MONTGOMERY — Congress avoided the fiscal cliff, but the result of the New Year’s Day budget compromise now means an estimated $60 million drop in education funding in Alabama.
“It reduces our taxable income,” said state Rep. Jay Love, R-Montgomery, chair of the House committee that oversees the state’s Education Trust Fund.
Here’s the problem: The legislation did not prevent the temporary Social Security payroll tax from expiring on Jan. 1. In 2012, that 2-percent cut in the payroll tax was worth about $1,000 annually to a worker making $50,000 a year, The Associated Press reported.
Now the federal Social Security payroll tax has jumped back to 6.2 percent. While it means less take-home pay for Alabamians, it also means an increased deduction on state income taxes. And income taxes are a major revenue source for the education budget, which this year is about $5.5 billion.
“That will be $60 million less than we could have had,” Love said.
The good news is that the Education Trust Fund revenue has been increasing. The fund, which supports the state’s K-12 system as well as the two- and four-year colleges, ended fiscal 2012 in September with its first surplus in three years.
State Sen. Arthur Orr, R-Decatur, who sits on the Senate’s education budget committee, called the $60 million decrease “extremely significant” because even though the ETF’s revenue is expected to increase at least slightly, so are some of its expenses. The largest of which is a $423 million loan it must repay the Alabama Trust Fund in the next two years.
Meanwhile, Henry Mabry, executive secretary of the Alabama Education Association, and others are advocating for a 10-percent raise for teachers.
State Rep. and Minority Leader Craig Ford, D-Gadsden, pre-filed a bill that would give teachers, education support personnel, other state employees and retirees a 10-percent cost-of-living increase over two years — 2014 and 2015.
Educators have not received a raise in five years. The 10-percent increase for educators represents about $374 million.
“Under the current budget constraints, 10 percent will be impossible,” Love said last week. He went on to say that he’s hopeful that smaller raises are possible in 2014.
Orr said a 1-percent raise for teachers equals about $35 million.
“Sixty million dollars can equate to almost a 2 percent raise for teachers,” Orr said last week.