Budget Watch FY 2026

Written by: Sarah Waldinger, Policy Director

It’s that time of year again! The 2025 Alabama Legislative Session began on February 4, during which important budgetary decisions will be made for Alabama’s schools. 

Wednesday, February 5, 2025

Dr. Eric Mackey, Superintendent of Education, presented the ALSDE’s budget request for FY2026 and shared some updates on the department’s work. The ALSDE voted to send this request to the Governor at their October 10, 2024 meeting. Our recap of the October 10 meeting can be read here, and the full budget request spreadsheet from the ALSDE can be found here. The ALSDE’s priorities were also covered in the state board retreat, which were highlighted in the January 30, 2025 Across the Board. Dr. Mackey prioritized the following requests:

• Advanced Placement: $14.5 million for AP, an increase of $1 million over FY25.
• Alabama Numeracy Act: $95 million, a $27 million increase.
• Alabama Reading Initiative: A total of $150.2 million, including $36.8 million for K-3 reading coaches and $600 thousand for certified academic language therapists.
• Struggling Readers Beyond Grade 3: $52 million for a line item that received no funding in FY25, despite a $22 million request.
  Computer Science: Level funding at $6 million.
• Mental Health Service Coordinators: $7.6 million, an increase of $2.9 million.
• Student Assessment: $32.8 million, an increase of $13.4 million.
• Principal Leadership & Mentoring Act: A total of $38.5 million, including $17.4 million for principal stipends, $11.1 million for assistant principal stipends, and $2.3 million for additional stipends for those working in hard-to-staff schools.

Wednesday, February 5, 2025

On Wednesday, February 5, Governor Kay Ivey’s budget was released and state agencies presented their FY2026 budget requests to the budget committees.

State Budget Projections

Kirk Fulford, the Deputy Director of the Legislative Services Agency (LSA) presented the state budget projections for the Education Trust Fund (ETF). The ETF is funded primarily through income and sales taxes and allocates funds for all state education activities, including K-12 schools and some higher education programs.

Fulford presented the tax revenues that go into the ETF, and where current legislation requires those funds to flow. He shared the increases and totals from FY2024, which ended in September 2024, and what can be appropriated in the FY2025 Supplemental and the FY2026 budget. The full presentation can be found here.

For the past several years, state tax revenue has been high due to federal funding during the pandemic. In FY2022 and FY2023, revenue was $10.4 billion. In FY2024, revenue increased to $10.6 billion. Even though revenue increased, the maximum amount that the legislature can appropriate in the FY2026 budget is $9.9 billion. This is a 6% increase over the FY2025 appropriation. While ETF revenues are only expected to grow by 1.8%, spending caps over the last few years have led to the ability to increase the budget spending by significantly more and still be below expected revenues.

Similar to recent years, more tax revenue came in than the Legislature appropriated for FY2024. There was a surplus of $1.86 billion, which must flow into four different buckets according to the Rolling Reserve Act. The balance is allocated to specific savings accounts and if there is enough leftover, a supplemental budget:

Governor Kay Ivey’s Budget Proposal

Bill Poole, the State Finance Director and Governor Ivey’s senior advisor, presented the Governor’s priorities for FY2026. The full presentation can be found here, the Governor’s budget spreadsheet can be found here, and the full budget priorities can be found here.

FY 2026 Education Trust Fund budget – The Governor’s proposal for the FY2026 Education Trust Fund allocated $6.7 billion to K-12 funding, and $3.2 billion to higher education and other funding. The budget prioritized the following:

• Alabama Numeracy Act: A $27 million increase for 220 math coaches, which brings the total to $95 million
• Alabama Literacy Act: $7.4 million increase, with a total of $112 million
• Afterschool and Summer Learning Program: A $14.4 million increase, which brings the total to $17.2 million
• Turnaround Schools: Level funded at $10 million
• Alabama Math, Science, and Technology Initiative (AMSTI):$6 million, which brings the total to $39.3 million
• English Language Learners: $10 million increase, with a total of $26.5 million
• First Class Pre-K Expansion and Increased Per Unit Funding: $668k
• CHOOSE Act Funding: $101 million, which funds next year’s (FY 2026) education savings accounts at the required annual funding level. This is the first time funding for the CHOOSE Act has been in the main ETF budget and not the Supplemental.

FY 2025 Supplemental Budget – The Governor’s proposal for the FY 2025 Supplemental budget allocated $348 million of the $524 million to K-12 funding. Additionally, $142 million was allocated to higher education funding, and $34 million to other funding. The Governor highlighted the following priorities:

• Summer and After School Programs: $30 million
• Struggling Readers Beyond Grade 3: $3.5 million
• Principals/Assistant Principals Stipent Supplements (Principal Act): $14 million
• Charter School Grants: $10.3 million
• School Safety Initiative: $50 million
• TEAMS Act: $5 million
• College and Career Readiness Grants: $20 million
• Civics Course of Study: – $500K
• CHOOSE Act: $50 million, this bring current year’s (FY 2025) funding for the CHOOSE Act ESAs to $100 million, as required by law.

FY 2026 Educational Opportunities Reserve Fund Appropriation – The Governor also proposed spending some of the Education Opportunities Reserve Fund (EORF), which is the first-ever appropriation proposed from this new savings account which was created in 2022. By May 2025, the total of the EORF will be $1.12 billion. She proposed a $133 million appropriation, which includes:

• $100 million to the State Department of Education to go towards the new hybrid formula for student weights. This is one of the potential pathways that the Joint Legislative Commission on Modernizing K-12 Funding has explored. To learn more about the hybrid formula, click here.
• $15 million to the Alabama Department of Workforce
• $3 million to the Alabama Department of Workforce’s Community College Career Pathways Partnership
• $15 million to Higher Education Research Institutions