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Officials warn interest-driven revenue may decline as state readies FY26 budgets
Summary
Legislative Fiscal Officer Kirk Fulford and Finance Director Poole told the Joint Interim Committees the recent boost from interest on state deposits is likely temporary, leaving slimmer margins for supplemental spending and raising pressure on Medicaid, CHIP and corrections spending in FY26.
Kirk Fulford, Legislative Fiscal Officer, told members of the Joint Interim Committees that Alabama’s recent revenue gains driven by high interest on state deposits are unlikely to persist and that the state should plan for flatter receipts in FY26.
“The interest on state deposits — it’s a big deal,” Fulford said, noting that the line rose to about $557,000,000 in 2024 after only $19,000,000 in 2021. He warned that much of recent general fund growth depends on that volatile source and that budget planners should be cautious as the Federal Reserve and broader economy evolve.
The warning followed Fulford’s review of both the general fund and the Education Trust Fund (ETF). He said the general fund ended the year with a $759,000,000 ending balance, but much of that — including $298,000,000 in conditional appropriations and $191,000,000 in reversions — has already been reappropriated. Fulford emphasized that removing interest-on-deposits growth would leave minimal year-over-year growth in recurring revenues.
Finance Director Poole echoed Fulford’s cautions and…
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