State's Budgets Go Into Effect October 1

The Alabama Legislature has two constitutional duties each annual regular session, that is to pass the state's two budgets. In times past that sometimes required the unplugging of the chamber clock just before midnight on the last day so they could legally get them through both houses. Today there was no need for overtime.

The nearly $10 billion Education Trust Fund (ETF) and $3.7 billion General Fund budgets were approved this afternoon and sent to Governor Ivey for her signature, which she applied to the documents on the final day of the 2026 session this afternoon.

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“Throughout my tenure as governor and even before, we have worked hard to be fiscally conservative in our budgeting, making meaningful investments to benefit the people of Alabama." Ivey stated during the signing ceremony. "This Regular Session wraps up my 10^th as governor, and I am proud of the fact that we have not once declared proration. Our General Fund wisely invests in our core government services, and our Education Trust Fund is once again the largest ever investment in education in our state’s history. Thank you to our budget chairmen, Sen. Greg Albritton, Rep. Rex Reynolds, Sen. Arthur Orr and Rep. Danny Garrett, for their outstanding leadership. And thank you to our Legislature for continuing our strong track record of wise budgeting in Alabama.”

Proration (midyear budget cuts) was once almost an annual occurrence as Alabama struggled to balance the budgets. But state lawmakers have gotten their act together over the last decade-plus to pass relatively solid budgets, based on strong revenues from growth and now defunct federal COVID19 funds.

One of the great helps economically has been the controversial 8% Simplified Sellers Use Tax of online retailers. The law became mandatory for most online retailers beginning in January 2019, at which point online sales tax revenue jumped significantly helping with funding budgets.

The FY27 ETF funds education programs from pre-K through higher education. It includes a 2% pay raise for teachers and an additional $250 million for the CHOOSE Act, a program that gives money to parents for non-public education expenses.

The ETF budget includes a $99.2 million increase for the Public Education Employees’ Health Insurance Plan (PEEHIP) with the state contribution going from $800 to $904

The FY27 General Fund includes $16 million for a 2% pay raise, this one to cover a cost-of-living raise for state workers. There are also additional funds for the Alabama Department of Corrections and Medicaid services. It also includes full funding for the expected increase in state employee health insurance costs and a one-time, lump sum bonus for state retirees.

Also added to the General Fund is $10 million for the first payment due this fall on the Legislature’s new $400 million State House.

The fund's supplemental budget also includes $387.5 million for the Public Road and Bridge Fund and $200 million for the Rebuild Alabama Fund. It also increases funds for highway project bond repayment by $59.8 million for a total of $193.5 million. That money will help pay for the West Alabama Corridor, 4-laning the highway between Thomasville and Tuscaloosa.

Both budgets become effective on October 1, the beginning of the 2027 Fiscal Year.