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Inflation, insurance costs expected to take bigger portion of Alabama higher ed budget

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Inflation, insurance costs expected to take bigger portion of Alabama higher ed budget

Dec 08, 2023 | 2:30 pm ET
By Jemma Stephenson
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Inflation, insurance costs expected to take bigger portion of Alabama higher ed budget
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Inflationary and insurance costs will consume a larger portion of Alabama’s higher education budget than in years past.

The Alabama Commission on Higher Education Friday approved a $156 million consolidated budget request for fiscal year 2025, scheduled to start on Oct. 1 of next year.  Due to changes in the law last year, ACHE tried to keep their request to a lesser increase than in previous years.

The request contains funding for each of the state’s higher education institutions. It includes two- and four-year institutions.

The total budget request for higher education is $2.12 billion, an increase of 6.84%, according to a release provided by Margaret Gunter, ACHE spokesperson.

The consolidated budget recommendation is 28.2% mandatory funds, up from 3.3% last year. More than half the budget request (51.2%) would go to “inflationary costs, building maintenance, other,” up from 37.7% last year.

Mandatory costs include items like insurance. Property insurance has increased due to the age of Alabama buildings on campuses and the rising cost of construction.

“It’s almost like a perfect storm or a worst case scenario for institutions,” said Jim Hood, deputy director of Financial and Information Systems, at the Finance and Accountability Subcommittee ahead of the main ACHE meeting

ACHE is not recommending salary increases in their budget this year, said Hood, which differs from past years. Personnel, salaries and benefits went from 41.1% of the budget last year to 0% for this request.

“Just because we’re not recommending salaries in our recommendation doesn’t mean that the institution can’t address that on their own,” Hood.

Part of the consideration for this year’s budget was a change to the Rolling Reserve Act last year with a bill sponsored by Sen. Arthur Orr, R-Decatur. The law now says that the education budget should not exceed the fiscal year appropriation cap or new secondary spending limits, whichever is lower.

For this upcoming fiscal year, the secondary spending limit would be a 6.5% increase. Higher education has historically been a little over 25% of the education budget in the calculations used by ACHE.

Hood said he thinks they are in line with legislative intent despite being slightly over. The budget request was already submitted.

The Legislature will ultimately decide the allocations for the state’s higher education institutions. Lawmakers will return for the 2024 regular session of the Legislature in February.The Education Trust Fund budget, which pays for most education funding in the state, is expected to grow at a slower rate this year than in years previous.

This story was updated at 3:02 p.m.