Trapped in Fiscal Fantasy: The Alabama State Government Budget

0:00The website you see plugged here, I'm just going to start with a quick plug to it, that's a brand new website, started in December and it's nothing more than a collection of political news, political opinions from around the state, state politics. It's a good place to go find information, after I put it together I found myself using the links on it to go look at Allison and a bunch of other things, you know, my book market, I can just go out to this one and use it. Well, you may not know it, but there's this horrible creature that haunts the Alabama countryside. It's got long fangs, it's got sharp claws, and it's got a ravenous hunger. Left unchecked, it will destroy our prisons and it will allow violent criminals to wander our streets freely. It will deny medical treatment to thousands of Medicaid recipients.

0:48It will oppress our children in the tyranny of illiteracy, and it will allow corrupt officials to cheat and steal without limits. This evil creature is the budget shortfall beast. Now I know the rhetoric is a little much and it's a little tongue-in-cheek even, but that's the kind of thing you can expect to hear and a lot of people believe it, that kind of prediction because we hear it all the time. Every year we hear that we're going to have a budget shortfall or proration or massive spending cuts. Every single year there is not a single budget year that goes by without it, without these claims. Most agencies go along with that.

1:33As they make their requests for money, they also tell you all the bad things that are going to happen. For example, I'll give you one example in the current budget year. The Ethics Commission says that without a 20% increase in funding, they will not be able to maintain their current workload. Let me rephrase that a little bit. If you only increase our funding by 19%, we're going to do less work than we did yesterday. These are the kind of things that you hear. It's very common. So what we need to do is we need to look at these things a lot critically. Do you all remember the $1.2 billion tax increase? Do you all remember the claims about it? School systems will go bankrupt and then close. We'd lose sports programs. Violent prisoners would wander the streets because we couldn't have any place to keep them.

2:20What would happen if we didn't pass the tax? Well, we didn't pass the tax, and none of them happened. These are the kind of claims that we have to really look at. When they start telling you the doom and gloom, we've got to look at it real close. Let's start by looking at the claims behind the shortfall. What are the claims being made? Well, first off, we have a $250 million shortfall in our budget. This, of course, ignores the $500

3:18So what's our solution? Well, we either have to cut spending and then there's the horrible consequences about people without Medicaid will lose matching Federal funds and everything else, or we have to raise taxes, which is of course every legislator's favorite topic. And the one thing again I want to reiterate is that the legislature has claimed shortfalls for at least the past five years. Now, I only go back five years because that's as far as my memory goes. I don't remember what happened in the mid-90s. I'm pretty sure they did then too, but since I can't prove it, I'm not going to claim it. But that's what the thing looks like. I always think it's a good idea when people talk about a shortfall.

4:06There's two sides to a budget. Budget is an equation. There's two sides to that equation. There's the spending and there's the income. They're all saying that the shortfall is a shortfall in income. The equation is unbalanced because of too little money. But it's also possibly unbalanced if there's too much spending. And so we have to look and see if that's the kind of thing that's happening. This chart was pulled from the budget documents available online at the Executive Budget Office and it shows the Alabama spending since the year 2000. And you can see that we've had steady increases in spending. As a matter of fact, the state budget has increased by an average of 6.2% a year or $982 million since 1999.

4:54Now, you remember last year, the last budget, the governor said, we've cut everything to the bone. And you've heard legislators say it this year, we're cut to the bone, we can't cut anymore. Does that look like bone or fat? That's a lot of money. And you can see some years are better than others. 2004 was probably the smallest. It's $710 million, only $710 million. But 2003 was $1400 million, $1.4 billion increase in spending. That's a lot of money. If you go back to 1999, you'll see that we have increased by almost $6 billion a year. 43% increase in spending since 1999.

5:42It's what, five, six years ago? That's a lot of money. That is a lot of money. Judging from this, we can't tell if there's excessive spending, but we can sure tell that there has been spending. And it does tend to hint that spending might be part of the problem.

6:06This is a total number. This is a total number. I could have broken it down by Education Trust Fund and General Fund and in fact I do have those figures broken down that way on politicsalabama.org and you'll find that they do, both of the funds increase steadily over the years. It toggles some years one way, some years the other. Two years ago, the General Fund grew a lot faster than the Education Trust Fund did. This year, there's no comparison. The Education Trust Fund is 10 times, you know, growing 10 times as fast as the General Fund. And I want to thank the Governor, by the way, for coming out with his budget last night, so I had time to incorporate it.

6:52The agencies have requested their money. Medicaid agency wants $127 million more, the Department of Public Health wants $48 million more, the Department of Human Resources wants $47 million more. The Department of Corrections is my favorite because they want to double their budget. That is literally double their budget. It's 100% increase in funding. It doesn't take much. The projection is we're going to have between 5 and 7 percent more revenue in the next budget year as we had this year. It doesn't take much intelligence to say, let's split the difference, with a 6 percent projected increase in funding, we can't afford 100 percent increases in spending.

7:39But you'll see agencies all throughout the budget requesting 20, 40, 50 percent. It just so happens that the Department of Corrections is the worst offender at 100 percent, but they're not the only ones. More evidence to show that, yeah, it could be overspending that's causing this budget problem that we're having. Well, the governor's come out with his proposed budget. And you'll see $10.2 billion for the general fund, $10.3 billion for the education trust fund. We broke $20 billion, ladies and gentlemen. That's a target we've been shooting at for years, but we broke $20 billion. Only a $174 million increase for General Fund. Wait a minute, I thought we had $250 million too little.

8:25But without a tax increase, he managed to find $174 million more.

8:35Remember, we're going to answer the question at the end, is the budget shortfall factor myth? I could stop now, but I won't. The Education Trust Fund got almost a billion dollars more. In his suggested budget, now this isn't what the legislature is going to pass, this is what he is presenting for them to build off of. Our total spending is more than 20 billion dollars. That's a 1.1 billion dollar increase, almost 1.2. And as I was telling Don Markwell, who is on WACV 1170, as a talk show host, I think the governor was thinking of him because he proposed an $11.70 million increase in spending. 6% increase in spending, which is pretty much what the projections were for increase in funding.

9:29They projected between 5% and 7% increase in funding, pretty good. That's a lot of information, so let's look at this a little bit. A budget shortfall, as I said earlier, can be caused, like this is going to be a short presentation, the topic is not that complicated when you look at it. The newspapers and the politicians like to make it complicated, but it's just not that complicated. A budget shortfall can be caused by one of two things, too little money, too much spending. There have been claims that we had too little money. Well, the governor managed a $174 million spending increase in the general fund with no tax increases. The money was there. That's what that says. The money was there. The claims were false. They had to be.

10:18Both the General Fund and the Education Trust Fund show a spending increase. And you can see the General Fund is increasing by 1.7 percent, the education by 10.6. Dramatic growth in the Education Trust Fund, little growth in the General Fund, but they're both increasing. I think we can answer the question now. Budget shortfall, fact or myth? It's a myth. Yes, absolutely. There's no question about it. It's not caused by inadequate revenue, and to be honest, it's not caused by excessive spending. It just isn't there. There is no budget shortfall. It'd be real easy to live within it. You can't say there's a budget shortfall when you're spending an extra $1.1 billion this year. There's no budget shortfall.

11:07In my honest opinion, when you hear about budget shortfalls, when you hear about prorations, when you hear about all the horrible things, these are just tactics, political tactics, for no other reason than to create a panic, to create a crisis that the public can get behind and say, you're right, it's something that needs to be fixed, to justify their need for the extra money, and that's about all it is. Math, and if the budget continues to increase at the current rate, 6.2%, we'll break the $30 billion mark in five years. Five years. It took us a decade to get from 10 to 20. It's going to take us five years to get from 20 to 30. Told you it was a short one. The The budget shortfall doesn't exist.

12:05You can see from the charts that the problem may not be excessive spending this year. Probably was excessive spending on a long-term basis. Q. Since you brought out the credit key, or the proration, the quote from Alabama, you just say it, by bringing it across in front of the vampire, I think it's actually a badge of honor for Alabama, right? It's the real world. It's how every Alabama family lives with proration. You come up and you find, oops, we used a little too much electricity this month. It's an extra 50 bucks. We'll just cut off two nights out at the restaurants this month.

13:03You spent more money in one area? Guess what? That's proration. So you cut it elsewhere. That's the way Alabama families live every day. That's the way the state government should live. And it's not a bad thing. It's a good thing.

13:33Absolutely, and you'll see that a lot. When the budget hits the desk, the news media treats that as what the state government needs, must have, to function in the coming year. Well, it's not that. It's a request for spending increase. The Department of Corrections asked for $266 million. Where is it? There it is. They got three. They'll live. They won't be able to build the two prisons they wanted. They won't be able to do a lot of things they wanted to do. But they'll survive. They'll continue. They got an additional $3 million in the governor's proposed budget. I don't think that will survive the legislature, by the way.

14:18Budget shortfall. Well, again, I still say there is no budget shortfall. If there was an actual budget shortfall, you would spend $250 million less than the general fund than we did last year, and we're not. We're spending $174 million more. So there is no budget shortfall. It's a myth. It's a complete manufactured thing to put pressure on us to approve tax increases. That's it. There were some of those. I saw the breakdown last night. There were some of those. But there was another $140-some-odd million, which had nothing to do with federal mandates, had to do with opening a new building they wanted to open and some other things. It had nothing to do with federal mandates. Some of it did, yes. But again, they got something that sounds is good. They got a nice looking peg they can hang the hat on. Unfunded mandates. Yes, they did have some of that. There's the peg. We got $100 million in unfunded mandates.

15:26We can hang up there a $266 million request for spending, for funding increase. Nice peg, isn't it? It's hard to argue with Medicaid and unfunded mandates. If they're talking about the Sports Hall of Fame, we're going to double the budget for the Sports Hall. That's an easy target, you know. You're going to double the budget for what? But for Medicaid, It's hard to argue against the Medicaid increase, you know, people look at you like you're some kind of a monster, they eat babies, you know, you're that. Yes sir?

16:07Excellent question and not one I have the answer to.

16:16and well I'm sure there's some of that in there I don't have the answer that question there's a lot of state agencies and I just haven't gone to look to see which are appointed and which are merit rate and all that kind of stuff so I I don't know the answer.

17:01Well, now keep in mind, they requested $266 million, they only got $3 million, so that's not a huge increase in their budget, and I don't know what the politics are behind it, unfortunately. But we've got a private prison being built here in the state and the state government has said we will not use it.

17:51I think there's even a state law that says they can't, which can be changed this legislative session. Does this say, I don't know, people go to the budget? Is it the Barclay Correctional, number one, who are asking for more money than anybody else would? Actually, Medicaid is the biggie. It takes, what was the figure, I think, 34 or 35% of the general fund budget. And I think it's somewhere in the neighborhood of, hmm? Oh, oh, I thought you were disagreeing with me. And I think it takes somewhere in the neighborhood of 18 or 19% of the total state spending. What a huge chunk, just for one department, you know. But that's where I think that is the biggest agency. After that would probably have to be the schools, I'm guessing, the K through 12.

18:41A hundred percent increase in funding is always out of proportion. I don't care what agency you are, you know, doubling your budget in one year, that's always with Medicaid, they're actually pretty good at the budgetary shuffle themselves, I found this when I was working with the governor, the particularly amazing, what we do in the state of Alabama, you know, the Medicaid, the state has to match the spending by the federal government, and 90% of it comes from the federal government or something to that effect, and Alabama has to match the spending by the federal government, and 90% of it comes from the federal government or something to that effect,

19:511500 or 2500 a bed? Isn't it lovely? I'm just curious, I mean, in different states tax different things, so you're going to visit Florida, and it's also secure to have a lot of tax exemptions for Florida taxing. And then, I'm not going to get into that, but it's just like the opposite person, how do they arrive at having to get into tax exemptions?

20:41There's a 10-cent tax on a deck of playing cards. I'm not kidding. There used to be something to fight gambling with. Obviously, a deck of playing cards isn't the big gambling demon anymore, so they don't use it for that, but it goes right into the general fund and have fun with it. But they'll tax anything they can get. There's a bill in front of the legislature right now that will actually not allow us to deduct our federal income tax from our and our state income tax. So that money we pay to the feds, we have to have that taxed and pay state taxes on it. Isn't that wonderful? You know, and these are the kind of things they do, you know, and they're talking now about what, a five percent tax on, or a nickel tax on soft drinks, or actually any bottled drink.

21:26So, you know, they'll tax anything they get their hands on, it has nothing to do with fiscal responsibility or what they need, it has to do with what they can get away with, you know. And that's exactly what we're looking at here. And that's what this whole thing with this budget shortfall is, you know, if the governor says we're not going to do taxes, you know, well, Hubbard, Paul Hubbard is complaining about almost every single thing the governor has proposed. And if Paul Hubbard gets his way, which he's got a lot of clout, then, you know, there's very little that the legislature is going to be able to do except raise taxes. The, you know, again, not because they need to spend the money, but because they want to spend the money. I don't think anybody that I've ever met can look at this kind of a spending increase in one year and say it's justified, you know, that's almost a $1.2 billion spending increase.

22:17And if you look at the year that the governor presented his $1.2 billion tax increase proposal, said we've got to spend this extra $1.2 billion, how much did our spending go up? A pretty good amount, right. So he wasn't talking about overall a $1.2 billion increase in spending, he's talking about that on top of what we normally would see, which would have put us at a $2 billion increase at least in one year. It's ridiculous, okay? These are overreaching legislators. These are people who see about spending money and want to spend it. That's how they get their power. Yes? Can you explain why the general fund is so much, there's so much less growth rather than the general fund and the education?

23:21And guess what? The kids don't have all the money they need to eat their hot meal and to work on their computer and surf out to all those websites. The general fund doesn't get that kind of, they don't have growth taxes to go to feed them. So an economic boom doesn't really help the state as we're seeing. You see that the sales tax collections has increased the education trust fund by almost a billion dollars this year. But because they don't have growth taxes behind the general fund. And, of course, you realize that the whole Education Trust Fund was created specifically to get around a constitutional limitation on spending, right? You can't make expense, or spend, how does this go? It's been a while since I've looked at it. There's a limitation on the spending increases you can make to education out of the general fund until, before your debt is paid off.

24:15Debt is paid off. As long as you have debt, you can't increase more to education out of the general fund. Simple answer, create a different fund, funnel all your education spending through that. Now you can have all the debt you want and still increase your spending at the education level. So the whole creation of the Education Trust Fund, well, okay, one way of looking at it, is that it was created as a dodge to get around spending limitations.

25:11But if you constructed via the Constitution, you actually need a constitution amendment in order to change the money going into it. So, we had $500 million extra going into Education Trust Fund. Because of the way the legislature set it up, they couldn't just transfer the money. Because that money is earmarked. The sales tax money is earmarked going into Education. I'm not sure. I had the information last night, but I don't remember it. The governor printed up a, well, okay, the legislative fiscal office posted an entire document showing all the sources of revenue, how much they're going to get, where it's going to go, and it was 137 pages long, so I didn't memorize it.

25:58Sorry. I looked at that two years ago and found out that teachers were paid in the neighborhood of $35,000 as an average salary and that the average Alabamian salary was in the neighborhood of $29,000. So teachers are getting paid more than everybody else on average, you know, for nine months of work. three-month vacation and you know not have to worry about so so you know that's that's the kind of thing you're looking at well you have to deal with the legislators each legislator has their own pet program that they want to see increased and there it is and you have to deal with it because you can't just the governor can present anything he wants but the legislators are the ones that vote on it.

27:12As a matter of fact, as we all know, it often comes down to one legislator, the chairman of the committee that the bill goes to. And if the chairman of the committee doesn't like the bill, it never gets on that agenda. We've seen that, haven't we, John? Haven't we, Dick? Haven't we seen this with ballot access legislation? It goes to the Constitution and Elections Committee, Gwen doesn't like it, it never comes up. One legislator, the way we've got our system structured, can block anything they want, as long as they're on the right committee. and so when you get the spending increases for this or spending cuts or whatever for this agency or that agency it can be blocked real simple or they can turn around and uh... put in a special bill for a special appropriation and uh... put it that way there's already one bill in the legislature for another tax exemption it's not even a charity it's a thrift store well I understand that thrift stores do a good job but

28:03a sales tax exemption they're talking about we have a two hundred fifty million dollar shortfall and they They want to give a tax exemption? What is this? It doesn't make any sense, but that's because the source, there's not one source for these bills. There's 140 sources in the legislation, and that's why. We're talking about giving the exemption to thrift stores? One specific thrift store, not even all thrift stores, just one thrift store, and that's part of the craziness of our system. Well, it's like Montgomery earlier, or I was going to say earlier this year, but last year came up with a brilliant idea to have a sales tax holiday.

28:51Where the state or the city and the county would get together and they would charge no sales tax for one day so you could buy school supplies. It was a great idea. And I got up in front of them and I said, why don't you do it all year long? If it's a good idea for one day, why isn't it a good idea for the whole year? Instead of one day of no sales tax, why don't you chop a whole penny off permanently? I'll take it. Especially since we've got a 10% sales tax in Montgomery right now. But they don't like that. It's easier to say one day sales tax free. It's symbolism. That's exactly what you're seeing with this budget shortfall thing. Budget shortfall, it's a symbol. It's something that most people can get behind. Most people can get behind. They don't bother looking deep to see the claws of the beast. All they see is the pretty facade that's painted over them.

29:39Yes, sir? Sorry.

29:58Looking at those numbers, it screams at me the pressure for them to want to get rid of their money. How soon do you think they'll actually do it?

30:28What the legislators do, because we're the ones who elect them. But if you look at them, and if you go out to the Politics Alabama's website, you can see a chart. Half of the state house sitting, our representatives today, didn't have an opponent in the last general election. Half. What choice do we have? I mean, how can we change that half of the legislature? We don't have a choice, and they don't care what we say, because we're not going to get a chance to vote for them anyway. And as long as we have that kind of situation, the legislators are never going to care what we think because the ones that don't have an opponent this last time think, you know, hey, it'll happen again. And the ones that had an opponent this time say, maybe I won't have one next time and it'll be my turn at the gravy train, you know. We've got people out there who've had six terms with no opponent.

31:16Alvin Holmes had five terms with no opponent. That's the only name I remember. There's a good number of names on the list. What's happened in the U.S. so often? The guys down in the U.S. so often, you've been here for a while, and you can't possibly live under a constitution with no guys in the U.S. Obviously, we know why they don't change the constitution, but do they still acknowledge that it's a completely bad constitution? I think within the next two or three election cycles, you'll see it push back up, and you'll see the constitutional convention idea come about, which is probably the worst idea I can possibly think of, the same people who we complain about how bad a job they've done in the last couple of years, the same people who complain about how bad a job they've done in the last couple of years, The legislature would have some control over completely rewriting it in their own image, are you kidding? No, thank you.

32:52Well, there are actually a few amendments that have been introduced to the legislature this session that do exactly that. If this provision has been superseded, it's no longer valid, repeal it. Perfect. That's the kind of thing you need. The only type of constitutional rewrite I would support would be one that only compiled all of the amendments into a single document.

33:39Just removed them by applying them into the document itself. That would be the only constitutional rewrite I would support. The argument is that if you have none of the above situation, you do not have a legislature I suppose it could happen if nobody ran, then what do they do if nobody runs?

34:36Well, if nobody runs, they'll do essentially like Dick Brubaker did at the last minute. He'll file his papers and he'll get in. Dick Brubaker, by the way, is one of, in my opinion, one of the better legislators. I like what he does. He does a lot of good work. But he came in at the last minute without an opponent. He never faced an opponent in the general election and he never faced an opponent in the primary. Nobody has ever voted with a choice for Dick Brubaker. And that's bad. He's a good legislator. I think he is. I honestly do right now. But how he got in was bad. He needs an opponent. Everybody needs an opponent. At least one opponent. Two, three, four. Don't talk about crowded ballots. Hey, that's fine. When I go out to eat dinner, I don't choose between McDonald's and Burger King. I've got hundreds of restaurants to choose from. And that's why I can always pick the one that best suits my needs today.

35:22Because I've got a lot of choices. We don't need two choices. We don't need one choice. We need ten choices. There are a few bills that have been introduced to reduce the ballot access requirements. The most interesting, believe it or not, did not come from a third party. And its proposal is to take the state judgeships, make them nonpartisan. There is no signature requirement for this, only a filing fee, 2% of the salary. That's great. Nonpartisan, I don't care whether they're Democrats or Republicans, look at their case histories.

36:07That's how you judge a judge, what decisions have they made, right? No signatures. You don't need people to say, yes, I want you to be a judge. They do that at the ballot box anyway. You just pay that little filing fee and you're on the ballot. Now I'd love to see that. I'd love to see that for the governor and all the other statewide races and the legislature. Let's get the parties out of the legislature. That's great. And that's probably the most interesting bill. And because it's the most interesting and promising bill I've seen, it ain't going nowhere. My opinion. I could be wrong, but I don't think it's going to get passed. In your opinion, a lot of times their budget projections, of course, are long, they don't necessarily pay out, sometimes they over-project, over-spend, but then they have to come in with unexpected prorations, a lot of times they under-project and they end up with extra money.

37:00And they spend it. There's no doubt about that. They always find a way to burn every last dollar by the end of the year, by the end of the fiscal year, by the rainy day. Well, the budget has at its bottom. I don't think we have any. Certainly we do. We still have money to look at. Yes, yes. They dipped into it last time to pay off some of the budget, and that's one of the arguments, is with that kind of an increase in funding, we should completely rejuvenate the rainy day fund. and Money-day Fund. But Paul Hubbard is saying, no, 7% teacher pay increase. That's the kind of thing that's biting into us. But at the bottom of every budget, you've got a section of conditional appropriations, which is appropriations, money we can spend if we have it. Well, they don't have it, that's fine, but hey, income is now going, the state revenue is increasing more than we thought it would. Guess what? These conditional appropriations kick in one

37:55by one. Boom, boom, boom, boom, boom. And there's no way we actually come up in the We spent the whole year with more money, you know, with a surplus than we thought we would, because those conditional appropriations lead all up as quick as they can. And we actually saw it, there was some late disbursements of cash. When we knew we were going to have a surplus, there were some late disbursements of cash these last couple of months. You know, so, interesting. Interesting.

38:50Those are the primary sources of income. I would think, given the fact that oil and coal prices are so high, in fact that forest crop prices are so high, and that agricultural crops are pretty high in the continent, And don't ever doubt it. The income projections are also based on how much they want to spend. That gets in there.

39:40I've seen the figures. I've seen figures from one agency and another agency talking about how much revenue we'd have and there's like $200, $300 billion difference in between, or a million dollars difference. So, you know, it's not as scientific as we would like to believe. A little more, yeah. Spending always goes up. Always goes up. Unless we have a proration situation. The legislature, in my memory, has never budgeted less this year than they had last year. Never. Never. They may run into spending too much and have to cut back I've got some figures from, I don't know if y'all ever read The Governing Magazine, they come out with a yearly source book, the last one was June of 2004, and based on that information, Alabama still had a negative economic momentum, it was small, I think four-tenths of one percent, but our economy was still trending downward, a negative economic momentum, not growing. Now that's obviously changing.

40:53I've changed a little bit with the sales tax and the revenue we're seeing, but Alabama has not responded like a lot of the rest of the nation has. Our economy is not growing gangbusters. I want to see the new numbers they come out with in a couple of months to see how we changed over the last year. And when you look at our tax, if you look at the tax revenue and our tax burden it looks is really low, we're always down in the low 40s, the 47th lowest taxes in the nation.

41:47But when you look at it on a per capita basis as a percent of our personal income, we're about up in the 13 to 20 range, because our income is a lot lower than most other states as an average, and so therefore the same amount of money taken out of ours is a bigger bite percentage-wise. So we actually rank higher when you look at taxes as a percentage of our per capita personal and Financial Income. We're way up there in the text. And I've seen, like I said, over the time I've seen this range between 13 and 20 in the rankings. And it's ridiculous. It's like when you look at teacher's pay, for example. Teacher's pay, we saw the report a week ago. It said, what, we were 47th, 46th in the nation. So really low, okay? Lowest teacher's pay. They weren't taking into account any of the benefits that they get. You know, the vacation, the healthcare. You pay $1, you got healthcare. Good heavens. That's a wonderful benefit.

42:38I'd love it, you know, but they weren't taking any of that into account, and somebody actually went to them and talked to them, spent some time, figured it out, and if you took that into account, we were up in the 20s, the retirement, yeah, there's a bill in front of the legislature right now that will allow people who've had military service to buy in retirement time. If you've had four years of military service, you can then pay the premiums that you would normally pay, a dollar a month, a dollar, whatever, you know, pay your premiums that you normally pay and you get credit for that as just as if you've been employed by the state, but you weren't employed by the state, so you shouldn't get the retirement benefits for it, you know. This is just one more way to get additional expense, more benefits for the employees, more expense for the taxpayers, and it's one of the problems that we have, because the legislators

43:24still do that kind of thing. Yes? In California, in the late 90s, when the budgets were going up, revenues were going up, capital gains were at all, instead of saving some of that money, the legislative body went off and gave bimms to state bureaucrats who went off over, and now they're gonna have to pay the price, ______. Pretty much and you saw the economic boon times, you know, if you look at all around the nation most states will increase their spending to match the revenue and it's a recurring expenditure.

44:13Well, we all know this, okay? Economies don't go straight up or straight down forever. You cycle, okay? You have good economic times and bad economic times. Good economic times, bad economic times. Well, the spending levels don't have anything to do with the economic times, you know? It's just when you get an increase in revenue, they increase the spending to match. And then when the revenue starts to drop, they start to panic. And the only way out of it is to raise taxes. So, yeah, that's exactly what happens. And it's not In the state government, there's so many automatic increases in spending, people get automatic raises, promotions, health care costs go up by so much, years of service, there's a whole series of things, the rental agreements that we agree to have automatic increases in spending.

45:08And you're exactly right, one of the big debates is how much of a raise to give teachers this year. The debate isn't should we give teachers a raise, it's how much. It's how much? It's how much because there's a state law that was passed a few years back that says if you get more than I think is a three or four percent increase in revenue to the education trust fund, you have to give teachers a pay raise. It's a mandatory pay raise. Well, look at that. We triggered it. They have to get a pay raise. So the question is how much? That's the only question we have. And you're right. That's a bad thing.

46:02Any time you're forced into giving a pay raise simply because you got the money, I was talking to a city council in Wetumka a few years back. They were considering dropping a one penny on the sales tax. And I was up there saying, yes, it's a good idea. You should do that. And as I left, one of the county commissioners corralled me. He says, I want you to be more persuasive because we could use that one penny sales tax that we're going to raise as soon as they drop it. City Councilman over in Montgomery once told me, we can always use more money, and that's true, they can always spend more money. There is no limit to it. You could double the budget today and they could spend it, okay? Department of Corrections, if you gave them their double budget, they'd be hollering for more within two years.

46:48They're never satisfied. Colorado has a good system that they implemented a few years ago, and what they do is they take last year's budget, multiply it by the increase in population, so the population went up by one percent, they would multiply last year's budget by a hundred and one percent. and then they adjust it to the cost of living so that in any one year, the budget can go up by that, by the contract, so you get a definite amount with 10 of these and if the revenues come in in excess of that, it has to be returned to the tax payers, it doesn't go into any of the funds or left over for some other project, it goes back to the tax payers, and they have to start all over again in the next two to three. Legislators and bureaucrats want to spend more money, but they're focused more on, you know, what can you cut so that you can spend on the paper projects and of course there's a lot of debate and public pressure to get rid of this amendment to the constitution and overspend those limits and things of that nature

48:12Also, you know, a lot of people think that the legislature does a much better job of managing resources because they drop programs and drop resources. They sell off those things in order to keep their products safe. Because they're more attentive to the general needs of the population. And that's a good idea. When Riley was elected, I sent a series of proposals and things he should think about when crafting his first budget. And one of them was that you had to have some way of examining programs, examining spending to see if it's accomplishing what you intended it to. And if it's not, cut it. Figure out another way to do it, and do it that way instead.

49:01And of course, I never heard back from him. He's not terribly interested in that kind of common sense. In a sense, that's the kind of wisdom you get when you talk to a business owner. Okay, the business owner says, is it paying, is what we're doing here paying for itself? No, stop it. Right, he has insisted on his performance-based budget. Which, I haven't seen its effects yet. Well, unfortunately... I haven't seen its effects yet. Unfortunately, it's, you know, here's your money, here's your duty, and did you accomplish your goal. But instead of saying, if you didn't, they're going to cut you. If you didn't, then you're going to get more money. So you didn't quite get the message. You didn't read all the way down to the bottom.

49:46Well, government actually, that is a common problem, and that is that the government rewards failure. They always view it as we didn't do it with enough money. And so therefore, increasing the funding for the next year will allow us to accomplish our goal. That is the way the government collective tends to think. There's individuals who are different, like I said Dick Brubaker doesn't seem to think that way when I talk to him, but as a collective that's the way they think. And so then when the schools are getting constant C's and D's on our performance and how they teach their students, well let's just funnel more money into them. That's the solution. It doesn't help because the same people are involved in spending the money and they're running the same programs that gave us the poor student education in the first place. But it's more money, therefore it must be good.

50:33That's one of the problems is the legislators tend to focus on money, not on performance. They don't care about performance. As long as they can hand money out, they've got power. They've got prestige. They can go on talk radio shows and TV shows and they can go to banquets and go to the GOP local meeting and be welcomed with open arms. Well, what happens to the legislators who don't do that, who don't put bills out, who don't bring money home? They get voted out the next election. So, yes sir.

51:27Yes. And that's why one of the problems I have with government competing in the private sector businesses, such as the ABC stores, okay? You've got government with their ability to just take in whatever money from the taxpayers they want, and there's no restrictions they have, really, effectively. They can under-price anybody they want, and they can do whatever they want. I want, fund it with taxpayer dollars, run anybody out of business they wanted to, if they chose to. Okay? That's the kind of power they have, running up against the privately owned package stores. I'd rather see privately owned package stores. It's not going to happen. Now, Fulmer, Emery Fulmer, former mayor of Montgomery, is now head of the ABC board, and he made the right noises at the beginning.

52:18Yeah, we're going to see about privatization, he said. Then he went in and came out and said, we can't. And I said, well, why can't you? Because we have leases with the buildings for like five or ten years down the road. Sell the leases to whoever buys the package store. No, no, we can't do that. Okay, yeah, phase them out one by one. Yeah, but see, it doesn't happen that way. So, the changes that we want to see are very hard to make simply because of the types of people that get up there. You know, I've had my disagreements and agreements with Mayor Fulmer, But I always gauged my opinion of him based on what he was doing. And it's lower now than it was before because of what he's not doing that he could do with the ABC board.

53:04Yes, sir? Would you say that the ABC store is pricing below the top? No, I said they could. If you want to look at it, though, there is a... Go to a package store, privately owned package store. Compare the price of the alcohol with what you'll find in an ABC store. It's higher. Why? The tech insurer has to buy from me the insurer has to retail fund me.

53:52You've got all the licenses and you're fine. You've got all the wine. You're ready to sell it. You can't sell it to somebody who walks in your door. You have to sell it to the state. The state can sell it back to you. You can sell it then to the customer. You can't sell your wine directly. You have to sell it to the state first. No, you can. There's two wineries, three wineries in Alabama. No. You can't make any alcohol for personal use unless you're licensed. Nothing. Federal losses you can make up to 200 gallons per year for personal consumption. 100 gallons per adult with a two adult household, that's 200 gallons.

54:39I don't know about you, I can't drink 200 gallons worth of beer, wine or anything in a year, not and still keep my job and stay out of AA, but that's what federal law allows you to do. State law says you can't make any kind of alcoholic beverage without the tax stamps. Why? Without the tax stamps. That's why. They want their tax money. They don't want you making your wine or your beer and drinking it instead of buying from the ABC because again everything goes through the ABC store. In addition to the taxes they also You can also get the markups they do when the alcohol is sold to the ABC board and then they sell it to the retailer. There's a markup automatically. So they get a lot of profit. You can get a criminal charge for possession of marijuana without the tax stamps.

55:31Anybody want to bet that there's a cop down there waiting for the idiot? I want tax stamps for my marijuana. The whole point is to give another charge you can pile on them. And here's another interesting bill that's before the legislature. Anybody ever heard of pseudoephedrine? It's a decongestant. It's in maybe half the cough medicines that you'll find on the market, over the market. Pseudoephedrine is also a precursor drug for the making of methamphetamines. Don't nod so, we might think you might know this for our, you know. So, it's a precursor drug, so the new bill in front of the legislature says that any product, including cold medication, over the counter cold medication, that has pseudoephedrine above a certain concentration, you have to show a photo ID and sign a register in order to buy it, and you're limited to three packages at a time.

56:28I'm trying to stop the dreaded production of methamphetamines, but I got to show a driver's ID, a driver's license now, I don't know. Dick, can you tell us? I'm sorry. You just nodded so quickly when I said it before. I just couldn't resist. I don't know how much it would take, but the point is, you know, they're moving over into a lot of things. They've got their one goal, that's the goal they're after, and they've got their second goal, and they've got their third goal, and they've got their fourth goal, and they've got their fifth goal, and they've got their sixth goal, and they've got their seventh goal. and the heck with everything else. So what? You've got to show a driver's license and sign a form when you buy your cold meds. We have an important goal we're trying to reach, and you're just going to have to be inconvenient.

57:19There's a lot of things you can learn by looking at what the legislator tries to do. The ones that fail are more interesting than the ones that succeed sometimes. What are they trying to do? Everybody knows what they did do, but what did they try to do? It's fascinating sometimes. Thank you, we're out of time. I want to thank you for a great presentation coming down from Montgomery and liking it.