Budget Watch: Tracking the 2027 Education Trust Fund Budget

Written by: Sarah Waldinger, Policy Director

It’s that time of year again! The 2026 Alabama Legislative Session began on January 13, and the Governor’s budget recommendations were released and introduced to the House of Representatives on January 14. Check back here throughout the Legislative Session to learn about important budgetary decisions for Alabama’s schools and students.

Thursday, February 5, 2026

On February 2, the House Ways and Means Education and the Senate Finance and Taxation Education Committee members gathered for the Education Trust Fund (ETF) budget hearings. The committees heard testimony from the Retirement Systems of Alabama (RSA), the Alabama Community College System (ACCS), the Alabama Commission on Higher Education (ACHE), and the State Department of Education (ALSDE). 

Neah Scott, Legislative Counsel for the Retirement Systems of Alabama (RSA), presented on the department’s budget request. She highlighted the Public Education Employees’ Health Insurance Plan (PEEHIP), which is the state’s health insurance program for teachers and the Teachers’ Retirement System (TRS). Scott emphasized the increased appropriations request for PEEHIP, noting that more people are using the program, those in the program are using more services, and those services are becoming more expensive. PEEHIP supports 355,000 public education employees, retirees, and dependents, and the program is facing a $380 million shortfall. To make up for this shortfall, the RSA is requesting $274 million from the ETF, which is $122 million over the Governor’s recommendation. This would bring PEEHIP’s total from the ETF to $1.09 billion for FY27. The RSA is also requesting $778 million for the TRS, which is an increase of $3 million over last year’s budget. About $10.5 billion is available for appropriations in the ETF this year, and the RSA is requesting about 17.8% of that total budget.

Dr. Eric Mackey, Alabama State Superintendent of Education, presented the Alabama Department of Education’s (ALSDE) budget request. Mackey highlighted the success that Alabama students have achieved, including incredible gains in 4th-grade math and 3rd-grade reading through the Alabama Literacy and Numeracy Acts. He emphasized the need to fund increasing transportation costs, Struggling Readers Beyond Grade 3, and the programs that are currently working for Alabama students. Budget request totals for the ALSDE’s priorities include:

• Alabama Reading Initiative: $112.8 million, aligned with the Governor’s recommendation
• K-3 Reading Coaches: $36.8 million, aligned with the Governor’s recommendation
• Struggling Readers Beyond Grade 3: $54 million, $7 million over the Governor’s recommendation
• Alabama Numeracy Act: $114 million, aligned with the Governor’s recommendation
• English Learners: $4 million, aligned with the Governor’s recommendation
• Principal Leadership Mentoring Act: $33.2 million, aligned with the Governor’s recommendation
• Computer Science for Alabama (CS4AL): $7 million, aligned with the Governor’s recommendation
• Advanced Placement: $14.5 million, $1 million over the Governor’s recommendation
• Math & Science Teacher Salary Matrix (TEAMS): $87 million, $15 million over the Governor’s recommendation
• Career Tech Initiative: $53.7 million, $15 million over the Governor’s recommendation
• Mental Health Service Coordinator Program: $7.65 million, aligned with the Governor’s recommendation
• Transportation: $615.4 million, $29.1 million over the Governor’s recommendation
• School Safety, Security, & Climate: $52.9 million, $14 million under the Governor’s recommendation

Dr. Jim Purcell, Executive Director for the Commission on Higher Education, presented on Higher Education’s budget request. Purcell emphasized the importance of higher education, and provided data on salaries for those who earn advanced degrees as compared to those who earn high school degrees. The further that Alabamians go in school, the more money they earn annually and over their lifetime. In 2023, the median annual income for high school graduates was $35,397, as compared to college graduates with a bachelor’s degree, who earn $57,000. 

The Commission on Higher Education requested a total of $87.7 million from the ETF, which is a $2.5 million increase over FY26. These funds support student financial aid, grants and scholarships, the Paralympics, and programs like Pathways to Progress.

For more information about the budget hearings, check out this article by the AL Daily News.

Wednesday, January 14, 2026

On January 14, Chairman Danny Garrett introduced four education budget bills to the House of Representatives. These bills outlined budgets for the Education Trust Fund (ETF), the FY26 ETF Supplemental, the Advancement and Technology fund, and the Education Opportunities Reserve Fund, and they reflect the Governor’s recommended budget package.

The ETF budget bill, HB 238, will fund Pre-K-12 and higher education programs in Alabama for the Fiscal Year 2027, and the 2026-2027 school year. The bill that was introduced follows the Governor’s recommendations, appropriating $10.47 billion for K-12 and higher education. The bill language can be found here, and Governor Ivey’s budget spreadsheet with comparisons to FY26 can be found here.

The Educational Opportunities Reserve Fund (EORF) budget bill, HB 237, transfers funds from the EORF savings account to the Renewing Alabama’s Investment in Student Excellence (RAISE) Act Fund and appropriates funding for various higher education institutions. Higher education is allocated $137.6 million that will be used to fund the new outcomes-based funding model that Chairman Orr and Chairman Garrett are proposing this year. The RAISE Act Fund will receive $362.4 million to support the state’s commitment to continuing and expanding the funding of student needs. This is in addition to the $375 million that was transferred from the EORF to the RAISE Act Fund last year. The bill language can be found here, more information on the RAISE Act can be found here, and this Alabama Daily News article has more information about outcomes-based funding.

The Advancement and Technology budget bill, HB 236, will appropriate $1 billion for one-time expenses to K-12 school systems and higher education programs. The bill allocates $624.9 million to K-12, $275.1 million to higher education, and $100 million to the Department of Education to provide matching grants to expand regional career tech centers. Each school district will receive funds based on a formula, and the exact funding levels can be found in the bill.

The FY26 ETF Supplemental budget bill, HB 235, appropriates funds that were left over from FY26. The bill that was introduced follows the Governor’s recommendations, appropriating a total of $419.7 million. The bill also directs a separate $100 million to be appropriated from the CHOOSE Act for the program in the 2026-2027 school year. The bill language includes the following K-12 priorities:

• Struggling Readers Beyond Grade 3: $45 million – This was a big priority for the ALSDE, which requested $52 million.
• Social Studies Curriculum Project: $7 million
• Department of Public Health for CHIP: $19.25 million
• Career Tech: $15 million
• Charter School Grants: $10 million
• College and Career Readiness Grants: $20 million
• Summer and Afterschool Programs: $30 million
• School Safety: $50 million

Wednesday, January 14, 2026

On Wednesday, January 14, Governor Kay Ivey’s budget proposal was released. Additionally, during the Joint Legislative Budget Overview, legislators heard from State Fiscal Officer at the Legislative Services Agency (LSA) Kirk Fulford and Finance Director Bill Poole on Alabama’s budget projections for Fiscal Year 2026-2027 (FY27). Governor Ivey’s budget spreadsheet can be found here, and Kirk Fulford’s full presentation can be found here.

Alabama Budget Basics

The Alabama Legislature has two budgets – the Education Trust Fund, which funds all state education activities, including K-12 school systems, two-year colleges, and public four-year colleges and universities, and the General Fund, which funds all other state activity. Historically, the ETF has grown by about 3-4% each year. 

To begin the budget process, all agencies, including the Alabama Department of Education (ALSDE), send their priorities and requests to the Governor’s office in November. The Governor then puts together a proposal for the ETF and General Funds, that are then considered by the Alabama Legislature.

The ETF is funded primarily through income and sales taxes, contributing to the fund’s projected annual total. The governor’s office and the legislature budgets for the following school year by estimating the total that will be available in the fund, but the increase in spending in the ETF budget is also capped at 5.75% growth or the average growth in the last 15 years, whichever is lower. In most years, more tax revenue will come in than is allocated in the budget. When there is a surplus, funds flow to three different savings accounts and one additional budget that can be allocated by the legislature. These include:

• Budget Stabilization Fund – Created by the Rolling Reserve Act, this fund can be used only if the Governor declares proration.
• Educational Opportunities Reserve Fund – Created in 2023, this savings account can be used to bolster spending if revenue drops, or to fund transformative educational opportunities. This fund was used for the first time in 2025 to support the RAISE Act and the CHOOSE Act. 
• Advancement & Technology Fund – This fund can be distributed, through a predetermined formula, to K-12 school districts and colleges for one-time expenses.
• ETF Supplemental Budget – If funds are left over from the previous year’s Education Trust Fund budget and the above savings accounts are funded, this fund can be used for one-time projects or educational priorities that were not originally included in the previous year’s ETF budget.

FY2027 State Budget Projections

Kirk Fulford presented on where the ETF currently stands, what projected growth may look like, and the totals in each of the savings accounts. The maximum amount that the legislature can appropriate in the FY2027 ETF budget is capped at $10.47 billion. This is an increase of $569.7 million, or 5.75%, over FY2026.

• Budget Stabilization Fund – $116.3 million added in FY25, for a current total of $939 million. These dollars are only accessible during proration.
• Educational Opportunities Reserve Fund – $297.8 million added in FY25, for a current total of $1.04 billion. The legislature could choose to appropriate up to the total balance of this fund. 
• Advancement & Technology Fund – $744.5 million added in FY25, for a current total of $1.12 billion. The legislature could choose to appropriate up to the total balance of this fund.
• FY26 ETF Supplemental Budget – $446.7 million available from the FY25 overflow. $27 million has already been appropriated, so the legislature has $419.7 million left to appropriate for this year.

Beyond the FY2027 budget, Fulford also looked towards recent federal legislation, the One Big Beautiful Bill Act passed in July 2025, that will impact Alabama’s budget this year and beyond. He highlighted that the law impacts tax provisions for individuals and corporations, the Supplemental Nutrition Assistance Program (SNAP), and Medicaid. Beginning FY2027, Alabama will incur an additional cost of $39.8 million for SNAP administration, and could be responsible for over $173 million of SNAP payments to families beginning in FY2028. To read more about OBBBA’s impact on Alabama’s schools, students, and state budget, click here.

Fulford shared that in the years following the COVID-19 Pandemic, state tax revenues were extremely high due to federal funding increases. He projected that this fiscal year will return to pre-pandemic growth rates, impacting the total amount the legislature may have to distribute in future fiscal years. Along with ETF considerations, like PEEHIP for employer healthcare, teacher pay raises, and programmatic increases for the RAISE Act, Numeracy Act, and others, Fulford prepared the legislators for the main funding shifts they will consider this session.

FY2027 Governor’s Recommended Education Trust Fund Budget

The Governor’s proposal for the FY2027 ETF Budget allocates the maximum allowable expenditure of $10.47 million. The recommendation directs $7.1 billion (68%) to K-12 funding, $2.7 billion (26%) to higher education, and $646 million (6%) to other programs. 

Within the K-12 funding recommendations, $4.99 billion was allocated for the Foundation Program to support the state’s resource-based formula for funding public schools. This is a $218 million increase from FY26, which supports teacher pay raises, PEEHIP increases, and TRS rate increases.

Governor Ivey’s budget prioritizes the following Pre-K-12 initiatives:

• RAISE Act: Level funding at $58 million. This will be combined with $133 million from the existing RAISE Act Fund to support student needs for the 2026-2027 school year, for a total of $191 million.
• Alabama Literacy Act (“Reading Initiative”): Level funding at $112.8 million.
• Alabama Numeracy Act: $114 million total, increasing by $19 million from FY26.
• Advanced Placement: Level funding at $13.5 million.
• Afterschool and Summer Learning Program: Level funding at $17.2 million. This was a priority for the ALSDE’s budget proposal, which requested $47.2 million.
• Charter School Commission: $1.5 million total, increasing by $17K from FY26
• Principal Leadership and Mentoring Act: $33.2 million, increasing by $1 million from FY26.
• Turnaround Schools: Level funding at $10 million.
• School-Based Mental Health Service Coordinator: $7.6 million total, increasing by $3 million from FY26.
• Department of Early Childhood: $226.6 million total, increasing by $13.4 million from FY26 to support the Office of School Readiness, which includes a $9.7 increase for First Class Pre-K, and a $250,000 increase for the Dolly Parton Imagination Library. 
• Parental Leave: $12 million total, increasing by $2 million from FY26. 
• CHOOSE Act Funding: Level funding at $100 million. This will be combined with $150 million that was directed from this year’s revenues before they entered the ETF for a total of $250 million.
• Alabama Math, Science, and Technology Initiative (AMSTI): $38.8 million, increasing by $3 million from FY26. This was a priority for the ALSDE’s budget proposal, which requested $57.8 million.
• Dual Enrollment: $54.2 million, increasing by $10 million from FY26. This was a priority for the ALSDE’s budget proposal, which requested $79.2 million.
• Public Education Employee Injury Compensation Program: Level funding at $15.6 million.
• Workforce Development: Level funding at $49.3 million

Governor Ivey’s Additional Funding Recommendations

Governor Ivey made recommendations for the FY26 ETF Supplemental Budget, as well as the Advancement & Technology fund. These recommendations were presented by State Finance Director Bill Poole. 

Governor Ivey’s proposal for the FY26 ETF Supplemental was split, with $274 million (65%) going towards K-12 funding, $109 million (26%) going towards Higher Education funding, and $36 million (9%) going towards other programs. The proposal recommends:

• Career Tech: $15 million
• Charter School Grants: $10 million
• College and Career Readiness Grants: $20 million
• Summer and Afterschool Programs: $30 million
• Ed Farm Coding Workforce Training: $15 million
• Fleet Renewal for School Buses: $66.5 million
• School Safety: $50 million
• Specialty High Schools (ASFA, School of Math & Science, Cyber School, and Healthcare Sciences): $1.5 million each
• Struggling Readers Beyond Grade 3: $45 million – This was a big priority for the ALSDE, which requested $52 million.
• Universities for Capital Projects or Deferred Maintenance (Higher Education): $84.7 million
• Department of Workforce (other): $6.5 million

Poole also shared that Governor Ivey’s proposal for the Advancement & Technology Fund will include distributing $1 billion of the $1.1 billion account.