The News Courier in Athens, Alabama

Local News

February 11, 2013

Fiscal cliff settlement costs state schools $70M

— MONTGOMERY, Ala. (AP) — The fiscal cliff agreement in Washington will cut funding for Alabama's public schools and colleges by at least $70 million annually, state financial experts predict.

The current talk in Washington about federal budget cuts could cost the state even more.

The fiscal cliff settlement, reached New Year's Day, affects Alabama differently because it is one of the few states that provides its citizens with a state income tax deduction for federal taxes paid.

The federal settlement allowed a temporary reduction in payroll taxes for Social Security and Medicare to expire. It also raised the tax rates on individuals making more than $400,000 and couples making more than 4450,000. The change in payroll taxes affected nearly all workers, while the tax rate affected the wealthiest 1 percent of Americans.

With higher federal taxes, Alabamians will get to deduct more on their state income tax returns and pay less state tax. The impact will be felt by public schools and colleges in the next fiscal year because Alabama earmarks its income tax revenue for public education.

Norris Green, director of the Legislative Fiscal Office, said the Social Security tax change should cut Alabama's income tax collections by $60 million annually, and the higher tax rate on the wealthiest citizens should reduce Alabama's collections by $10 million to $15 million annually.

That's more than 1 percent of the $5.6 billion education budget that the governor is recommending for the 2013-2014 school year.

Gov. Robert Bentley's state finance director, Marquita Davis, recently told legislators that she concurs with Green's predictions.

Before the fiscal cliff settlement, state officials had been talking about giving public school employees their first cost-of-living increase since fall 2007. Figures ranged as high as 10 percent until the fiscal cliff settlement tempered the talk. Now the governor is now recommending a 2.5 percent raise for the upcoming school year. That raise is expected to cost $83 million, Davis said.

Text Only
Local News
Photos


Poll

Which foreign crisis is the biggest threat to the security of the United States?

Russia-Ukraine
Israel-Palestine
Iraq
None of the above
     View Results
Facebook
AP Video
Couple Channel Grief Into Soldiers' Retreat WWI Aviation Still Alive at Aerodrome in NY Raw: Rescuers at Taiwan Explosion Scene Raw: Woman Who Faced Death Over Faith in N.H. Clinton Before 9-11: Could Have Killed Bin Laden Netanyahu Vows to Destroy Hamas Tunnels Obama Slams Republicans Over Lawsuit House Leaders Trade Blame for Inaction Malaysian PM: Stop Fighting in Ukraine Cantor Warns of Instability, Terror in Farewell Ravens' Ray Rice: 'I Made a Huge Mistake' Florida Panther Rebound Upsets Ranchers Small Plane Crash in San Diego Parking Lot Busy Franco's Not Afraid of Overexposure Fighting Blocks Access to Ukraine Crash Site Dangerous Bacteria Kills One in Florida Workers Dig for Survivors After India Landslide Texas Scientists Study Ebola Virus Smartphone Powered Paper Plane Debuts at Airshow Southern Accent Reduction Class Cancelled in TN
Twitter Updates
Hyperlocal Search
Premier Guide
Find a business

Walking Fingers
Maps, Menus, Store hours, Coupons, and more...
Premier Guide
Stocks
Parade
Magazine

Click HERE to read all your Parade favorites including Hollywood Wire, Celebrity interviews and photo galleries, Food recipes and cooking tips, Games and lots more.
Business Marquee