Proration Plan in Effect

Saying the nation’s struggling economy is having a “tremendous impact” on Alabama, Gov. Bob Riley Monday announced the implementation of a deficit prevention plan, or pro-rata budget cuts known in the state as proration.

Riley ordered cuts in both of the components that make up the state budget — the general fund and the education fund.

“Because of the national economy’s slowdown, if we remain on our current course Alabama would finish this fiscal year with a budget deficit,” Riley said. “That is unacceptable not only because the state has a legal obligation to operate with a balanced budget, we also have a moral obligation to put Alabama’s fiscal house in order.”

Riley used his authority under the Budget Management Act to reduce state agency budgets by 10%, which is expected to cut spending by about $200 million in this fiscal year. The cuts will be targeted at administrative and overhead expenses, rather than services to the public, but include a hiring freeze and a freeze on merit pay raises as well as other non-essential expenses.

“Through the hiring freeze we should be able to reduce the number of state workers by 3,000 over the next year without layoffs,” Riley said.

Riley said proration at the rate of 12.5% would be necessary in the education budget, but he softened the reduction to 9% by drawing down $218 million, or half of the amount available, in the rainy-day fund for education.

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