High School Graduation

All students from kindergarten through third grade who aren’t reading at grade level are provided literacy boot camps in the summer. In high-need schools, all students are offered the opportunity. According to Alabama State Superintendent Eric Mackey, about half the students who take advantage of the summer program test at grade level by the end of the summer. However, not all of the identified children attend the summer literacy programs, as they are not required to. The state department and school systems are trying to encourage attendance and remove barriers. This summer, the state has authorized the use of transportation support for the literacy camps.

The highest concentration of students testing below grade level tend to be found in school systems where the poverty level is highest. The graphic below shows that correlation.

But demographics are not destiny. At the school level, there is a wide variation in the percentage of students reading below grade level. Thus, school-based leadership, teaching, training, culture, and resources make a difference.

You can explore your local system and compare results to peer systems, systems with similar economics and demographics.

Results are also available at the school level.

Huntsville continued to surge ahead as Alabama’s three other largest cities lost population to surrounding suburbs. However, the pace of decline slowed in Birmingham and Montgomery, as it did in many cities nationwide that were hit hard by pandemic-driven change.

That’s from the latest estimates produced by U.S. Census Bureau. The estimates cover the period between July 1, 2021, and July 1, 2022, a period during which the effects of the Covid-19 pandemic continued to echo.

Since the outbreak of the Covid-19 pandemic, many urban centers have seen an erosion in population, both from heightened death rates and outward migration due to changes in work and commuting patterns. In 2022, some central cities began to bounce back, particularly in the South. Nashville and Atlanta returned to population growth.

Meanwhile, other Southeastern cities barely slowed during the pandemic and have since accelerated. Charlotte, N.C., and Jacksonville, Florida, landed in the Top 10 for growth in 2022, along with Florida and Texas cities.

Alabama’s Four Large Cities

As the 2020 Census approached, the state’s four largest cities had converged at about 200,000 residents each. As the cities have changed ranks, population trends have become increasingly closely watched. (Coverage by Al.com).

Long the state’s largest city, Birmingham’s population peaked in 1960 at 340,000. After 1960, almost all Birmingham-area residential growth occurred in surrounding suburbs rather than the city. A downtown urban residential renaissance in recent years hasn’t been enough to offset the shift to newer housing farther from the city center. According to the estimates, Birmingham is now the third largest city, behind Huntsville and Montgomery. However, Birmingham’s urban core remains larger, and its metro area is more than twice as large as Huntsville.

Meanwhile, Huntsville’s population growth has been spurred by both private and public defense and technology investment, as well as by the successful recruitment of manufacturers like Mazda-Toyota and Polaris. And unlike Birmingham, Huntsville has been able to add population because it strategically annexed land where residential and job growth is taking place. Instead of being surrounded by a ring of suburbs, Huntsville now encircles its largest suburb, Madison.

Mobile has seen steady population loss but is pursuing an annexation campaign to boost its population above Birmingham and Montgomery.

Metropolitan Statistical Areas

When looking at groupings of urban counties known as metropolitan statistical areas (MSAs), the state’s largest MSA, Birmingham-Hoover, saw a population decline according to the estimates. Data released earlier showed that growth in Shelby and St. Clair County didn’t offset the larger out-migration from Jefferson County and the elevated rate of death rate experienced in Jefferson County. In the new 2022 estimates, most of the inner ring of Birmingham suburbs also showed a population decline, with the growth concentrated farther from the city center. Mobile, Gadsden, and Columbus, GA-AL MSAs also saw declines. The rest of the state’s MSAs posted population gains.

A cluster of north Alabama MSAs — Huntsville (Limestone and Madison County), Decatur (Morgan County), and the Shoals (Colbert and Lauderdale Counties) — saw the most growth. In percentage terms, Baldwin County MSA grew the fastest.

Growth in Smaller Cities

Most of the population growth occurred outside of the big four cities. Tuscaloosa and Auburn-Opelika continued to see population increases. Tuscaloosa has seen Alabama’s most significant bump in its total population since the 2020 Census. Part of the rise in the numbers was due to what amounted to a recount. Tuscaloosa successfully argued that the 2020 Census undercounted the city’s population since most students had left for home during those early days of the pandemic. After considering new data, the Census Bureau now counts Tuscaloosa’s population at over 110,000, more than 10,000 residents higher than the 2020 estimates base.

Huntsville neighbors Madison and Athens were among the big gainers, as were more distant neighbors in its orbit like Cullman, Florence, and Muscle Shoals.

Baldwin County’s growth is widespread to the south, with several cities — Foley, Daphne, Fairhope, Gulf Shores, and Loxley — among the top 20 for growth in Alabama cities.

The most recent estimates showed close-in Birmingham suburbs Vestavia Hills, Homewood, Mountain Brook, and even Hoover as declining in population. The high cost of houses and short supply in the already-developed suburbs has likely affected the trajectory of population levels in those communities. Meanwhile, newer suburbs farther afield, like Helena, Chelsea, and Calera, continue to see growth.

Montgomery, which was long the only sizeable city in Montgomery County, is seeing population growth in its relatively new neighbor, Pike Road, which has added more than 1,000 new residents since 2020. Prattville is seeing similar growth levels.

The population is growing modestly in Wiregrass communities, the biggest gainer being Enterprise which has added about 1,000 residents since 2020.

Cities surrounding Anniston and Gadsden have continued to see very modest population changes.

Across Alabama, about 55% of cities lost population in the most recent year. Wide swaths of rural Alabama, particularly in the west and central part of the state, are experiencing population decline. Only 50 cities statewide out of 460 added 100 people or more between July 1, 2021, and July 1, 2022, according to the estimates.

PARCA’s new report, titled E-Commerce and Taxation: Questions of Efficiency and Equal Treatment, questions whether changes are needed to the state’s Simplified Sellers Use Tax (SSUT).

Executive Summary

Alabama’s tax on online goods sold by out-of-state sellers, the Simplified Sellers Use Tax (SSUT), has been a boost to state budgets but a mixed blessing for local governments and schools. As online commerce continues to grow, the assessment and distribution of the tax is increasingly important and potentially problematic.  

At the state level, the SSUT is the equivalent of the state sales tax, a 4% levy on online sales, the same rate that is applied to sales in Alabama stores. In terms of state taxes, the SSUT creates a level playing field between online vendors and brick-and-mortar stores. But at the local level, the tax creates winners and losers.

• Online retailers benefit from a simple system, paying a total of 8% on all purchases made by Alabamians. The proceeds are divided in half between the state and local governments.
  
• Brick-and-mortar stores are put at a competitive price disadvantage. The weighted average sales tax is 9.25%[1] across the state, and thus, most in-person sales are subject to higher taxes than online purchases.
  
• Communities with less commercial activity and lower wealth benefit from the distribution formula of the SSUT because the proceeds are distributed on the basis of population, not where the purchase occurs.
  
• Big cities and counties, which tend to have higher sales volume and local sales tax rates higher than 4%, receive less from online purchases made by their residents than if those same purchases were made in person.
  
• In 2021, 120 school systems received revenue from county sales tax (totaling $665 million), and 40 school systems received revenue from city sales taxes (totaling $176 million). Some systems receive both city and county sales taxes. In total, 131 school systems received sales taxes from a county, a city, or both.

Considering the divergent interests involved, no one policy solution satisfies all parties. Options include:

• Raise SSUT’s rate to match the prevailing local sales tax rate.
  


• Join the 24 other states participating in the streamlined sales tax, which would allow a unified system for applying and remitting sales taxes for online and in-person sales. The local tax rates could be applied, but only one entity would collect state and local taxes, eliminating local oversight.
  


• Build our own system for online retailers to look up and submit sales taxes based on where the purchase is made.

Since state and local coffers are full at the moment, immediate action on the SSUT is not expected. However, the issue will become more central with the continued shift toward online sales.

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[1] Janelle Fritts, “State and Local Sales Tax Rates,” Tax Foundation (blog), accessed March 22, 2023, https://taxfoundation.org/publications/state-and-local-sales-tax-rates/.

Introduction

The SSUT is Alabama’s tax on goods sold by online, out-of-state sellers. Since its adoption in 2015, more and more consumers have chosen online shopping carts over their metal counterparts.

According to the US Census Bureau’s Retail E-Commerce Sales Report, online sales accounted for less than 1% of sales in the fourth quarter of 1999 compared to 15% of all retail sales—more than $260 billion—in the fourth quarter of 2022.     

Figure 1. Total E-Commerce by Quarter and E-Commerce at a % of Overall Retail Sales, U.S. Census

The changes in the way we buy also affect the way we pay for state and local government. Shifts between traditional and online sales alter the flow of revenue with important consequences for the General Fund and Education Trust Fund, counties and municipalities, and schools across Alabama.

Although the SSUT was initially celebrated for capturing an elusive revenue stream, its distribution formula has led to debates about fairness. The SSUT’s rate is lower than the rate for in-person purchases in most large cities, creating an advantage for online retailers at the expense of brick-and-mortar stores. The growing volume of commerce the tax applies to has sparked fears that the traditional sales tax will diminish in favor of the online alternative. That, in turn, would diminish the revenue that cities and schools depend on.

Figure 2. Estimated Growth in E-Commerce Activity, based on collections of the Simplified Sellers Use Tax

This report aims to explain the SSUT’s origin, describe how it works, analyze its implications, and discuss alternative policies so that Alabamians are equipped for the conversation on the SSUT.

The Origin of the Simplified Sellers Use Tax

Traditionally, states were limited to applying sales tax only to transactions within their borders. That norm was challenged in the 1990s by Quill Company, which sold office equipment and stationery over the phone and through mail-order catalogs. A Delaware corporation, Quill shipped goods all over the country. Those sales went untaxed until the North Dakota State Tax Commissioner tried to force the company to collect and pay taxes on their sales in that state.

Supreme Court Decision Blocks Taxation on Certain Interstate Sales

The Supreme Court ruled in Quill’s favor and struck down the North Dakota tax. From 1992 to 2018, a company without a “physical nexus” (an existing retail outlet) in a state would not be subject to any taxation from that state. The decision, which revolved around mail-order catalogs, helped make way for the unforeseen boom in online retail sales.

In 2000, e-commerce retail sales made up less than 1% ($6 billion) of total sales in the U.S. By 2010, that percentage had climbed to nearly 5%, representing $45 billion in sales. That commerce went largely untaxed. Alabamians were expected to report their online spending when they filed their tax returns and to pay taxes on those items purchased. That is known as a consumer use tax, a companion to the sales tax, but it applies to purchases made in another state. The use tax is generally paid by the buyer rather than the seller.

But relying on consumers to self-report online purchases and pay taxes through the income tax system was ineffective. As states recognized they were missing out on an increasing share of revenue, they began to develop policies to capture it and lobbied for a national solution to the problem.

SSUT Initially Established as an Optional System for Online Sellers

Initially, states created voluntary tax schemes, like Alabama’s SSUT, for sellers to collect and remit online sales taxes. By 2018, 45 states had 45 policies with different qualifications, thresholds, and expectations for compliance. Alabama’s was called the Simplified Sellers Use Tax: “simple” because of its statewide flat rate of 8%, “sellers” because it put the burden of remitting on the out-of-state vendors.

Established by Act 2015-448, Alabama’s SSUT went into effect in January 2016. Its simple state-level rate of 8% made it easy for online vendors to collect a flat rate on sales statewide and submit the proceeds to the state rather than collecting and remitting sales taxes to each municipality and county where they sold items.

Meanwhile, pressure continued to build to allow states to tax online sales, particularly as it became increasingly clear that online retailers were benefiting from an advantage over brick-and-mortar stores located in local communities.

Supreme Court Reversal Allows States to Tax Online Sales

In 2018, the U.S. Supreme Court reversed the Quill decision, and in South Dakota v. Wayfair upheld a South Dakota law that required online sellers to collect and remit taxes on their sales in the state. The Wayfair decision led states, including Alabama, to amend and mandate their respective tax policies. The ruling stipulated, though, that state tax schemes should not put an undue burden on sellers.

Alabama’s SSUT Laws and Amendments

Since its establishment as a voluntary tax, the SSUT has been revised multiple times to conform to the changing environment. Highlights include:

Act 2015-448

Established SSUT. Allowed vendors with no physical nexus in the state to collect and remit an 8% tax on all online purchases destined from Alabama. The amount and its distribution proportions aim to mimic sales tax: a 4% tax levied by the state and 4% meant to represent local sales taxes. 

Act 2016-110

A business in the program may remain unless they establish a storefront or an affiliate business has a physical nexus.

Act 2018-539

Mandates marketplace facilitators with revenue of more than $250,000 to collect and remit. Additionally, a 2% discount (of the tax collected, not a reduction of the 8% SSUT rate) will be allowed on the first $400,000 remitted if remitted in a timely manner.

Updated the distribution formula to its current formation:

• State of Alabama takes half (4 cents on every SSUT-eligible dollar spent)
  • General Fund = 75% of the state share
  • Education Trust Fund = 25% of the state share

• Local Governments receive the other half of the revenue (4 cents on every SSUT-eligible dollar spent)

• 40% to counties
  • Individual county share based on the county’s share of the state population
• 60% to municipalities
  • Individual city share based on the city’s share of the total municipal population

Act 2019-382

Updates the amnesty and class action provisions for eligible sellers.

Figure 3. Growth in total collections of the Simplified Sellers Use Tax

How Has the SSUT Worked for State Government?

Alabama has an unusual approach when it comes to taxes and spending, an approach that has led to perpetual problems with budgeting. In most states, a mixture of taxes is levied, collected, and deposited into a General Fund. Then a budget reflecting the state’s priorities is created, and the funds flow out accordingly.

In Alabama, the bulk of taxes are earmarked by law, collected, and spent for a specific purpose. The largest sources of state revenue, the income tax and the state sales tax, are earmarked for education.  

That has been good for education in good economic times because those taxes grow with the economy. In bad economic times, that has been a problem because revenues contract and cuts have to be made. For the rest of the government, earmarking creates a problem. There is not enough money to pay for needs, and what revenue there is does not grow enough to keep up with inflation.

In recent years, the Legislature took steps on both the budgeting and the revenue side to improve the situation. On the budget side, they set up a system that keeps from overspending during periods of growth.

On the revenue side, the SSUT was one of a handful of enhancements that injected much-needed growth into the General Fund.

Historically, the General Fund, which pays for non-education functions of state government, has been slow growing. The addition of the SSUT has helped change that equation, adding a rapidly growing revenue source to the General Fund.

The General Fund receives 75% of the state share of the SSUT ($233 million in 2022), providing 8% of the fund’s total. The remaining 25% of the state share of the SSUT flows into the Education Trust Fund.

Figure 4. The SSUT’s Contribution to the Education Trust Fund and General Fund, 2015-2022

SSUT collections as a percentage of the funds have grown as well. In addition to the SSUT growth, the General Fund has benefited from adjustments to and growth in the traditional sales and use taxes.

In 2015, the General Fund (GF) received a total of $1.9 billion, and the Education Trust Fund (ETF) received a total of $6 billion. At the time, the SSUT contributed nothing to either. Meanwhile, sales and use taxes made up 9% ($168 million) of the GF and 32% ($1.9 billion) of the ETF.

In 2022, the GF received $2.8 billion, and the ETF received $10.4 billion. The SSUT contributed 8% ($233 million) and 1% ($78 million) of the GF and ETF, respectively. Meanwhile, traditional sales and use taxes made up 15% ($418 million) of the GF and 26% ($2.7 billion) of the ETF.

Figure 5. Change in Contribution of the SSUT and Sales and Use Tax to the Education Trust Fund and General Fund

While the SSUT arguably shifts revenue from the Education Trust Fund that would have been collected as sales tax, the rise of online sales has occurred at a time when the traditional sales tax and income tax have grown rapidly.

Thus, despite the change in flow, the ETF has seen healthy growth as well. Sales tax collections rose more than 40% from 2015 to 2022, but other revenue—principally the income tax—rose even more. Revenue from income taxes nearly doubled, from $3.9 billion to $7.4 billion in 2022.

Figure 6. Overall Growth in Alabama Education Trust Fund and General Fund, 2012-2022

How Has the SSUT Worked for Local Governments?

At the state level, the SSUT closely parallels the state’s general sales tax, except in its division of proceeds between the General Fund and the Education Trust Fund. At the local level, though, the revenue produced by SSUT and distributed to local governments does not match local sales tax rates or activity level.

Whether or not the SSUT should closely resemble local sales tax is a policy decision. Presumably, online sales compete with local brick-and-mortar sales. Those local brick-and-mortar stores must collect a higher sales tax rate than online retailers. Brick-and-mortar stores also pay property taxes and employ more local residents than are supported by delivery services linked to online retailers.  

At the same time, sales tax collections tend to be concentrated in larger communities. Those larger communities benefit from not only the sales taxes paid by residents but also from sales taxes paid by people from other towns and unincorporated areas who drive in to shop.

With the rise of online sales, should the taxes paid on goods purchased on the Internet and delivered to doorsteps reflect the existing shopping patterns? Or should the proceeds of online sales taxes be equally distributed according to where people live?

Currently, the SSUT reflects a simplified collection and distribution system with a flat rate and a distribution by population. Cities, counties, and school systems that benefit from taxes generated under the local sales tax system see the online option as a competitive threat, with a competitive advantage created by the SSUT.

At the same time, cities and counties without a strong commercial base may be benefiting from an online delivery system that decreases their residents’ need to travel to commercial centers while generating taxes that would otherwise have flowed to commercial centers.

Figure 7. Distribution of the Simplified Sellers Use Tax, as divided between state and local governments, 2022

Counties

Counties are now receiving 20% of total SSUT collections.

For those counties with little income from sales tax, the money from the SSUT represents new revenue. But counties that generate significant sales tax revenue might be missing out on revenue due to purchases moving online. That is because the tax rate for the SSUT is lower than the sales tax in most large jurisdictions. Additionally, the revenue from online transactions is being dispersed across the state on a per capita basis with no adjustment for where the order and delivery are occurring.  

The loss of revenue to a particular county can be estimated by first taking a county’s sales tax collections and estimating that county’s proportion of Alabama’s total sales tax collections.[1]

That proportion applied to an estimate for total online sales can be used to estimate that county’s portion of all SSUT-eligible spending. Finally, the county’s sales tax rate is applied to find the revenue the county would have received if the county’s tax rate was applied to online sales.

In fiscal year 2021 (FY 2021), Jefferson County received $14.2 million from the state from SSUT collections. That year, $6.4 billion was spent statewide on SSUT-eligible goods. According to PARCA calculations, in 2021, Jefferson County accounted for about 17% of the state’s total in-state sales tax collections. If Jefferson County accounted for 17% of SSUT-eligible spending as well, Jefferson County would have had more than $1 billion in taxable online sales. If Jefferson County’s countywide sales tax was applied to that total, the county would have collected $28 million in revenue from that online commerce.[2]

In FY 2021, Greene Country received $195,000 in remitted SSUT collections. Using the same approach applied to Jefferson, PARCA estimates that Greene County would have collected only $66,000 if it applied the county’s 3% rate to its estimated level of SSUT-eligible sales.

Another way to compare SSUT distributions and local sales tax is to take income into consideration. The current per capita distribution assumes that every person in every county spends similarly online. Since higher income is correlated with higher levels of spending, an income-weighted distribution might more closely approximate actual local spending patterns.

For instance, in FY 2021, Madison County received $7.2 million in SSUT remittance. If SSUT was distributed by income and population, PARCA estimates the county would have received $10 million in disbursements.

Figure 8. Top 5 Counties in SSUT Distributions

Cities

Questions about the SSUT’s distribution formula are most pressing for municipalities where brick-and-mortar stores tend to be concentrated. Higher sales tax rates and dependence on sales tax revenue make the issue especially contentious.

Since 2018, all municipalities have enjoyed this new revenue from online sales, with the amount received based on city population. However, municipalities with large populations and high sales tax contend they are losing out on revenue they would have received if the purchases had been subject to a local sales tax instead.

In FY 2021, Tuscaloosa received $4.8 million from the estimated $6.4 billion in SSUT-eligible statewide spending. PARCA estimates Tuscaloosa’s 3% tax on its portion of statewide sales would have yielded upward of $6.6 million.

In FY 2021, Hueytown received $860,000 from SSUT disbursements. That year, it accounted for roughly 0.33% of the state’s sales. If Hueytown had received their 4% tax on that proportion of the SSUT sales, it is estimated they would have received a slightly lower amount: $856,778.

Hueytown represents a middle ground of municipalities that receive similar collections in both methods. The smaller the sales tax collections, the greater the difference between what they would have collected and what they received.

Many municipalities have less sales tax revenue than Hueytown, and many are probably receiving twice what they would have collected from sales tax.

While this distribution method might seem inequitable, it is worth considering the flaws of traditional sales tax.

Sales taxes are paid at the point of sale. This means that the Alabamians flocking to cities with high sales tax for retail are not only paying above their dwelling municipality’s sales tax, but they are also paying into the budgets of a different municipality altogether.

Figure 9. Top 11 Cities for SSUT Distributions

School

The SSUT and its distribution system also have an impact on school budgets. School systems receive sales tax money, collected and distributed according to local law or flowing through the county or municipal government. Presumably, as sales shift online, that revenue is diminished. The taxes from those online transactions, collected through the SSUT, are distributed to cities and counties. Unlike sales taxes, local governments are not obligated to pass along a portion to the schools.    

In 2021, 120 school systems received revenue from county sales tax (totaling $665 million), and 40 school systems received revenue from city sales taxes (totaling $176 million). Some systems receive both city and county sales taxes. In total, 131 school systems received sales taxes from a county, a city, or both.

Some cities treat the SSUT as if it were sales tax and distribute it to the schools in the same proportion as the traditional sales tax. Some school systems have negotiated agreements to receive a portion of the SSUT. Many have not.

The Alabama Department of Education asks school systems to report local sources of revenue. This reporting may not completely capture whether or not SSUT funding is flowing to the systems, but far fewer systems report receiving SSUT funding than report receiving traditional sales taxes. As of December 2022, only eight school systems reported receiving funding from their county’s SSUT revenue, and only seven school systems reported receiving funding from their city’s SSUT revenue, according to Alabama Department of Education records.

SSUT’s Unintended Consequences in the Marketplace

SSUT decisions also impact brick-and-mortar businesses. The SSUT’s low rate of 8% allows out-of-state vendors to charge lower prices than their in-state competitors.

Brick-and-mortar businesses employ more people and contribute to the local economy in various ways, including through the payment of rent or property tax. And yet they are compelled to collect a higher combined sale and local sales tax rate than an online seller.

Small businesses in Alabama are obligated to collect and remit sales taxes, whatever their sales volume. Out-of-state online businesses that sell less than $250,000 to Alabama customers are not obligated to participate in SSUT.

There are also situations in which local businesses could find an advantage in selling through a third-party, online marketplace facilitator and thus avoid paying local taxes. The online transaction could be facilitated through an online marketplace, assessed the 8%. The customer can then pick up the item at the store or have it delivered to the home, circumventing local sales taxes.  

Alternatively, some Alabama residents are, at least in theory, overpaying sales taxes on online transactions—Alabama residents who live in jurisdictions where the sales tax is lower than the 8% SSUT.

The Alabama Department of Revenue does have a process in place to reimburse residents living in these jurisdictions. The process involves filing a claim with documentation of purchases. The Department does not report how much has been claimed through that process.  

Still, even if a rural resident pays the SSUT on a transaction, it is not necessarily true that they are suffering an injustice. If that rural individual were to instead purchase the same item in a physical store, that store would likely be located in a jurisdiction that collects 8 cents or more in local taxes, since most retail stores are located in cities with sales taxes.

If Alabama wanted the SSUT to match the local sales tax, it would need to make sure a replacement system doesn’t impose an “undue burden on interstate commerce.” The opinion of the court gave little detail about what is burdensome, but it expressed that what South Dakota had set up “appear(s) designed to prevent…undue burdens upon interstate commerce” and that it would be up to Congress to decide. Despite this, there are cases going on in Louisiana and Colorado that might force the courts to give more guidance.

It is currently unknown what constitutes an undue burden, but it gets even harder to anticipate what that will look like as new technology emerges. In the Quill era, finding local rates in different states and remitting the correct amount was a huge burden. Nowadays, it has been made much simpler by the creation of easy-to-use databases and automated processes.

Currently, Alabama’s SSUT is less burdensome than most other policies. This means that our policy will not likely conflict with a future ruling. The implication for Alabama is that we could probably afford a more complex and demanding policy that might fix some of the problems discussed in this report.

Policy Alternatives

Alabama Simplified Sellers Use Tax has plenty of fans, and, for the time being, it will likely remain as it is.

It is simple—one uniform rate statewide, collected by one entity, the State of Alabama. This simplicity decreases the cost of compliance for businesses and the cost of collection for the state. It also encourages participation in the system, which otherwise could be difficult to enforce.

For smaller jurisdictions that lack commercial activity, it has created a revenue stream where none existed. For counties, always cash-strapped and lacking independent authority to levy a tax, the SSUT has been a boon.

But if the concerns of brick-and-mortar retailers and larger cities and counties are to be addressed, there are policy options.

Option 1: Level the playing field between online sellers and brick-and-mortar stores

The current SSUT rate of 8% online purchases is lower than the state average sales tax of 9.24%.[3]

That gives online vendors an advantage over brick-and-mortar stores. The difference is even more significant in some of the larger municipalities, with sales tax rates on in-person purchases reaching 10% in Birmingham, Montgomery, Mobile, and Tuscaloosa.

Table 1. Sales tax rates for top 10 cities, sorted by combined sales tax rate

Argument for: This option would maintain the simplicity of the SSUT for online sellers while leveling the playing field. This approach is the simplest to achieve politically and would benefit all the recipients of the SSUT. It would lower the incentive for companies to remain out-of-state or migrate transactions to an online third party.

Argument against: Raising the rate does not address objections to the current distribution system, which does not align with the level of commercial activity or wealth in a community. As currently structured, the SSUT is more of a statewide revenue-sharing mechanism than a local tax. Additionally, for residents of low-tax jurisdictions, the tax on online goods would be much higher than in their home jurisdictions. Raising the rate also does not address the plight of school systems losing out on local sales tax.

Option 2: Equalize other terms between online and in-person sales   

Currently, a remote business that generates less than $250,000 in revenue annually does not have to collect and remit SSUT. Notably, this threshold is more than double the typical threshold of $100,000 in force in other states. More importantly, there is no similar threshold for brick-and-mortar stores subject to normal sales tax. This gives small online retailers a considerable advantage over their local competitors.

Argument for: An adjusted threshold would bring Alabama more in line with the majority of states in terms of capturing sales taxes from online transactions, and changes could level the playing field with Alabama-based sellers. The amount of SSUT collections would increase, and all the recipients of it would benefit.

Argument against: The adjustments would impose a burden on smaller Internet-based companies in terms of compliance. It would not address the disbursement method for those who want it changed. It doesn’t help local schools that lose out on local sales tax.

Option 3: Apply to all purchases, online or in-person, the appropriate state and local taxes for the jurisdiction

Alabama could require online sellers to calculate and pay the sales tax based on where the order is being delivered. That would require that Alabama provide a system for cataloging, geocoding, and communicating the appropriate rates. And it would likely require localities to give up control of the tax collection and administration process.    

Perhaps, the easiest route would be to join the 24 states, including Georgia, North Carolina, Kentucky, and Tennessee, in adopting the Streamlined Sales Tax, a multistate cooperative system for simplifying the assessment and payment of sales taxes. The participating states agree to a set of common rules and definitions and provide up-to-date information on sales tax rates and the precise geographic areas where those rates apply.

The simplification effort was launched after the original Quill decision, which prohibited taxation across state lines because of the overwhelming complexity of determining local sales tax rates and rules in the multitudes of jurisdictions across the country. Since then, cooperating states have been supported by businesses interested in simplifying compliance and payment. Like the SSUT, the Streamlined Sales Tax initially offered a simplified and voluntary way to pay taxes on online sales.  

The drive to simplify and the evolution of technology helped pave the way for the Wayfair decision, which allowed states to require online vendors to collect sales tax. In the Wayfair case, the Supreme Court reversed Quill, recognizing that South Dakota, a participant in the Streamlined Sales Tax effort, had created a system in which Wayfair was no longer facing an “undue burden” complying with the taxes state and local governments levied.

Remote companies who want to sell to participating states must register with the Streamlined Sales Tax Governing Board Companies and then can use the database (provided by the state to the Streamlined Sales Tax Governing Board) of locations and tax rates. The collections are sent directly to a single state entity and then distributed to the areas from which they were collected.

Alabama has traditionally been resistant to having one entity, presumably the State Department of Revenue, administer taxes on behalf of all local governments. In fact, Alabama, Alaska, Arizona, Colorado, and Louisiana are the only states that allow complete home rule over sales taxes.[4]

That resistance to state collection and distribution is one of the reasons why Alabama has not joined the Streamlined Sales Tax organization. If Alabama joined, municipalities could still set their own sales tax rates, but they would lose control of aspects of tax administration. A centralized system for filing and payment of sales taxes would be required. Cities require returns submitted to individual jurisdictions or audit businesses they suspect are not paying their fair share. Certain definitions and schedules would need to be uniform.

Alabama’s SSUT avoids the complexities that would have resulted if Alabama allowed municipalities to tax online sales. Louisiana and Colorado both have notoriously complex home rule local sales tax systems. Both states are facing lawsuits from companies that claim the complex system is too hard to comply with and places an undue burden on remote sellers. If Alabama were to adopt a system in which local sales tax rates were assessed on online transactions, the state would be wise to adopt a unified and simplified system for administering it.

Argument for: Bringing local sales tax rates and online sales tax rates into conformity would create a level playing field and would allow local communities to set rates and benefit from the economic activity within their borders. Local transactions would support local priorities.

Argument against: Alabama would need to have a sole entity collect sales taxes and oversee sales tax auditing. Local governments would lose some aspects of control. Alabama would need to create and maintain a centralized database of all the sales tax rates and their respective boundaries. Compliance would be more complex for online sellers. The equalized distribution of tax resources produced by the SSUT would be eliminated and replaced with a system that perpetuates the concentration of wealth and economic activity.

Conclusion

The Simplified Sellers Use Tax was a good step in a direction many states still have not attempted. Its simplicity and low-rate prioritized compliance did not require much coordination. It enticed online sellers to participate, providing advantages at a time when collection and payment of online taxes were voluntary.

Since the SSUT was adopted, remittance is now mandated. The amount of money spent online has exploded, and with it, the consequences of the SSUT’s setup.

Currently, many brick-and-mortar stores must charge higher prices to cover higher tax rates. Large municipalities and counties miss out on critical sales tax revenue, and schools lose out on local sales tax revenue. Meanwhile, smaller counties and municipalities are receiving a substantial amount of money from SSUT distributions. The effects of this policy are somewhat hidden behind our recent windfall of federal money and general economic surge, but they will become more pronounced when we are strapped for cash.

Whether a change to the Simplified Sellers Use Tax comes this session or in the next few years, it will likely come. It could come as a small rate change, an adjustment of distribution, or perhaps a major overhaul of sales tax as we know it. Even after such a step, the Wayfair decision set in motion a technological and political conundrum that will not soon be solved. Ongoing litigation will more clearly establish what constitutes an undue burden in the collection of Internet sales taxes. This will change how much governments can ask of businesses, but evolving technology will also make that mark a continually moving target.

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[1] A certain portion of the sales tax is not attributable to a particular county. That pool of sales tax revenue is not considered in this calculation.

[2] Jefferson County’s traditional countywide sales taxes flow not just to the county commission but to multiple agencies as designated by law. As in other counties, the SSUT distributions in Jefferson are sent to the county commission.

[3] Fritts, “State and Local Sales Tax Rates,” accessed March 22, 2023, https://taxfoundation.org/publications/state-and-local-sales-tax-rates/.

[4] Gail Cole, “Economic Nexus, Home Rule, and Sales Tax: What Businesses Need to Know,” Avalara, Inc., accessed April 11, 2023, https://www.avalara.com/blog/en/north-america/2022/07/economic-nexus-home-rule-sales-tax-what-businesses-need-to-know.html.

As graduation approaches for the Class of 2023, there’s new data available allowing us to look back on last spring’s graduates.

The Class of 2022 faced particular challenges due to the Covid-19 pandemic, which struck when they were sophomores and persisted through their junior year. In both those years, the number of kids who dropped out was elevated: over 1,000 juniors from the Class of 2022 cohort dropped out, more than double the number of juniors that dropped out in the Class of 2021.

In the end, 89% of seniors graduated, compared to 92% in 2011, but those that persisted were more likely to finish college- and career-ready (CCR).

The Class of 2022 posted a significant jump in the percentage of CCR seniors, thanks to a jump in the percentage of students earning workforce-related credentials and an increase in dual enrollment.

In 2022, 79% of seniors were certified as CCR, up from 76% in 2021. That gain was despite a large drop in the percentage of seniors testing college ready on the ACT. (See PARCA’s previous analysis on the ACT results).

Fig1. Trends in High School Graduation and College and Career Readiness

The Class of 2022 broke a trend of smaller graduating classes, and despite the elevated dropout rate, more students graduated.

State leaders had been calling on schools to close the gap between graduation and career-ready rates.

A lower graduation rate combined with college-and-career readiness means that the gap between graduation and readiness narrowed to 10 percentage points, compared with 15 percentage points the previous year.

Shifts in Readiness

High school students can demonstrate college and career readiness in several different ways. Figure 1. allows you to explore trends on each measure. Diving below the surface on these measures presents a mixed picture of the Class of 2022.

Fig. 2 College and Career Readiness Measures, by Percentage of Seniors Earning

College and career readiness can be demonstrated by one or more of the following: 

1. Earn an Industry Recognized Credential through Career Technical Education: 39% of students earned an industry-recognized credential through career technical education in 2022, the highest rate for any class. These credentials result from taking work-oriented courses offered at high schools or K-12 career tech centers. Credentials must be tied to a student’s course of study and should be valued in a career field that is in demand in the regional job market. According to State Department of Education data, in 2022, the biggest jump in credentials earned was in certifications in the use of Microsoft software. Big gains were also posted in the number of students earning Certified Guest Professional credentials, a credential associated with the hospitality industry, and in Adult Beef Quality Assurance, an ag-related credential. Also posting gains were credentials associated with healthcare, construction, forestry, and the military’s ROTC programs. Across all grades, the 2021-2022 academic year saw more students earning CTE credentials than ever before: 33,535 compared to the pre-pandemic peak of 31,062 in 2019. While the growth is laudable, attention should continue to be focused on the quality and value of the credentials available.
2. Earn Credit Through a College: a higher percentage of students earned college credit while in high school in 2022 than ever before: 18%. That’s up from 17% in 2020. These courses, also known as dual enrollment, tend to be taken through a local community college but can also be through a university. The student must successfully complete the course and earn credit to qualify as CCR.
3. Earn a Qualifying Score through College-level Courses Taught in High Schools: Advanced Placement (AP) courses are taught in a high school but have the rigor and approach of college courses. In 2022, 12% of students qualified as CCR through AP, which is tied for the highest percentage ever. To count as CCR, a student has to score three or higher (out of 5) on the national end-of-course test, a level at which a college might award college credit. The number of students qualifying through success in International Baccalaureate (IB) classes also increased. IB is similar in rigor to AP, though less widely used.
4. Earn a qualifying score on WorkKeys: 39% of seniors demonstrated college readiness by performing well on ACT’s WorkKeys test. This marked a recovery in the number and percentage of students qualifying by this measure. After dropping from 2019 to 2021, 2022 saw a recovery of 5 percentage points in 2022. WorkKeys is a standardized test designed to measure whether students have the math and communication skills expected in workplaces. WorkKeys is no longer required, and, in many systems, students who have already demonstrated college and career readiness by another means opt out. (More on WorkKeys results below)
5. Earn a benchmark score in a subject test on the ACT: The percentage of students scoring at or above the college-ready benchmark on the ACT was down by 8 percentage points in 2022, to 37%. This rate has been dipping consistently every year and is now down 14% from 2018.  A student scoring above the benchmark has a 50% chance of earning a B or above and a 75% chance of making a C or above in that course in college. Covid disruptions may have had some bearing on students’ ability to prepare for and take the ACT, which tests readiness for success in college. Alabama’s drop in performance coincides with a national drop that began before Covid but appears to have been exacerbated by the pandemic.
6. Successfully enlist in the U.S. Military: The same percentage of students gained admission to the military, but that represents an increase of from 519 in 2021 to 590 in 2022. However, that total is less than half of what it was in 2018 when 1,129 seniors entered the military after high school.

Fig. 3 College and Career Ready, by Number of Seniors Earning

The Class of 2022 deviates from recent trends. Over the past few years, fewer students have been progressing through Alabama public schools. From 2018-2021, class sizes were down 7%. During that time, we saw a 6% decrease in graduates and a 5% decrease in career or college-ready students. In 2022 however, we saw a class size increase of 5%, a 2% rise in graduates, and an 8% rise in career or college-ready students. This symbolizes a return to pre-pandemic numbers. However, the new generation of students is known to be smaller. In light of this and the ongoing elevated demand for skilled workers, Alabama must focus on graduating every student with the skills needed to succeed in higher education and/or the workplace.

School and System Results

Last year, one system and twenty-four schools reported a 100% on-time graduation rate. This year, one system, Magic City Acceptance Academy, and only fourteen high schools reported a 100% on-time graduation rate. Fourteen high schools reported both 100% graduation and 100% CCR rate. In some schools, a higher percentage of seniors demonstrated college and career readiness than graduated.

Fig. 4 CCR and Graduation Rates by System, 2022

On the other hand, fifteen schools had graduation rates below 75%. Nineteen high schools had CCR rates below 50%. Only nine school systems had a gap greater than 25% between their graduation rate and the college and career readiness rate. In those systems, more than a quarter of students receiving diplomas hadn’t demonstrated their readiness for college or work, despite having met Alabama’s requirements for obtaining a high school diploma.

In the visualizations below, school systems and schools can be sorted by either graduation rate or college and career readiness rate. The solid-colored horizontal bar represents the graduation rate; the short vertical bar represents the CCR rate. Through the tabs above the visualization, other data is accessible, including a graph of the gap between the graduation and CCR rate by system.

The same set of sortable data is available by school. In order to protect student privacy, results for small subpopulations of students are not presented.

Fig. 5 CCR and Graduation Rates by School, 2022

Gaps Between Subgroups

Historically, there have been gaps in the high school graduation rate between students of different races. In 2022, the gaps in graduation got slightly bigger, and the gap in overall CCR was slightly reduced. Some trends seen in past years are continued or even exaggerated. CCR rates for economically disadvantaged students are well behind those of non-economically disadvantaged students. Examining the subcomponents of CCR, the gap is widest on the ACT despite everyone achieving lower numbers from years past.

Only 18% of Blacks and 22% of Hispanics benchmarked in a subject on the ACT, compared to 47% of whites. Asians are much further ahead, with 68%. By contrast, there is almost no racial gap in college and career readiness rates in career technical education: 38% of Black students earned an industry-recognized credential through CTE compared to 40% of whites and 40% of Hispanics.

Fig. 6 CCR and Graduation Rates by Subgroup, 2022

WorkKeys

The number of high school seniors taking ACT’s WorkKeys Assessment increased by almost 4,000 in 2022, a major reversal in a downward trend in the use of the test.

Along with higher participation, a higher percentage (60%) and a greater number of students (2,833) qualified as college and career ready as a result of their scores.

Fig. 7 WorkKeys Results, Statewide Trends

WorkKeys is given to seniors and is designed to measure practical math, reading, and graphical literacy skills as they are employed in the workplace. That’s different than the ACT, which tests for knowledge and skills needed in a college classroom.

WorkKeys was given to all seniors through 2019, but the State Department of Education stopped mandating the test in 2019. While some systems still test all seniors, some systems make the test an option for students who haven’t demonstrated college and career readiness by another measure.  

Some businesses, particularly industrial employers, build WorkKeys into their hiring practices. They have determined what level of proficiency, as measured by WorkKeys, is needed in particular jobs. Depending on their test performance, students earn a platinum, gold, silver, or bronze National Career Readiness Certificate. A student scoring Silver or above is considered college and career ready.

Jefferson, Mobile, Montgomery, Limestone, and Lauderdale County systems, as well as city systems in Huntsville, Birmingham, Florence, and Madison recorded large increases in the number of students taking WorkKeys and successfully earning credentials.

Fig. 8. Number of Students Workforce Ready 2022 and Change from 2021

The visualizations that follow present WorkKeys results statewide and in systems where more than 90% of seniors took the test. The percentage of students scoring workforce ready are those that score Silver or above.

Fig. 9. Percentage Workforce Ready by System, 2022

The visualization below presents the results in a more detailed fashion. Each color represents the percentage of tested students scoring at each level: platinum, gold, silver, bronze, and no certificate earned.

Fig. 10. WorkKeys Results, by Level of Certification, 2022

People are moving to Alabama, and according to most recent population estimates, the growth is more widespread than it has been. Out of 67 counties, 36 saw population growth between July 1, 2021, and July 1, 2022, the period covered in the latest Census Bureau release. In the prior year, only 29 counties saw positive growth. Throughout the 2010s, only 24 counties grew.

Fig. 1. Numeric Change 2021-2022

The growth is particularly noteworthy because four factors were putting downward pressure on population growth:

• Death rates were still elevated in the wake of the Covid-19 pandemic
• The large Baby Boom generation is entering years of increased mortality
• Smaller succeeding generations have lower birthrates
• International immigration is still lower than historical norms

Printable PDF available here.

But in the counties that grew, and for the state as a whole, domestic migration — a net positive number of U.S. residents moving into the state — overcame the headwinds.

Fig. 2 Domestic Migration 2021-2022

The strongest growth was among the usual suspects: Baldwin County in the south and Madison and Limestone counties in the north, with Lee, Shelby, and Tuscaloosa counties also continuing positive growth trends. The Huntsville area’s growth continues to spread across North Alabama, with population growth accelerating in The Shoals (Lauderdale and Colbert), Cullman, Morgan, and Marshall counties.

The Wiregrass and Northeast Alabama counties also grew, including Calhoun County, which had been on an extended population losing streak. Calhoun added over 600 new residents through domestic migration for a net population gain of 111. Etowah County attracted 524 new residents, but since deaths exceeded births, the population total declined slightly, down just 55 residents.

In percentage terms, Limestone County grew the fastest. That’s likely growth not only in Athens, the county seat, but also from Huntsville and Madison, which have spread from Madison County into Limestone. Generally, counties along the Interstate corridors are growing, as well as counties bordering Tennessee, Georgia, and Florida. On the western border with Mississippi, most counties are losing population.

Urban losses

Alabama’s traditional urban centers — Jefferson, Montgomery, and Mobile — lost population, primarily due to domestic outmigration.

That population loss parallels national trends among urban counties: in the wake of the pandemic, most population centers lost population. According to the estimates, Jefferson County’s population decreased 4,588 in 2022. Since the 2020 Census, Jefferson County’s population has decreased by almost 9,000.

Rate of Domestic Migration, 2021-2022

There are signs of a turnaround, though. Nationally, large urban centers began seeing population recovery in 2022. Jefferson County’s population loss was lower in 2022 than in 2021. International immigration and natural increase helped fuel population growth in urban centers elsewhere, including among Southern neighbors. Alabama’s big cities saw some population growth through international immigration. However, Alabama generally sees much lower rates of international in-migration.

Rate of International Migration, 2021-2022

Divergent Rates of Change

Alabama’s Black Belt and other more remote rural counties continued to lose population through residents moving away and through higher death rates. According to the estimates, Lowndes, Perry, and Greene Counties are each now below 10,000 in population, with Greene being the least populous at 7,422. Bullock, Coosa, and Wilcox are close to 10,000. Nationally, about 1,000 of the more than 3,000 counties in the U.S. have 10,000 or fewer residents.

Population Estimates, 2022, U.S. Census Bureau

In addition to outmigration, rural counties tend to have negative rates of natural change: in other words, more deaths than births. Those counties tend to have a higher median age, with a higher share of the population over 60. That’s a population that has an increased risk of death from natural causes.

Rate of Death, 2021-2021

On the opposite end of the spectrum are counties with a higher proportion of the population who are young adults or in their child-bearing years. In only eight counties have births outnumbered deaths since 2020: Lee, Shelby, Madison, Montgomery, Tuscaloosa, Limestone, Marshall, and Autauga.

Rate of Natural Increase, 2021-2022

The tabs above the images allow you to explore statistics for individual counties for births and deaths, and domestic and international migration, as well as numeric change over time.

The National Picture

Alabama’s population change is occurring in the context of national trends that are visible when zoomed out to the national level. Population losses in Alabama’s Black Belt are connected to patterns along the Mississippi River from Mississippi and Louisiana, Arkansas, Missouri, and even Illinois. Baldwin County’s growth rate has echoes along the coasts of Florida, Georgia, and North and South Carolina coasts. Huntsville’s growth sits at the edge of the mountain interior southern region stretching across Tennessee, North and South Carolina, and Northern and Central Georgia.

In Alabama and across the country, average scores on the ACT, the widely-used college readiness test, dropped for the pandemic-plagued Class of 2022, with Alabama scores reaching their lowest point since 2015.

Compared to the Class of 2021, Alabama public high graduates’ average composite score dropped by almost a point from 18.6 to 17.7 on a 36-point scale.

Printable PDF version available here.

That’s down from a high of 19.2 reached by the Class of 2017. The 2022 drop was sharper than but parallel to a half-point decline in the national average ACT score. ACT reports that the 2022 composite is the lowest national score in over three decades. The percentage of students rated college ready also dropped in every tested subject.

In Alabama, only 12.5% of seniors in the Class of 2022 scored at or above the college-ready benchmark in all four subjects. The subject with the highest college-ready rate was English, in which 40% of students met or exceeded the benchmark. In math, only 16.9% met the college-ready standard.

This PARCA analysis of ACT results includes interactive charts to explore and compare the performance of your local school and school system. Use the tabs above the graphs to explore different views of the data. Use the menu options on the right to change the subject being viewed or toggle through results for various demographic subgroups.

Why the drop in scores?

The most immediate explanation for the drop in scores is the Covid-19 pandemic.

While the Class of 2022 experienced a relatively normal senior year in 2021-2022, their sophomore and junior years, key ACT preparation and testing years, were disrupted.

In their sophomore year, in-person schooling ended abruptly in March 2020. Their junior year, which began in the fall of 2020, featured an uneven mix of remote and in-person learning. All Alabama juniors take the test in the spring, with some retesting into the senior year.

At the same time, many colleges dropped the requirement that students take a standardized admission test. So, students who previously would have taken the test several times in hopes of improving their scores were less motivated to do that.

On average, students who take the test multiple times improve their scores. According to ACT, the number of Alabama students taking the test three or more times declined from approximately 21,000 in 2017 to 13,000 for the graduating class of 2022. The results presented in this dataset and previous years are based on the highest scores achieved by graduates.

The drop in scores was prevalent across most Alabama schools and systems. There was no discernable pattern in the performance decline across schools and systems. Neither the socio-economic mix of the student population, per-student funding, or previous ACT score performance correlated with the changes.

Among demographic subgroups, White and Hispanic students saw steeper drops in performance than Blacks and Asians. As with most standardized tests, score gaps exist between racial, ethnic, and economic groups. On average, Blacks and Hispanics earn lower test scores, and a smaller proportion of test-takers in those groups reach the college-ready benchmark. Asians, on the other hand, outscore Whites.

Students from economically disadvantaged households are also less likely to earn a college-ready score than students who aren’t economically disadvantaged.

While the pandemic’s disruptions are the most immediate and obvious cause for declining scores, the downward trend in performance in Alabama and across the country predates the pandemic. What would have caused scores to rise in Alabama through 2017 and then decline? What factors would be so widespread that scores across the country on all four subjects could be affected?

ACT points to the declining percentage of high school students taking four or more years of core classes: four years of English and three or more years of math, social studies, and the natural sciences. Across demographic groups, students who take the full complement of core academic classes perform better on the ACT.

Why is the ACT important?

Many colleges use a student’s ACT score as a factor in admissions and as a qualification for scholarships. The ACT tests student skills needed for college success in four subject areas: English, reading, math, and science.

Each subject test is scored on a 36-point scale, and the subject scores are averaged to form a composite score. Through research, ACT established a benchmark score in each subject. Scoring above the benchmark is associated with having a 50% chance of obtaining a B or higher in the entry-level course in the subject area. Alabama tests all juniors as a way to encourage and support college aspirations among students and also as a measure of how well high schools are preparing students for college.

The ACT has been taken by all Alabama public school students since 2015 when the state began giving the test to all high school juniors. Because all students in Alabama take the test, the state’s scores shouldn’t be compared to the national average or to other states where the test is only taken by a subset of students, those applying to college.

The ACT serves as one of several measures of college and career readiness for students. Students whose score meets or exceeds the college-ready benchmark on one of the subject area tests are deemed college ready.

By giving all students the ACT, the state provides an opportunity for all students, regardless of wealth or family background, to take the test and consider pursuing a college education. Performing well on the ACT can attract the attention of colleges seeking and qualifying students for scholarships. Alabama is one of 16 states that test all or most high school students using the ACT.

The ACT also serves as a measure of how well high schools are doing at preparing students academically. Federal and state governments require a standardized test as part of their accountability requirements, and Alabama uses the ACT as its measure.

The ACT’s role in accountability and the decline in scores has some in the education community advocating for replacing the ACT.

At March’s Alabama State School Board meeting, at least two board members questioned whether the ACT was the proper test for accountability purposes. The ACT is designed to predict student preparation for success in college-level classes and doesn’t necessarily reflect the content required by Alabama’s course of study.

At the same time though, Alabama Governor Kay Ivey has set goals for raising Alabamians’ level of educational attainment. Some rise in attainment levels can be accomplished through technical training. The resulting credentials can improve income and career path. But a bachelor’s degree or higher still provides a more significant boost when it comes to better job prospects over the course of a lifetime. So, raising college-going and competition rates remains a key priority.

And despite the fall in scores on the ACT over time, Alabama’s high school graduation rate has increased over the same period, and the percentage of those graduates going on to four-year college has remained steady. Those two factors have meant the number of Alabama students proceeding on to four-year college has increased, despite the overall student population trending down. Meanwhile, the pandemic and the high demand for workers have led to a drop in the number and percentage of students going straight into two-year colleges. That’s not uncommon. In periods of low unemployment, more people are drawn directly into the workforce. For a more detailed analysis and discussion of college-going in Alabama, you can consult PARCA’s analysis of the most recent college-going rates.

Gov. Kay Ivey identified affordable and high-quality child care as a key priority in her speech to the Public Affairs Research Council’s Annual Forum, held Friday, March 10, at the Harbert Center in Birmingham.

“Many Alabamians and others across the country face a dilemma in finding safe, reliable childcare,” Ivey told the crowd of close to 400, “As more and more Alabamians join the workforce, which is a very positive development for our state and quality of life, more working families will also be in need of childcare services. There is no better time than right now to address this fundamental need facing this state.”

Friday’s Forum featured researchers, parents, childcare providers, and employers discussing the state’s challenges in fostering an adequate supply of affordable, convenient, and high-quality care for young children and their working parents.

Below you can find the program for the event, which includes biographies of the featured speakers.

Speakers included Alison Hooper, an assistant professor of early childhood education at the University of Alabama’s College of Education, whose research has mapped childcare availability and access across the state, and Cynthia Osborne, the executive director of the Prenatal-to-3 Policy Impact Center and professor of Early Childhood Education and Policy at Vanderbilt University’s Peabody College of Education and Human Development.

Osborne’s center has developed a 50-state comparison of key policies that relate to childcare, plus statistical comparisons of child well-being and policy options for delivering additional support to children and families. That includes a summary of findings for each state, including Alabama.

Both presentations are embedded below.

The Forum also included a panel facilitated by Janina Nobles, Child Development Instructor and Program Advisor at Bevill State Community College. The panel included a collection of parents, a childcare provider, and an employer to provide a range of perspectives on the issues happening in childcare.

Alabama’s population grew faster in 2022 than in any year in more than a decade, with changing factors producing the growth, according to estimates generated by the U.S. Census Bureau.

Printable PDF version available here.

The data, released in December, covers the period between July 1, 2021, and July 1, 2022. The Census Bureau estimates that Alabama grew by 24,450 or 0.5% over the period. That growth rate ranks No. 20 nationally and is ahead of Mississippi and Louisiana but behind Southeastern neighbors like Tennessee and the southern states on the East Coast.

Changing factors

From 2010-2017, Alabama grew slowly, with natural change (births minus deaths) and international migration (migrants arriving from another country) providing slow but positive growth.

Since then, factors have flipped. With the arrival of Covid-19, the number of deaths jumped. Natural change has gone negative, with more people dying than being born. While mortality from Covid will decline, the death rate is expected to remain elevated as the large population cohort known as the Baby Boom ages and moves into years of increased mortality.

Meanwhile, with changes to immigration policy during the Trump administration and with restrictions imposed during the pandemic, international immigration contracted. However, for Alabama, the contraction in international migration was offset by a surge in domestic migration: more people moving to Alabama from other U.S. states.

Rates of Change

As part of its data release, the Census Bureau calculates rates of change for the basic factors of population change. The rates are calculated by estimating the change and then adjusting for population.

• Alabama ranks 16th in domestic migration in 2022, but 48th in international immigration.
• Alabama’s birth rate was slightly above the U.S. average in 2022, but claims the 5th highest death rate among U.S. states

Conclusion

Alabama is growing, though not as fast as some of its Southeastern neighbors. Alabama’s high death rate indicates that underlying health challenges and disparities in healthcare access likely contributed to a higher mortality rate. Domestic immigration shows strength, indicating that the state is attracting new residents from other states. However, international immigration rates are lower in Alabama.

Estimates for counties, cities, and metro areas will be released later this year. Those estimates will provide further insight into where people are moving within the state and how other factors affect population change.

Alabama’s 2021 public high school graduates entered higher education at a slightly higher rate than the Class of 2020, according to new data from the Alabama Commission on Higher Education. However, with only 55% of graduates entering higher education the year after graduation, the 2021 rate was still much lower than in the years before the pandemic.

Remarkably, though, the percentage of high school graduates enrolling at 4-year colleges is tied with its highest rate on record, with 32% of Alabama high school graduates enrolling at 4-year schools. Even more notable is that the 4-year college-going rate for Black and White high school graduates was equal among the Class of 2021: 33% of Black high school graduates and 33% of White high school graduates in Alabama enrolled in a 4-year college the year after graduation. Historically, there has been a gap between the rate of enrollment of Black and White students in college.

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The new data comes from the Alabama Commission on Higher Education (ACHE), the state’s higher education coordinating body. ACHE annually queries the National Student Clearinghouse of Data to check which of Alabama’s high school graduates enrolled in college, either two-year or four-year, anywhere in the country in the year following their high school graduation. Maps, college-going destinations, and rates are available for high schools and public school systems by exploring the tabs in the visualization.

The figures for the Class of 2021 show a continuing decline in the number of recent high school graduates enrolling in two-year colleges. Only 11,389 or 23% of graduates enrolled at a community college compared to the more than 15,000 typically normally enrolled in community colleges in the years prior to 2018.

The number and percentage of students enrolling at 4-year colleges increased to 15,856 or 32% of recent high school graduates. Prior to 2019, the number and percentage of students who enrolled in four-year colleges and two-year schools were about equal.

Trends

College-going rates have been affected by multiple factors over the past decade. Between 2010 and 2020, as Alabama’s high school graduation rate climbed from 72% to over 90%, the percentage of those high school graduates going immediately into college declined. Some of those additional graduates likely lacked the academic preparation to go straight into college.

Two-Year Colleges

Also, in the current economy, demand for workers is at historic highs. Low unemployment and a strong economy typically drive down two-year college enrollment. And statistics support the idea that more high school graduates are entering the workforce rather than pursuing education. According to U.S. Census Bureau surveys, 32.6% of individuals between the age of 16-19 were in the labor force in Alabama in 2014. By 2021, 39% of 16 to 19-year-olds were in the labor force, according to Census.

The Covid-19 pandemic also disrupted college enrollment, particularly at two-year colleges. For graduates of the Class of 2020, two-year enrollment fell under 12,000, marking the lowest total since 2014, the earliest year in the dataset. And for the Class of 2021, the numbers were lower still, 11,389.

While those recent high graduates may be delaying entry to community college, other enrollees have begun to return to two-year colleges. At the height of the pandemic, overall Alabama community college enrollment dropped by 10,000, from approximately 80,000 to 70,000. Recovery began in 2021, and preliminary overall fall enrollment was above 75,000. Some students who didn’t immediately enter may now be returning to pursue a degree.

A final factor appears to have some bearing on the equation. An increasing number of high school students are also enrolled at community colleges, which is known as dual enrollment. In 2018, only 15,372 students took dual enrollment courses. By the 2021-2022 school year, 23,483 students were dually enrolled. Students taking dual enrollment classes can graduate high school with college credit, with an industry-recognized credential, or even with an associate’s degree. That will increase the chances the student will enroll at a four-year college after graduation or flow into the workforce. Those dual enrollment students aren’t captured in the college-going rate data which tracks high school graduates in the year after their high school graduation.

4-Year Colleges

Meanwhile, recovery was more rapid at four-year schools, with 15,856 graduates of the Alabama public high school Class of 2021 enrolling at 4-year colleges. That’s more 4-year enrollees than any year in the dataset, and it comes in a year when there were fewer high school graduates.

In terms of destination, the Class of 2021 sent more students to Alabama 4-year colleges but also increased the number of students going to out-of-state public and private schools. Enrollment at Alabama private colleges was slightly lower for the Class of 2021.

Interesting patterns emerge when college-going statistics are broken down by race. White public high school graduates are more likely to enroll in higher education than Black and Hispanic/Latino graduates: 58% of whites compared to 51% of blacks and 39% of Hispanics.

As mentioned above, White and Black high school graduates are enrolling in equal proportions at 4-year schools. But there has been a significant shift at 2-year colleges. In 2019, 25% of Black high school graduates enrolled at a 2-year school in the year after graduation. In 2021 only 18 percent did.

And among all groups, there has been an uptick in the percentage of recent high school graduates who did not enroll in college the year after graduating. According to the statistics cited above, these individuals are likely finding employment. It’s also possible that some of these high school graduates earned certificates that will allow them entry into a career with plenty of upward mobility. However, state policy should ensure these individuals have ready access to return to the education and training system if and when they need more advanced skills to pursue a more promising career path.