Senate passes largest education budget in history

April 10, 2025 – MONTGOMERY, AL - The Alabama Senate passed the largest education trust fund (ETF) budget in the history of the state of Alabama on Thursday.

Senate Bill 112 (SB 112) is sponsored by state Senator Arthur Orr (R-Decatur). SB112 would set a new record for the state ETF at $9.89 billion for the fiscal year 2026 budget year which starts on October 1. That is an increase of $543.3 million over the FY2025 budget – the current record all time high education budget - a 5.81% increase. The budget for education increased by $542.5 million over the FY2025 budget.

Despite the $543.3 million increase, the budget does not include any educator pay raise.

Orr said that the reason the teachers did not get a raise is that the state is spending significantly more money providing them with their health insurance. Also the teachers retirement system's (RSA) investments apparently did not make that much money so the state has had to increase the amount of money that they contribute to RSA to provide for their retirements. No teacher, teacher's aide, bus driver, cafeteria worker, janitor, etc. will pay one dollar more for their retirement and health insurance than they pay now.

If the state would switch from a defined benefit plan to 401K for educators there is a potential to save billions of dollars moving forward. The difficulty with that would be coming up with the enormous up front cost of funding RSA so that the existing workers and retirees could receive the benefits that the state has already promised them. In the existing model RSA does not have nearly enough income generating assets to pay the pension benefits that they owe the employees already in the system so new employees withholdings are needed to pay for the benefits of the people who are already retired. Even with a growing educator workforce, the state still has to contribute over a $billion a year to keep RSA solvent.

The Senate also passed two supplemental appropriations of $524 million and $1.25 billion supplemental appropriation from the Education Trust Fund Advancement and Technology Fund.

The Senate also passed a bill – the RAISE Act - to change how K-12 public schools are funded in Alabama and approved $375 million from the Education Opportunities Reserve Fund to pre-fund the funding model for K-12 schools.

Senate Bill 111 is sponsored by Senator Orr. It is the supplemental appropriation of money from the excess money in the rolling reserve fund. SB111 appropriate $375,000,000 from the Educational Opportunities Reserve Fund (EORF) to the Renewing Alabama's Investment in Student Excellence (RAISE) Fund.

"The thinking is that we will now put $375 million into the Raise Fund and from that fund we will push that money out to the K-12 schools through the new funding formula," explained Orr. "In year one we will spend $100 million, $125 million in year two, and $150 million in year three."

"We don't want to pull the rug out from under the school systems," said Orr explaining why the legislation was prefunding the RAISE Act fund through 2028 out of current funds.

SB113 is a supplemental appropriation bill sponsored by Orr. SB113 would appropriate $524,276,588 from the Education Trust Fund (ETF) for fiscal year 2025 to various agencies and entities to be used pursuant to the provisions of this bill.

SB114 is a supplemental appropriation bill sponsored by Orr. SB114 Senate Bill 114 would appropriate $1,249,991,080 from the Education Trust Fund (ETF) Advancement and Technology Fund (the rolling reserve) for fiscal year 2025 as follows: "1. $342,125,000 to public institutions of higher education; and 2. $807,866,080 to the Department of Education to be allocated to the local boards of education, the Board of Trustees of the Alabama Institute for Deaf and Blind, the Board of Youth Services School Districts, the Board of Directors of the Alabama School of Fine Arts, the Board of Trustees of the Alabama School of Math and Science, the Board of Trustees of the Alabama School of Cyber Technology and Engineering; and the Board of Trustees of the Alabama School of Healthcare Sciences. This bill would further provide that the funds allocated to the local school systems shall not be expended without prior approval of the State Superintendent of Education. 3. $100,000,000 to the Department of Education. Additionally, this bill would reappropriate unexpended and reverted funds from fiscal year 2024 in the amount of $35,057,322 to certain local boards of education. In addition, this bill would provide that all funds not expended in the current fiscal year shall not revert but shall be carried forward for the purposes appropriated."

The package of bills traveling with the budget includes appropriations for Southern Preparatory Academy (SB122), Tuskegee University (SB109 $15 million), and Talladega College (SB150.

The $9.89 billion education budget passed the Senate unanimously. The total education budget package is around $12 billion. It now goes to the House for their consideration, where it is assigned to the House Ways & Means General Fund Committee.

Tuesday is Day 22 of the 2025 Alabama Regular Legislative Session.