By Verna Gates
MONTGOMERY, Alabama (Reuters) - Alabama voters will decide on Tuesday whether to transfer more than $437 million from a state trust fund to shore up the state general fund, primarily to support prisons and Medicaid payments.
Alabama is required by law to have a balanced budget. Under its 1901 Constitution, voters must approve amendments in order to raise taxes or make other financial decisions such as the proposed transfer from the $2.3 billion trust fund.
More than 1 million people in Alabama received at least one service from Medicaid, spending on average $3,621 per year, according to the Alabama Policy Institute. With a total impact of $5 billion, a collapse of the Medicaid industry could send healthcare providers scrambling to stay in business, supporters say.
"Half of our revenues are from Medicaid," said Mike Warren, chief executive of Children's of Alabama, a state pediatric hospital that employs 4,000 people and sees 55,000 patients a year in its emergency room alone.
"The economic impact would be huge at a time we don't need any more bad news."
More than 200,000 people in Alabama work in heathcare and the flagship University of Alabama at Birmingham's medical center and school rank as the largest employer in the city.
At the Department of Corrections, the failure of the referendum would mean a budget cut of at least 10 percent.
More than 26,000 inmates crowd into the state's 29 facilities, which are 91 percent over capacity. The state already spends the second lowest amount in the nation on its prisoners, $42.16 per day, according to the Department of Corrections budget presentation.
More than 30 organizations, including Chambers of Commerce and business associations have signed on to support the referendum, according to Rick Journey, spokesman for Keep Alabama Working, a political action committee supporting the amendment.
Opponents perceive the dire predictions as scare tactics to encourage a "yes" vote. The same arguments were made in 2003 when a measure to raise $1.3 billion failed, according to Sam Duvall, director of communications for the Alabama Forestry Association, which is urging members to oppose the amendment.
"Every time they have a crisis, it's going to push Granny off the cliff in her wheelchair. But nothing ever happens," Duvall said.
The money in the trust fund comes from royalty payments from companies that pump natural gas off Alabama's coast. Opponents worry that depleting the fund without a payback plan could hurt future budgets. Arranging the temporary fix dodges yet another opportunity to fix the system, said Chris Isaacson, executive vice president of the Alabama Forestry Association.
"This amendment will just prop the general fund up and allow it to grow more until it is much worse when we finally hit the wall," Isaacson said.
They also believe government could scale back and save enough in efficiencies to replace the shortfall. Republican Governor Robert Bentley recently announced he could save nearly $1 billion in the next 30 years with efficiencies and cuts. Isaacson points to a $48 million savings by switching to electronic funds as an example.
(This version of the story corrects the fourth paragraph to show figures reflect emergency room only and corrects ninth paragraph to show that the group is a PAC.)
(Editing by Jane Sutton)