>> FROM OUR STATE HOUSE STUDIO IN MONTGOMERY, I'M TODD STACY.

WELCOME TO CAPITOL JOURNAL.

STATE LAWMAKERS ARE DUE BACK IN THE CAPITAL CITY TOMORROW FOR THE 19TH DAY OF THE LEGISLATIVE SESSION.

SOME IN THE STATE HOUSE ARE STILL REELING FROM LAST WEEK, WHEN THE SENATE PASSED BOTH A RECORD $8.8 BILLION EDUCATION BUDGET AND A $2.8 BILLION SUPPLEMENTAL APPROPRIATIONS BILL THAT WAS DRAMATICALLY DIFFERENT THAN WHAT THE GOVERNOR PROPOSED.

MANY OF THE CHANGES WERE ENGINEERED BY STATE SENATOR ARTHUR ORR, WHO CHAIRS THE SENATE EDUCATION BUDGET COMMITTEE.

THE MEASURE CREATES A $500 MILLION EDUCATION RESERVE ACCOUNT LAWMAKERS CAN DRAW FROM FOR LEAN BUDGET YEARS OR EMERGENCY SPENDING.

ORR SAID THE CHANGES WERE NECESSARY BECAUSE OF THE ECONOMIC UNCERTAINTY AHEAD AND HOW THAT MIGHT IMPACT STATE BUDGETS.

>> WE ENDED UP TAKING HALF A BILLION DOLLARS AND PUTTING IT IN A SAVINGS ACCOUNT.

IF YOU LOOK AT THE BUSINESS PRESS, THEY ARE PREDICTING ECONOMIC SLOW DOWN AND THAT MEANS THINGS WILL DROP OFF FOR REVENUE.

AS FAR AS FILINGS, INCOME TAX RETURNS, WE'VE SEEN A DROPOFF OVER THE FIRST SEVEN MONTHS OF THIS FISCAL YEAR.

AND YEAR OVER YEAR, WE'RE DOWN ALREADY OVER INCOME TAXES.

AND THE POINT IS, WE'RE SEEING A SLOW DOWN IN THE ECONOMY, WE BELIEVE WE NEED A SAVINGS ACCOUNT FOR IMPORTANT PROGRAMS THAT REQUIRE ADDITIONAL FUNDS EVERY YEAR.

LITERACY ACT, SALARY MATRIX FOR STAFF.

AND THAT'S THE REASON WE WANTED TO ESTABLISH THAT SAVINGS ACCOUNT.

>> ONE ITEM LEFT UNDECIDED IN THE EDUCATION BUDGET WAS WHETHER TO OFFER SCHOOL SUPPORT WORKERS A PAY RAISE.

WHILE IT WAS DISCUSSED IN SENATE COMMITTEE, LAWMAKERS ULTIMATELY DECIDED TO LET THE HOUSE CONSIDER THE ISSUE BASED ON MORE UPDATED ECONOMIC PROJECTIONS.

MEMBERS OF THE ALABAMA EDUCATION ASSOCIATION RALLIED AT THE STATE HOUSE LAST WEEK URGING LAWMAKERS TO SUPPORT PAY RAISES FOR SUPPORT WORKERS.

>> SUPPORT STAFF IN ALABAMA HAVE NEVER BEEN PAID ALONG THE SAME GUIDELINES AS TEACHERS IN ALABAMA.

BECAUSE OF THAT, IT'S CREATED DISCREPANCIES IN DIFFERENT AREAS OF THE STATE.

AND SCHOOL BUS OPERATOR IN BIRMINGHAM MAKES MUCH MORE THAN OTHERS DO IN OTHER AREAS.

SO, WE WANT TO MAKE THE MATRIX SETUP.

>> WE'RE REQUIRED TO HAVE A TWO YEAR DEGREE OR EQUIVALENT TO IT.

AND YET, WE MAKE LESS THAN WHAT AN EMPLOYEE AT MCDONALD'S MAKES.

AND WE'RE ENTRUSTED WITH THE CHILDREN, WORKING WITH KIDS IN THE SMALL GROUP BECAUSE THE PROBLEMS THEY HAVE IN THE LARGE GROUP SETTING, THEY CAN'T SEEM TO GET IT >> WITH 12 DAYS LEFT IN THE LEGISLATIVE SESSION, THERE'S LOTS OF BUSINESS STILL TO COMPLETE AS THE DAYS WIND DOWN.

WITH MANY OF THE BIG TICKET PRIORITIES OUT OF THE WAY, SENATE PRESIDENT PRO TEM GREG REED SAYS INDIVIDUAL LAWMAKERS WILL WANT TO SEE THEIR OWN PRIORITIES GET A HEARING AND A VOTE IN THE REMAINING DAYS.

I THINK YOU GOT SEVERAL ISSUES NOW ARE PRIORITIES OF MEMBERS.

OBVIOUSLY, WE BEGAN AND Y'ALL HAVE HEARD ME SAY I HAD THREE PRIMARY LARGE GOALS THAT WE WERE FOCUSED ON FOR THE LEGISLATIVE SESSION.

DEAL WITH ARPA AND BE ABLE TO APPROPRIATE THAT BILLION DOLLARS AND NEXT, INCENTIVES, MANAGE THAT.

AND WE MOVED FORWARD ON THOSE INCENTIVE PACKAGES.

AND THEN THE BUDGETS.

AND WE HAVE THE GENERAL FUND BUDGET BUT WE'VE MANAGED THE EDUCATION BUDGET AND SUPPLEMENTAL BUDGET AND THAT'S A HUGE ACCOMPLISHMENT FOR THE BODY TODAY AS WE CONTINUE TO WORK THAT.

I THINK YOU HAVE SEVERAL OTHER TOPICS THAT ARE GOING TO BE COMING AS ISSUES OF INTEREST TO MEMBERS IN TOPICS THEY WANT TO TALK ABOUT, PRETTY INTENSELY AS WE'RE NOW MORE THAN HALFWAY THROUGH THE LEGISLATIVE SESSION.

AND YOU HAVE A PROCESS OF MEMBERS THAT HAVE INTRODUCED LEGISLATION TRYING TO GET THAT ON THE CALENDAR AND MOVE THAT FORWARD.

WE'VE HAD A PIECES OF LEGISLATION ALREADY THAT HAVE BEEN ABLE TO PASS THROUGH THE SENATE AND ON THE WAY TO THE HOUSE.

AND THOSE COMING FROM THE HOUSE AS WELL.

AND WE'LL GET MORE INTENSE WITH THOSE PIECES OF LEGISLATION.

>> MAY IS MENTAL HEALTH AWARENESS MONTH.

IT'S A REMINDER TO PRIORITIZE OUR OWN MENTAL HEALTH, THAT OF OTHERS AND POLICIES THAT PROMOTE BETTER OUTCOMES.

AT A RECENT EVENT PROMOTING WHAT THE STATE DEPARTMENT OF MENTAL HEALTH IS DOING TO ENCOURAGE THE PUBLIC TO ADDRESS THEIR MENTAL HEALTH IS DOING TO ENCOURAGE THE PUBLIC TO ADDRESS THEIR MENTAL HEALTH NEEDS, COMMISSIONER KIM BOSWELL SHARED SOME POIGNANT THOUGHTS FOR THOSE STILL DEALING WITH THE TRAGIC MASS SHOOTING THAT OCCURRED IN DADEVILLE NEARLY A MONTH AGO.

>> IT'S IMPORTANT FOR FOLKS TO REALIZE THAT IF THEY ARE STILL FEELING IT, HAVING, FEELING ANXIOUS THEY NEED TO SEE SOMEBODY.

TRAUMA HAS MUCH MORE IMPACT THAN JUST THAT ONE DAY.

WE NEED PEOPLE TO REACH OUT AND SEEK HELP BECAUSE YOU MAY THINK, OH, WELL, I WASN'T THERE.

BUT REALLY THE TRUTH IS, THAT WAS A TRAUMATIC EVENT FOR THE WHOLE COMMUNITY.

THERE ARE FIRST RESPONDERS, PEOPLE AT THE HOSPITAL THAT REALLY NEED OUR HELP.

AND OUR COMMUNITY MENTAL HEALTH CENTERS HAVE REACHED OUT AND OFFERED THE SERVICES NOT ONLY TO THE FAMILIES BUT TO THE FIRST RESPONDERS THERE TAKING CARE OF THE INDIVIDUALS AS THEY CAME INTO THE HOSPITAL.

>> COMING UP NEXT, I'LL SIT DOWN WITH KIRK FULFORD ABOUT THE LEGISLATIVE BUDGETS THAT CAME THROUGH THE LEGISLATURE.

>> ORIGINALLY DESIGNATED AS POSTAL ROUTE IN 1806, THE FEDERAL ROAD STRETCHED THROUGH CREEK TERRITORY, LOWER ALABAMA AND FUNCTIONED AS A MAJOR THOROUGHFARE INTO THE OLD SOUTHWEST.

IT WAS EXPLORATION OF NATIVE AMERICAN TERRITORY AND ALTHOUGH MOST OF THE ROAD HAS DISAPPEARED, PORTIONS OF IT REMAIN.

>> JOINING ME NEXT, KIRK FULFORD CHIEF BUDGET OFFICER, FOR THE LEGISLATIVE EDUCATION SERVICES.

THANKS FOR COMING ON THE SHOW.

>> THANKS FOR HAVING ME.

>> YOU HAD A COUPLE BUSY WEEKS.

>> YEAH, IT HAS BEEN.

>> AND WE SAW THE HOUSE COMMITTEE AND THE FLOOR MOVE THE GENERAL FUND BUDGET, TWO WEEKS AGO.

PRETTY BIG WEEK.

THEN LAST WEEK, UP THROUGH THE SENATE, COMMITTEE, THEY PASSED THE EDUCATION TRUST FUND.

AND BOTH OF THESE COVERING BIG SPENDING BILLS AND A MASSIVE AMOUNT OF MONEY, REVENUE AND SPENDING PASSING GOOD LEGISLATION.

IT'S ALL YOU AND YOUR OFFICE INTERTWINED INTO ALL OF THAT.

SO I'M CURIOUS WHAT THE LAST TWO WEEKS HAS BEEN LIKE YOU AND YOUR STAFF.

HOW DID YOU HANDLE IT.

IT'S HECTIC BUT WE'RE USED TO IT, RIGHT?

WE'VE GOT A SMALL STAFF IN COMPARISON TO OTHER STATES BUT WE MANAGE IT PRETTY EASILY THIS TIME OF YEAR BECAUSE WE'RE USED TO THAT WORK FLOW.

DOESN'T MATTER THAT, I MEAN, DOESN'T HAPPEN OFTEN THAT WE DO CONSECUTIVE BUDGETS LIKE WE DID THIS TIME.

AND GET THE BUDGET PUT TOGETHER AND ALL OF THE OTHER INFORMATION THAT GOES ALONG WITH THAT.

I'M REALLY PROUD OF THE WORK THAT WE'RE ABLE TO ACCOMPLISH AND ALL OF THE PEOPLE THAT WORK FOR US.

>> AND IT SHOULD BE ACKNOWLEDGED, COMPARED TO OTHER STATES, ALABAMA HAS A SMALL LEGISLATIVE STAFF TO GET THAT KIND OF WORK DONE.

EXTRA KUDOS TO YOU ALL.

>> THANK YOU.

>> I'M CURIOUS ABOUT THE EDUCATION SUBSTITUTE SUPPLEMENTAL.

THIS IS $2.8 BILLION FUND EXTRA REVENUE, CARRYOVER, HE GUESS YOU CALL IT.

AND IT CHANGED SIGNIFICANTLY FROM WHAT THE GOVERNOR PROPOSED.

THE BASE BUDGET STAYED LARGELY THE SAME.

AND THE SUPPLEMENTAL CHANGED A LOT.

THE TAX REBATE CHANGED A LOT AND WENT WAY DOWN.

THERE WERE SEVERAL ITEMS TAKEN OUT AND SEVERAL PUT IN.

SO I'M CURIOUS AS TO THE LOGISTICS IN THE PROCESS.

YOU HAVE TO RUN ALL OF THOSE THINGS DOWN WHENEVER THERE'S AN IDEA FROM THE CHAIRMAN.

YOU RUN ALL OF THOSE THINGS DOWN.

WAS THAT ALSO AN ADDITIONAL CHALLENGE?

ALMOST REWRITING THE WHOLE $2.1 BILLION.

>> SUPPLEMENTAL BILL IS NOT THAT DIFFICULT TO WRITE, IT'S JUST TO BE SURE THAT WE GET ALL OF THE NUMBERS ALIGNED.

WE MAKE SURE THAT ALL OF THE NUMBERS WITHIN THE DOCUMENT, WE KNOW HOW MUCH WE HAVE TO SPEND BUT MAKE SURE THEY ALIGN WITH WHAT WE ARE SPENDING.

WHAT THE MEMBERS DO AND HOW THEY DO IT, THAT'S NOT OUR CONCERN WHEN WE PUT IT TOGETHER.

WE WANT TO BE SURE THAT ALL OF THE NUMBERS ADD UP AT THE END OF THE DAY.

AND OBVIOUSLY OUR MEMBERS HAD A DIFFERENT WAY TO LOOK AT IT THAN THE GOVERNOR WHEN SHE SENT THE SUPPLEMENTAL BILL OVER.

>> LET'S TALK ABOUT THE EDUCATION SAVINGS ACCOUNT.

THIS IS WHAT SENATOR ORR AND I SAY THE EDUCATION BUDGET REVENUE SAVINGS ACCOUNT, NOT THE ESA'S, BUT $500 MILLION, HE DESCRIBED IT AS A FUND, A RAINY DAY FUND OF SORTS TO BE USED IF IN FUTURE YEARS THE REVENUE BUDGET IS NOT WHAT WE EXPECT.

AND IT HAS DIFFERENT RULES THAT APPLY TO IT.

MAYBE MORE FLEXIBILITY THAN THE OTHER RAINY DAY FUNDS DECLARING PRORATION OR GOING TO THE PEOPLE.

>> WELL, THAT WAS THE MAIN REASON FOR ESTABLISHING THAT.

THE FUND IN PLACE NOW, IF THERE IS A PRORATION EVENT AND HAVEN'T HAD THAT SINCE 2011 IN THE EDUCATION BUDGET.

IT DOES NOT ALLOW FOR WITHDRAWAL REVENUE SLOWDOWNS OR ADDRESSING EMERGENCY NEEDS.

IT'S ONLY WITHDRAWN IN THE EVENT OF A PRORATION.

AND THIS NEW SAVINGS ACCOUNT HAS A DIFFERENT SET OF PARAMETERS.

IT'S TO OFF SET REDUCTION IN REVENUE, ACCESSED TO PAY FOR EMERGENCY OR UNEXPECTED EXPENDITURES AND TO ADDRESS SOME FUTURE ONE-OFF TYPE SITUATIONS THAT MAY ADDRESS THEMSELVES IN BOTH K-12 AND HIGHER ED.

IT'S MORE FLEXIBLE AND CONSIDERED MORE OF A LIQUID WAY OF ACCESSING A RESERVE FUND.

THAT'S THE BUDGET STABILIZATION FUND LIKE I SAY, ONLY ACCESSED FOR PRORATION AND WE HAVE A RAINY DAY ACCOUNT, SAME PROCESS.

ONLY TO BE ACCESSED THROUGH PRORATION AND WE HAVE TO PAY THAT MONEY BACK.

THIS IS A LIQUID RESERVE FUND TO BE USED FOR MORE THINGS THAN JUST TO OFFSET PRORATION.

AND CERTAINLY PROVIDES OPPORTUNITY TO ADDRESS OTHER NEEDS AS WE GET DOWN THE ROAD AND AWAY FROM THE ABNORMAL GROWTH PATTERN THAT WE'VE SEEN RECENTLY.

>> WERE THERE ROLLING RESERVE PROCESS CHANGES?

>> YEAH, THERE'S A COUPLE OF ITEMS THAT CHANGE.

THERE'S CREATING THE NEW RESERVE FUND.

ANOTHER IS TO ADDRESS AMBIGUITIES IN THE LAW AND TO MAKE SURE THEY ARE CLEAR AND ALSO, TO SET THE PROCESS GOING FORWARD ABOUT HOW WE TRANSFER MONEY INTO THE FUNDS AS WELL AS ESTABLISHING WHAT THE EXPENDITURE LEVEL CAN BE.

RIGHT NOW, WE HAVE AN EDUCATION CAP THAT WE CAN'T SPEND OVER, BUT GIVEN THE LAST TWO YEARS OF EXORBITANT GROWTH, THE STARTING POINT FOR THE CAP IS SO MUCH HIGHER THAN WHAT IT WOULD BE IN A NORMAL GROWTH SITUATION THAT IS SO MUCH HIGHER THAN WHAT THE LEGISLATURE AND EVEN THE GOVERNOR BASED ON HER RECOMMENDED BUDGET ARE WILLING TO SPEND BECAUSE IT REQUIRES A CONTINUATION OF THIS EXORBITANT GROWTH TO BE ABLE TO SPEND TO THAT LEVEL.

THIS IS GOING TO SET A FLOOR IN PLACE GOING FORWARD.

PAST COUPLE OF YEARS, WE HAD A CAP AND THE BUDGETS THAT WERE ENACTED WE DIDN'T SPEND TO THE CAP.

SO, IT WAS A MATTER OF PRIORITY WHAT THE NUMBER IS GOING TO BE AND HOW FAR DOWN OR AWAY FROM THE CAP DO YOU GET.

THIS IS KIND OF GOING TO FORMALIZE A DIFFERENT APPROACH TO LOOKING AT THAT.

BUT IT'S STILL GOING TO ESTABLISH THE MAXIMUM AMOUNT TO BE APPROPRIATED IN ANY GIVEN YEAR.

>> LET ME SEE IF I UNDERSTAND YOU CORRECTLY AND THE AUDIENCE TOO.

THIS IS PRETTY COMPLICATED.

AND THE CAP IS BASED ON THAT AVERAGE.

SO, THE WHOLE IDEA IS, WE DON'T WANT TO SPEND, EVEN IF IT'S A TERRIFIC BUDGET YEAR LIKE IT WAS THIS PAST YEAR, REVENUE YEAR.

WE DON'T WANT TO OVERSPEND BECAUSE WE DON'T KNOW WHAT'S GOING TO HAPPEN IN THE FUTURE ECONOMICS.

BUT MAYBE THAT CAP IS NOT EXACTLY WHERE IT SHOULD BE TO ALLOW FOR, LOOK, WE'VE HAD SEVERAL YEARS OF PRETTY GREAT GROWTH.

IS THAT A FAIR WAY TO SAY IT?

WHAT'S THE CHANGE.

>> IT'S A FAIR INTERPRETATION.

IN REALITY, THE CALCULATION OF THE CAP IS BASED ON THE PRIOR YEAR'S ACTUAL RECEIPTS, STARTING POINT.

AND THEN, IT'S ADJUSTED ON A 15 YEAR AVERAGE OF RECEIPTS.

SO, IF YOU ARE BASICALLY PASSING A BUDGET FOR THE NEXT FISCAL YEAR, TWO YEARS AFTER THE YEAR YOU ARE BASING THE CAP ON, UNDER THE ASSUMPTION THAT GROWTH OR THAT STARTING POINT WILL CONTINUE, WELL, WE'RE ALL ASSUMING AND HAD CHARTS AND PRESENTATIONS RECENTLY, IF YOU LOOK AT THE LAST TWO YEARS OF GROWTH IN THE EDUCATION BUDGET, THEY ARE SO FAR OUT OF LINE WITH NORMAL GROWTH PATTERNS, WHAT THEY WOULD BE.

YOU BASE YOUR EXPENDITURE LEVELS ON A YEAR SO FAR OUT OF LINE WITH THAT, YOU HAVE THE POTENTIAL OF SETTING YOURSELF UP FOR A SITUATION WHERE YOU COULD POSSIBLY WIND UP IN PRORATION AND WE CERTAINLY DON'T WANT THAT SITUATION.

>> THAT WAS THE WHOLE POINT.

>> RIGHT, THAT WAS THE WHOLE POINT.

I WAS IN THE EARLY DRAFTING OF THAT AND CERTAINLY WANT TO BE SURE WE GET THIS RIGHT FOR THE FUTURE.

>> SPEAKING OF THAT, LET'S TALK ABOUT THE ECONOMIC OUTLOOK.

WHEN SENATOR ORR WAS ON THE SHOW AND TALKING ABOUT THE EDUCATION SAVINGS ACCOUNT.

HE TALKED ABOUT, LOOK, READING THE PRESS, CALLED IT THE BUSINESS PRESS, ECONOMIC PUBLICATION TALKING ABOUT A POSSIBLE RECESSION, WHAT IT MEANS FOR CONSUMER CONFIDENCE, WHAT THAT MEANS FOR SPENDING, TAXES, AND I KNOW YOU FOLLOW A LOT OF STUFF.

WHAT'S THE LATEST THAT YOU CAN TELL US ABOUT.

WILL THERE BE A RECESSION, DO WE KNOW?

WHAT KIND OF IMPACT WOULD THAT HAVE ON THE BUDGETS.

>> WELL, THE EDUCATION TRUST FUND IS ABOUT 93% OF SALES AND INCOME TAXES.

THOSE ARE THE TWO REVENUE SOURCES THAT RESPOND VERY QUICKLY AND DYNAMICALLY WHEN CHANGES OCCUR IN THE ECONOMY.

AS YOU SAY OVER THE PAST COUPLE OF YEARS, THINGS GOING GREAT, UNEMPLOYMENT, PEOPLE WORKING, JOB GROWTH AS WELL AS INCREASES IN EARNINGS, YOU CAN SEE OBVIOUSLY THE DYNAMIC IMPACT THAT HAS ON REVENUE SOURCES AND WHEN YOU HAVE HIGHER UNEMPLOYMENT AND THINGS NOT AS GREAT, ABSOLUTELY HAS THE OPPOSITE EFFECT ON THE ETF AND HE'S ABSOLUTELY CORRECT.

YOU CAN SEE THE TREND LINES, WHERE I HAVE THEM GOING BACK 30 YEARS.

EVERY TIME THERE'S A RECESSION, THERE'S AN IMPACT ON THE TRUST FUND.

AND ANY CHANGES IN THE ECONOMY, IT EFFECTS IT.

HE'S ABSOLUTELY RIGHT TO PAY ATTENTION TO THAT.

WE PAY ATTENTION TO THAT EVERY MONTH AS WE GET THE REPORTS THAT WE'RE TRYING TO MAKE SURE WE HAVE AVAILABLE SUPPORT THAT WE SPENT AND OBVIOUSLY DOING WELL IN THAT SITUATION.

WHAT ARE WE LOOKING FOR?

CERTAINLY ANY SLOWDOWNS IN DROPOFF AND DIFFERENT VIEWS WITH THE ECONOMIST IN TERMS OF WHEN, WHERE, AND HOW THE RECESSION IS GOING TO HAPPEN.

EVERYBODY ASSUMES THERE IS GOING TO BE ONE AT SOME POINT IN THE FUTURE.

AND I THINK SO.

BUT I THINK IT MAY VERY WELL LOOK DIFFERENT FROM WHAT IT HAS IN THE PAST IN TERMS OF BEING RECESSION, GENERALLY TYPIFIED BY NEGATIVE GROWTH IN THE EDUCATION BUDGET.

THIS MAY VERY WELL BE A SLOW GROWTH IN THE EDUCATION BUDGET BUT FEELS LIKE A RECESSION BECAUSE WE HAVE HAD TWO DOUBLE-DIGIT LOW IN TWO YEARS TOO.

SO IT MAY BE JUST MORE OF A NORMALIZATION OF THE NORMAL REVENUE STREAMS OF THE BUDGET.

I HOPE THAT'S THE CASE ANY WAY.

NOBODY IS ANTICIPATING IT BEING ANY WORSE THAN THAT.

ON THE GENERAL FUND, IT'S A DIFFERENT ANIMAL, RIGHT?

>> THE INSURANCE FUNDS AND ALSO, THE SALES TAX.

>> YEAH.

THAT.

AND THOSE ARE ON GOING GOOD REVENUE STREAMS.

AND RIGHT NOW WHAT'S DRIVING IT IS INTEREST DEPOSITS ON STATE DEPOSITS.

$200 MILLION FOR THE CURRENT FISCAL YEAR IN THIS DOUBLE DIGIT GROWTH AND THAT'S LIMITED ON THE STATE DEPOSITS, DIRECT RESULT OF THE FED'S ACTIONS OVER THE INTEREST RATES IN THE PAST YEAR.

AND THE JOBS REPORT, WE THINK THAT WILL GO UP AT LEAST IN THE NEXT MONTH OR SO.

SO, THE POSITIVE GROWTH IS GOING TO LOOK GOOD, SOUNDS GOOD AND MAKES EVERYBODY FEEL GOOD ABOUT THE GENERAL FUND.

BUT THAT'S NOT SOMETHING NECESSARILY TO LOOK AT AND THING IT'S GOING TO BE CONTINUED.

BUT AS SOON AS FEDS THINK THEY HAVE INFLATION UNDER CONTROL, THEY ARE GOING TO LOWER THEM, MORE QUICKLY THAN THEY RAISED THEM.

AND IT'S GOING TO GO DOWN QUICKLY.

AND WE HAVE OTHER REVENUE SOURCES IN THE GENERAL FUND.

BUT RIGHT NOW THEY ARE ON TRACK TO PRODUCE THE AVERAGE GROWTH THAT WE'RE SEEING IN THOSE REVENUE SOURCES BUT THIS INTEREST ON STATE DEPOSITS IS WHAT'S DRIVING EVERYTHING AT THIS MOMENT IN THE GENERAL FUND.

>> WHILE I STILL HAVE YOU, I WANT TO ASK ABOUT THE PROPOSAL, ELIMINATING OR CUT ANYTHING HALF SALES TAX ON GROCERIES, HAND FULL OF BILLS OUT THERE, BEEN AROUND 20 YEARS OR MORE AND SEEMS TO HAVE LEGS.

POLITICS ASIDE AND REALLY THE POLICY ASIDE, ULTIMATELY, YOU ARE TALKING ABOUT A REDUCTION IN SALES TAX AND WHAT THAT MEANS THAT WOULD HAVE A BUDGET IMPACT, IN THE IMMEDIATE FUTURE CERTAINLY DOWN THE ROAD.

TALK ABOUT THAT, WHAT YOUR CONVERSATIONS AND CONSULTATIONS AND ADVICE WOULD BE LIKE TO LAWMAKERS WHEN THEY BRING UP THE COMPLICATED SUBJECT OF CUTTING THE GROCERY TAX BUT NOT REALLY CUT INTO THE BUDGET TOO MUCH.

>> OBVIOUSLY THIS IS A REVENUE SOURCE FOR THE EDUCATION TRUST FUND.

AND THE SALES TAX ON GROCERIES, IF YOU ELIMINATE THE FULL AMOUNT $600 MILLION.

AND IT'S GOING GOING TO REDUCE IT BY 2 CENTS.

AND LOOKS LIKE IT'S GOING TO BE PHASED IN ACTUALLY OVER A PERIOD OF TIME.

AND THE CONVERSATION STARTS WITH THE SPENDING CAP THAT'S GOING TO BE ALIGNED IN THE CHANGES TO THE ROLLING RESERVE ACT.

THAT'S ABSOLUTELY NECESSARY TO THIS CONVERSATION.

AND THAT MAY DEPEND ON WHAT'S THE SPENDING TWO, THREE, FOUR YEARS DOWN THE ROAD.

IF YOU PASS THE ACT, YOU KNOW IT ABSOLUTELY CAN'T EXCEED THIS AMOUNT OF MONEY OVER A PERIOD OF TIME.

SO, ONCE YOU HAVE THAT NAILED DOWN, THEN IT'S A MATTER OF, IF WE KNOW WHAT WE CAN SPEND, HOW ARE OUR REVENUES.

OUR REVENUES ARE STILL WELL ABOVE TREND LINE TO SUPPORT THE EXPENDITURES.

EVEN THE GOVERNOR AND PASSED BUDGET, TO THE POINT THAT IT COULD SUPPORT THE PROPOSALS BEING PROMOTED OUT THERE.

WE'VE RUN SCENARIOS OUT THERE, AND LOOKING AT RECESSIONARY PERIODS AND HAD THE CONVERSATIONS WITH THE MEMBERS.

AS LONG AS WE GET THE EXPENDITURES ALIGNED TO WHERE WE KNOW WHAT THEY ARE GOING TO BE, WE CAN OBVIOUSLY LOOKING AT THE REVENUE IMPACT OF THAT MORE COMFORTABLY THAN IF WE DIDN'T HAVE ANY IDEA WHAT THE EXPENDITURES WERE GOING TO BE.

>> NOW, I KNOW THEY HAVE GUARD RAILS ON THIS PROPOSAL, HAS TO BE AT LEAST 2% GROWTH IN THE ATF IN ORDER FOR THESE SALES TAX ON GROCERIES TO KICK IN.

I WAS CURIOUS IF DOWN THE ROAD, FIVE, 10 YEARS DOWN THE ROAD AND WE DON'T HAVE 2% SALES TAX, DOES THE GROCERY TAX GO BACK?

>> NO, THERE'S NO MECHANISM IN THE FILL TO ALLOW IT TO GO UP.

IT JUST IS TO GO DOWN.

FIRST ONE DOESN'T REQUIRE GROWTH, GOES DOWN ONE PERCENT, 2023.

AND THE SUBSEQUENT CUTS ARE DEPENDING ENT ON THE 2% GROWTH AND THEN IF POSSIBLE, ANOTHER 1% TO LOWER.

AND THEN OBVIOUSLY IN THE SECOND PERIOD, IF WE CAN'T SHOW IT HAD A 2% GROWTH IN THE PREVIOUS YEAR, WE LOOK AT IT THE SUBTLE CONSTITUENT YEAR.

IT'S A LOOP BACK PERIOD UNTIL SUCH TIME AS WE HAVE SUCH GROWTH TO SUPPORT BOTH CUTS.

NO MECHANISM IN PLACE TO BRING IT BACK UP AFTER IT GOES DOWN.

THANKS SO MUCH FOR JOINING US.

GOOD LUCK FOR YOU AND YOUR STAFF.

YOU ARE SWITCHING CHAMBERS, YOU HAVE MORE WORK TO DO.

>> THAT'S RIGHT.

JUST GETTING STARTED.

>> THAT'S OUR SHOW FOR TONIGHT.

THANKS FOR WATCHING AND WE'LL BE BACK TOMORROW NIGHT AT 10:30 WITH MORE COVERAGE ON ALABAMA LEGISLATURE RIGHT HERE ON ALABAMA TELEVISION.

FOR OUR "CAPITOL JOURNAL" TEAM, I'M TODD STACY.