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Colleges asking for $207M more in fiscal 2024

The Alabama Commission on Higher Education is requesting a $207.1 million, 11.1% increase in state funding for colleges and universities in fiscal 2024.

The ACHE board approved the more than $2 billion request on Friday, citing schools’ increased salary and benefits costs and inflation-related expenses.

Meanwhile, the state Senate’s education budget leader on Friday said he expects any funding increases in 2024 to be “moderate.”

The commission held budget hearings with several schools last month. Jim Hood, ACHE’s deputy director of financial and information systems, on Friday said inflation-related cost increases were a common theme of the conversations. He said one university noted that a recent construction project went from an expected $5 million to $7 million because of jumps in supply costs.

“Our colleges and universities are struggling with (inflation) issues,” Hood said.

Of the requested $207.1 million increase, about 37.8% is directly related to inflation. 

About 41% is for salaries and benefits. Hood said universities are struggling to retain employees, especially as remote-work opportunities grow.

The budget recommendation represents an average 10.6% increase for colleges and universities.

“The operations of the state’s colleges and universities are facing new challenges in today’s world, such as competing with remote work opportunities in addition to salary compression,” said ACHE Executive Director Jim Purcell.

The ACHE board is required by state statute to come up with a higher education budget request each year. Its recommendations can differ from what individual schools request. This week, the Alabama Community College System board will vote on a 12.5% increase request for 2024.

Tax revenue collection in the Education Trust Fund in 2022 was an unprecedented 20.5% over 2021, at least in part because of continued federal COVID-19 spending. That influx has prompted some state officials, including education budget committee chairs Sen. Arthur Orr, R-Decatur, and Rep. Danny Garrett, R-Trussville, and Gov. Kay Ivey, to say tax rebates or specific tax cuts should be considered in the next legislative session. Meanwhile, many state leaders are bracing for an economic downturn.

“Almost every economic forecast that I read state we are headed for a recession,” Orr told Alabama Daily News on Friday. “That means both sales taxes and income taxes will be flat or maybe even decrease. Education funding in Alabama is unfortunately on a rollercoaster of highs and lows tied to the economy because we do not fund our education systems, for the most part, through the much more stable revenue stream created from property taxes—like most other states do.”

Lawmakers will start work on the 2024 education and General Fund budgets, which would carry the state through September 2024, when their regular session begins in March.

“For the fiscal 2024 budget, we must keep in mind that the revenue surplus is a one time revenue spike and not a new normal,” Orr said. “Consequently, we must be careful not to overcommit to an appropriation that we cannot fulfill well over a year after that budget is passed.”

Hood also said the budget recommendation process this year was a bit different because recent spikes in state revenues have thrown off previous calculations.

About 25% of the state’s annual education budget is dedicated to higher education. Lawmakers and Ivey approved a 7.5% increase for higher education between fiscal 2022 and the current fiscal 2023.

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