AMENDMENT 1: INVESTING IN ALABAMA'S FUTURE
"Guest Editorial - Jerry A. Newby, President, Alabama Farmers Federation"
Good stewardship and fiscal responsibility are vital to the financial success of any business or household. The same is true of state government.
This Nov. 7, voters will have the opportunity to vote on a constitutional amendment that will improve the way Alabama manages the royalties from its oil and gas reserves. After careful consideration, the Alabama Farmers Federation has decided to Amendment 1 not only is fiscally responsible, but also provides for wise investment of those financial resources.
Consider this. Next year, Alabama's two oil and gas trust funds will be merged into one fund--regardless of whether Amendment 1 passes.
The investment record for that fund shows it has been earning about 6.5 percent a year. Meanwhile, the Dow Jones stock index has averaged a return of 15.8 percent, and the stock market is increasing at a rate of 24 percent a year. Even the most conservative investment portfolios are earning 9 percent.
If these plans merge without any new provision for how to invest this money, the state's General Fund Budget would lose about $20 million a year in investment revenue. That means the Legislature would have to find that money somewhere else--probably in taxpayers' wallets.
By creating a new trust fund with a more aggressive investment strategy, David Bronner of the Retirement Systems of Alabama estimates the state's annual return on the trust funds could be increased by about $52 million. That's $17 million more than is needed to finance the construction projects outlined in the amendment.
If approved, Amendment 1 would use earnings from the state's oil and gas trust funds to finance bond issues to improve the state's roads and bridges, agricultural research and diagnostic facilities and the state docks in Mobile. These projects are necessary for the economic well-being of rural Alabama. As in the old trust funds, the principal and royalties would not be spent.
Perhaps more importantly, Amendment 1 would pump revenue into the state budget, which could prevent substantial tax increases from developing for several years.
Each of these components of the amendment has consistently been supported by the members of the Alabama Farmers Federation. We would not support this plan if it didn't make good business sense.
I am confident Amendment 1 provides a better investment strategy for the state's trust funds. Meanwhile, it will provide funding for a new State Diagnostics Lab and agricultural research projects at our land grant universities. For our children, Amendment 1 will mean school buses won't have to make 17,000 miles of detours a day just to keep from crossing one of the state's 3,000 dilapidated or obsolete bridges. And in Mobile, Alabama-made products will be shipped directly from our docks, instead of having to be trucked to better facilities in other states.
The Farmers Federation's decision to support Amendment 1 was not based on politics, but rather on sound business principles. As you study the amendment and cast your vote, I hope you will agree that Amendment 1 is a chance for us to invest in the future of Alabama.