>>> AG King calls 10:00am Friday news conference.
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MONTGOMERY, AL – After being informed Thursday that BP will not pay the state this month on its claim for $148 million in lost tax revenue, Governor Bob Riley's office said it had no choice but to increase proration for the education budget by two percent, or $113 million.
Riley's office is laying blame for the proration increase, and refusal of BP to pay the claim, squarely on Attorney General Troy King, who recently filed a lawsuit against the oil giant.
The proration increase is required because the end of this month is the end of the 2010 fiscal year, and the state is legally required to balance its budgets.
$116 million of the $148 million claim would have gone to the Education Trust Fund, according to the governor's office and $116 million would have been enough to avoid the additional $113 million in spending cuts resulting from the increase in proration by two percent, Riley said.
"With no claim payment because of the lawsuit, we have no choice but to increase proration if the state is to meet its Constitutional requirement for a balanced budget," Governor Riley said.
"If that lawsuit hadn't paralyzed our negotiations, we wouldn't have to make these additional cuts to education funding," said Governor Riley. "One man made a brash, reckless decision to sue BP while the state was still working to recover lost tax revenue from the company. He did it without consulting me or local officials on our coast. No other state's attorney general has sued BP at this time and King's lawsuit stopped our ability to recover these tax dollars before the end of this fiscal year. BP can't escape blame either. As the admitted responsible party, the company should live up to its commitments, even though the lawsuit stands in the way. No one is going to benefit from this nonsense except the lawyers."
Attorney General King:
"We've tried it the Governor's way and it did not work. Now it is time for him to get out of the way and let us do our job. It is obvious that BP is not dealing in good faith and is using every excuse possible to keep from paying its obligations both to the individuals and business with claims as well as to the state. You can't deal with a bully by bowing, scraping and begging. I said it before and it is now obvious that BP never had any intention of paying this claim. The fact is BP has not paid the other states that have filed claims either. We are not dealing with people who have the best interest of the state at heart, they are a for-profit cooperation and their first loyalty is to their stockholders, no matter how many slick commercials they run saying otherwise."
The Education Trust Fund entered fiscal year 2010, which started Oct. 1, with proration of 7.5 percent. The economy was on track to be able to sustain proration at 7.5 percent for the entire 2010 fiscal year until the BP oil disaster in April. The state estimated the disaster resulted in a loss of $148 million in lost tax revenue that would have gone to the state from May through September, including $116 million in revenue that was earmarked for the Education Trust Fund.
With the attorney general's lawsuit stopping BP's payment of the claim, proration at 7.5 percent cannot be maintained for the remainder of the 2010 fiscal year, which ends on Sept. 30, the Governor insisted. The state is legally required to have a balanced budget, so when revenues fall short, appropriations must be reduced -- a budgeting process called proration.
"As I've said all along, litigation is an option that can be exercised if it becomes necessary. But it should never have been the very first step," said Governor Riley.