Rising Health Costs Impact Alabama's Education Budget In 2026

Week three of the 2026 Alabama legislative session begins today with this afternoon's meeting of the Joint Legislative Budget Committee at the statehouse. Lawmakers have moved rapidly through the more than 500 bills filed for the session with only minimal problems but the education budget in front of the committee today may bring the blistering pace to a slowdown, if not a screeching halt.

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While lawmakers consider a wide range of new bills each session, the budgets are their main reason for meeting, as required by state law. There are two budgets, the General Fund and the Education Trust Fund (ETF). The General Fund provides funds for all non-education activities. The ETF budget funds all state education activities, including K-12 programs and higher education. The primary revenue streams for the ETF budget are income and sales taxes.

The 2026 ETF budget, while robust at roughly $10 billion, faces significant pressures, primarily a projected $380.5 million deficit in covering public education employee health insurance premiums. The Public Education Employees' Health Insurance Plan (PEEHIP) had initially recommended $210, however, declining federal funding for Medicare retirees, rising healthcare/pharmaceutical costs, and higher utilization of services by members has created a gap. PEEHIP has maintained level funding for nearly a decade, which is no longer sustainable given the escalating costs.

With this being an election year, legislators want to find a way to cover teachers healthcare costs while not being forced to raise premiums for PEEHIP members which would most likely exacerbate the high teacher turnover rate and make it even more difficult to recruit new teachers.

The Alabama Police Institute, a nonpartisan, non-profit research and educational organization focused on promoting conservative principles has weighed in on the issue. In a policy statement by Sr. Director Fiscal Policy Justin Bogie posted online, the organization's call for health and pension reforms. He suggests already low paid teachers contribute more to the health insurance plan.

"Alabama’s public benefits system is on an unsustainable track," Bogie writes. "Costs are outpacing revenues, benefits are far richer than what most taxpayers themselves receive, and eligibility has stretched far beyond true state employees. Simply demanding more taxpayer money year after year is not a solution."

Whatever the lawmakers decide some stakeholders are going to be unhappy and that is not a good thing with elections just ahead.

Today's Committee Schedule: