MONTGOMERY — Alabama officials said the state stands to lose thousands of jobs and millions in revenue for schools if the president and Congress don’t reach an agreement before the country goes over the “fiscal cliff.”
“There will be cuts in everything,” Gov. Robert Bentley said.
The Republican governor said research by the National Governors Association estimated that higher taxes and reduced federal spending could cause Alabama to lose 24,000 jobs. That’s slightly more than 1 percent of the people currently working in Alabama. That would push Alabama’s unemployment rate from 8.1 percent to more than 9 percent.
Another study from George Mason University estimates a greater impact with nearly 39,000 jobs lost in Alabama.
Failure to reach an agreement in Washington would also affect those already without jobs in Alabama. Extended unemployment benefits that now stretch to 76 weeks are set to revert back to the standard 26 weeks on Jan. 1. Tara Hutchinson, spokeswoman for the state Department of Labor, said about 18,000 jobless Alabamians would lose their extended benefits.
If the Bush-era tax cuts expire Jan. 1 and people start paying more for Social Security and Medicaid, the nonpartisan Tax Foundation estimates the typical Alabama family will pay $1,540 more annually.
That would mean a double-whammy, state officials said: First, it means Alabamians will have less to spend, which means fewer sales tax collections for state and local governments.
Second, Alabama is one of only a few states that allow citizens to deduct those federal payments on their state income tax returns.
For Alabama, the higher federal payments means higher deductions on state tax returns and the loss of about $145 million annually in state income taxes, said Curtis Stewart, director of tax policy and research for the state Revenue Department. That $145 million represents a 4 percent drop from what Alabamians paid in individual income taxes in 2011.
Alabama uses its income taxes to support public education. The $145 million equals nearly half of what Alabama allocates for operating its two-year college system.
Deputy state school superintendent Craig Pouncey said Alabama schools get nearly $1 billion annually from Washington, and they will lose $80 million to $100 million of that. He said the money primarily goes to special-needs students and school lunch programs.
Pouncey doesn’t expect the cuts to appear until July 2013 because of the way the money flows from Washington.
Bentley said he would like to see the national dilemma resolved through spending cuts and elimination of some tax deductions, rather than a change in anyone’s tax rates.
“I think everyone’s taxes are probably going to go up. But you cannot solve it unless you cut spending,” Bentley said.
Any reduction in federal spending would have a big impact on Alabama because more than 38 percent of the revenue spent by state programs in Alabama comes from the federal government.
That includes everything from helping the poor with winter heating bills to school lunch programs. Education officials said the most immediate impact would be on federal funds for low-income schools and for special education programs.
A study by the Pew Center on the States found that Alabama would feel budget cuts more than most states. Federal spending in Alabama on procurement and salaries accounted for 8.9 of the state’s gross domestic product in 2010. The national average was 5.3 percent.
The bulk of federal spending in Alabama was related to defense, and it provided stable economies around large military bases and aerospace companies in Huntsville, Mobile, Ozark and Montgomery.
As federal officials look for a solution, Alabamians know that most people don’t like budget cuts. At the request of the governor and Legislature, Alabama voters decided by a 2-to-1 margin on Sept. 18 that state officials could take $437 million out of state savings account during a three-year period to alleviate further cuts in state services.
For the federal government, there’s no similar cookie jar to raid.
“We need to be honest with the American people. This is going to take sacrifice, and it’s going to take sacrifice on everybody’s part,” the governor said.