Governor Riley announces Deficit Prevention Plan

MONTGOMERY, AL., (WSFA) -- Governor Bob Riley announced a Deficit Prevention Plan that includes a hiring freeze on state workers, a freeze on state employee merit pay raises, stopping the purchase of new state vehicles and other measures.

The Deficit Prevention Plan includes cuts of 10 percent in the current fiscal year to state agencies and - with the withdrawal of half of the amount available from the Rainy Day Fund for education - an effective proration rate of nine percent in the education budget.

"Because of the national economic slowdown, if we remain on our current course Alabama will finish this fiscal year with a budget deficit.  That is unacceptable, not only because the state has a legal obligation to operate with a balanced budget, we also have a moral obligation to put Alabama's fiscal house in order.

"So today I'm announcing a Deficit Prevention Plan to make sure state government lives within its means, meets its obligations and balances its budget," Governor Riley said during a news conference at the State Capitol.  "This Deficit Prevention Plan requires state government to do what Alabamians are having to do:  figure out how to get by with less during these tough times."

The plan includes three key elements:

Reduce agency spending:  The Governor will use his authority under the Budget Management Act to reduce state spending by 10 percent in state agencies funded out of the General Fund.  This will reduce spending in these agencies by about $200 million in the current fiscal year.

"Whenever possible, these cuts will be targeted at administrative and overhead expenses rather than services to the public.  They will include, but not be limited to, a hiring freeze, a freeze on merit pay raises, stopping new vehicle purchases, limiting equipment purchases and professional service contracts, and curtailing travel by state employees," Governor Riley announced.

It is expected that the hiring freeze will reduce the number of state employees by about 3,000 over the next year.  That would bring the state government's workforce down to about the size it was at the end of fiscal year 2004, when it stood at a little more than 36,000.

The Governor also said he would allow for flexibility in some agencies if the spending cuts could have a harmful impact on public safety.

Proration in education:  The Governor declared proration in the education budget of 12.5 percent.  Proration is the process of cutting spending when revenues fall short of expectations.  However, the amount of proration will be lessened with the use of some of the Rainy Day Fund for education.

Limit proration with Rainy Day Fund:  The Governor is withdrawing $218 million from the education Rainy Day Fund to lessen the impact of proration.  The use of the $218 million will result in an effective proration rate of nine percent.

"The second half of the Rainy Day Fund will be distributed during the remainder of the fiscal year," said Governor Riley.  "Based on all the economic forecasts I have, I believe this is the wisest course of action.  Doing this allows us to responsibly manage the disbursement of the Rainy Day Fund and also meet the needs of our schools."

Governor Riley noted that the current economic challenges facing Alabama are not unfamiliar to the state and that he is confident the state will pull them through.

"When we first came into office, Alabama was going through a similar situation:  budget shortfalls and a weak economy.  So we took a different tack.  We brought a business approach to government - and it worked.  In just a few short years, we turned the worst shortfall in Alabama history into a record budget surplus.  And we did it the right way:  by cutting spending across government, by recruiting new jobs and by bringing integrity to the budget process with SMART Governing.

"Now the global economy has brought some of these challenges back.  So we're going to have to do what we know works:  fiscal discipline, an aggressive economic development strategy, and more accountability in government.  We turned our economy around before and we can and will do it again," Governor Riley said.

The Governor also used the occasion to discuss what he said are bright spots in Alabama's economy, including several new and expanding industries that are hiring such as the ThyssenKrupp steel facility on the Mobile County-Washington County line, the Steelcase plant in Athens, and a sign company in Dothan.