General Fund grows, but Medicaid and Corrections consume more of it

A guard tower at Holman Correctional Facility in 2019. (Brian Lyman/Alabama Reflector)

The General Fund budget for 2025, approved by state lawmakers earlier this month, is the largest in state history.

It’s the latest milestone for the budget, which pays for most noneducation expenses in the state. After being cut by $444 million — almost 23% — during the Great Recession in 2009, the budget has grown from $1.52 billion to a projected $3.36 billion next year, a $1.78 billion increase.

The General Fund has benefited from sales tax revenues on Internet purchases and, outside the sharp but relatively short-lived COVID-related downturn in 2020, a stable economic environment.

But while all state agencies have seen increased allocations, in the last 20 years two have grown far faster and taken up much more of the budget than others, according to an Alabama Reflector analysis.

The Alabama Medicaid Agency, which provided health coverage to over 1 million Alabamians in 2021 — the majority of them children — saw a fourfold increase in General Fund spending, going from $231 million in 2002 to more than $955 million in 2025, a 313% increase.

The Alabama Department of Corrections’ budget went from $197 million in that timespan to $737 million, a 274% increase.

The share of the General Fund taken up by the agencies has also grown. In 2002, the agencies made up just over a third of General Fund spending. In 2024, they took up slightly more than half of the budget.

Those allocations do not represent all the spending of those agencies. The federal government pays for almost three-fourths of Alabama’s Medicaid program. But the trend has not gone unnoticed by observers and lawmakers overseeing the General Fund budget.

“For years, Corrections and Medicaid have been vying with each other as the biggest consumers of the un earmarked General Fund money,” said Carol Gundlach, a senior policy analyst with Alabama Arise, who studies the General Fund budget. “They outweigh all the other agencies that get General Fund appropriations.”

The increased dollars for some departments reflect increased investments on the part of lawmakers who wanted to prioritize specific issues in the state. Some of it can be explained by inflation, while some received funding because legislators had to make heavy investments to address years of neglect.

Other agencies saw increases, though some were more modest than others.

• The budget for the Alabama Department of Mental Health more than doubled in 20 years, from almost $100 million in 2002 to slightly more than $200 million in 2024.
• The General Fund outlays for the Alabama Department of Public Health also almost doubled, going from $57.4 million in 2002 to $113 million in fiscal year 2024.
• The budget for the Alabama Department of Human Resources, about $66 million in 2002, went to slightly more than $120 million in 2024.

Other departments saw varying increases.

• The budget for the Alabama Department of Environmental Management increased from $5 million back in the 2002 fiscal year to slightly more than $25 million by fiscal year 2024, though only after major cuts in the mid-2010s that reduced its budget 96% between 2008 and 2016, and at one point left its General Fund allocation at just $280,000 .
• Allocations to the state’s court system increased from $136 million to almost $200 million over the same period.
• The Alabama Attorney General’s Office, which never comprised a significant portion of the General Fund budget, went from $10 million in 2002 to about $13 million during the previous fiscal year’s budget.

As Corrections and Medicaid have taken up the bulk of the General Fund, most of the money for the other agencies is largely flat, or has even decreased, as a percentage of the total General Fund budget.

• Both the Alabama Department of Mental Health and the state courts consumed just 7% of the 2024 fiscal year General Fund budget.
• The Alabama Law Enforcement Agency, Department of Public Health and Department of Human Resources each take up 4% of the General Fund budget for 2024.
• ADEM, the Alabama Department of Economic and Community Affairs and the Attorney General’s Office barely make a dent, accounting for no more than 1% of the General Fund for the 2024 fiscal year.
• Those percentages have been relatively stable for the past 20 years.

Gundlach also said Corrections and courts could be taking up even more of the General Fund budget if the state had not turned to funding much of it through fines and fees.

“We have seen a lot of the cost of the criminal justice system, including the courts, getting shifted to fees that are assessed against people who use the court system as opposed to a General Fund appropriation, which is really harmful in all kinds of ways,” she said. “I think it distorts justice.”

Corrections funding

The DOC has faced overcrowding for decades and a surge of violence led the U.S. Department of Justice to sue the state in 2020. The agency has struggled to attract corrections officers to work in its facilities, many of which are in need of repair.

Other states have seen Corrections budgets skyrocket. The state was already behind the curve because lawmakers grew the Corrections system without making needed investments to house its incarcerated population safely and adequately.

“The problem with Corrections, I believe, is that we did not invest in that, or adequately provide for that, for a huge amount of time,” said Sen. Greg Albritton, R-Atmore. “What we are seeing is payment for our sins of the past. We have our prisons that we built that were junk to begin with. We took warehouses and put stuff in and put folks in there.”

In addition, the prison population is aging, creating additional health expenses.

As a result, Corrections spending has accelerated in the past few years. The agency, which received just over $400 million in 2018, is budgeted to get $737 million in 2025, an increase of almost 84% in the past six years.

Alabama’s incarcerated population has fallen from its 2007 peak, when the state held 25,000 people behind bars, but it has increased to about 20,000 this year after DOC’s resumed intakes of prisoners, which stopped briefly amid the COVID-19 outbreak.

“We have seen an increased number of prisoners,” said Bill Poole, director of the Department of Finance. “The census of persons held in the state system has increased over the last two years.”

Among the main drivers is the increase in salaries and benefits given to recruit and retain corrections officers. That’s a major expense throughout the country. According to the Prison Policy Initiative, a think tank that focuses on the problems with mass incarceration, prisons; jails; paroles; and probation cost about $80.7 billion annually nationwide. Of that, about $38.4 billion, almost half, is spent on people.

“The primary competition for corrections officers is police departments and sheriffs’ offices,” said Bennet Wright, executive director of the Alabama Sentencing Commission. “DOC absolutely had to get to a place where their compensation for correctional officers was either at or a little above, in most cases I would say at — I don’t think it is above — most municipal police officers and county sheriffs’ departments.”

Corrections also must deal with economies of scale, according to Wright.  Unlike some agencies, corrections departments are labor intensive, so there is a multiplier effect for spreading salary increases across many employees.

But despite augmented salaries, the department continues to struggle with its recruitment and retention efforts . Of the almost 2,500 corrections officer positions the state has budgeted for, 365 positions remain vacant, due in no small part to the difficult working conditions.

Corrections departments face recruitment and retention issues because of the nature of the work. Many are not as well educated and are not as well trained as other professions.

Requiring additional education will require additional compensation, so the dynamic is complicated and could increase budgets even further.

The dynamic, the increasing number of people incarcerated and decreased corrections officer volume is problematic for controlling the violence in the prison. Not only because there are fewer eyes supervising the population, but there is also not enough capacity to ensure programming is available.

Add to that the growing cost of providing health care to those who are incarcerated. According to the fact sheet from the Prison Policy Initiative, health care is the second highest expense category next to personnel, totaling $12.3 billion annually. Corrections awarded a $1 billion contract last year to meet the health care needs of those incarcerated.

Medicaid funding

Medicaid has traditionally been a cost-driver for the state’s General Fund budget, but it has reached record heights in recent years.

According to the Reflector’s analysis, funding for the Alabama Medicaid Agency was slightly more than $600 million in 2013. The budget for this year will touch almost $1 billion, with increases expected in the future, with few avenues for helping to bend the cost curve.

“That is a function that we have almost no control over,” Albritton said. “CMS (Centers for Medicare and Medicaid Services) tells us what to pay, it tells us who to cover, and we try to do the best we can with that.”

A federally mandated entitlement program administered by the state in which the cost is shared by both parties, Medicaid pays for the cost of medical services for low income and disabled individuals.

Despite the surge in spending, Alabama actually gets a break from the federal government. The percentage covered by the federal government is the third-highest in the country , behind only West Virginia and Mississippi.

KFF , a health news organization, has different figures from the Reflector’s analysis. According to its website, for the fiscal year 2022, Alabama spent almost $1.5 billion on Medicaid while the federal government contributed roughly $5.7 billion.

Gideon Lukens, a senior fellow and director of research and data analysis on the health policy team for the Center on Budget and Policy Priorities, provided figures which are slightly different from the numbers obtained by the Reflector.

According to a report by the National Association of State Budget Officers that compiled a report on the spending levels of different states for Medicaid , Alabama spent an estimated $687 million of its General Fund money on the program in fiscal year 2022, but the federal government invested nearly 10 times that amount at $6.4 billion. That is equivalent to 21.9% in terms of spending as a percentage of total expenditures.

“You can see that Alabama’s Medicaid spending as a percent of total state spending was 24.1% in 2023, below the national average of 29.6%,” Lukens said in an email.

Medical providers in the state also contribute to the program to help defray the cost of the state’s portion. While the figures differ from the various sources, a consistent theme is that Alabama pays less than other states for its share of the federal entitlement.

“It is hard to kick people off,” said Jennifer Tolbert, deputy director of KFF’s Program on Medicaid & Uninsured and director of State Health Reform. “There are federal minimum standards, so states are required to cover populations. States can play around with eligibility levels but that is very challenging.”

Regardless, it is difficult to impose cost controls because it is an entitlement program mandated by the federal government.

“Populations are increasing generally, so enrollment has increased over the years,” Poole said. “The cost of health care has increased, whether that is the cost of prescription drugs or other related health care costs.”

Solutions

While it is difficult to stem the cost increases for Medicaid because of federal mandates and rising health care costs, researchers have identified avenues to at least limit future increases to the cost for Corrections.

“These costs reflect a prison system that is choosing to blame staffing shortages, old facilities, exogenous characteristics of the prison population for increases in its budget, and that system should be pursuing decarceration,” said Wanda Bertram, a spokesperson for the Prison Policy Initiative.

Some corrections experts proposed flipping the cost formula for prisons on its head: instead of pursuing strategies to increase the number of corrections officers working in its facilities to achieve the ideal ratio of population to corrections officers, pursue an approach that reduces the population to fit the ratio to the number of corrections officers available.

“You could look at people who are currently in prison who don’t really need to be there, especially the aging population, especially people who are there for marijuana offenses, especially who got put there for these really punitive drug crimes, drug possessions, drug selling, years and years ago who are probably not a high risk anymore,” said Miriam Northcutt Bohmert, associate professor of criminal justice at the University of Indiana Bloomington.

Costs related to providing services and infrastructure needs are relatively low compared to the cost of personnel and medical care, but they are not negligible. Food, for example, costs an estimated $2.1 billion while utilities are $1.7 billion annually for prisons and jails nationwide.

“All of the money in Corrections is fixed cost,” Wright said. “Even if you take five people out of prison, you actually still have the same number of correctional officers, the health care contract is still the same.”

The system must release enough individuals in prison to reduce the need for corrections officers and begin closing prison facilities.

“With salaries and personnel expenses, those are things that we conceptualize as step-fixed,” said Bea Halbach-Singh, senior research associate for the Vera Institute of Justice’s Beyond Jails initiative, a nonprofit research organization that focuses on criminal justice. “Those are costs that can change as the population increases or declines by larger increments. And that is because of the way that facilities are set up.”

The Vera Institute of Justice reviewed the costs of county jails in Kentucky for fiscal year 2019 and expenses correlated with the population. Counties with a larger prison population tend to have higher operating expenses.

Jefferson County, Kentucky has an inmate population of about 1,800 and jail expenditures totaling $55.6 million. The Union County jail houses 58 people and operates on a budget of $1.6 million.

But these approaches are politically difficult in Alabama, where lawmakers have focused more on punishment than rehabilitation in recent years. Parole rates remain dramatically smaller than in the past — and that has had consequences for the prison population.

“I don’t think there has been any single piece of legislation that has done more to increase the cost of prisons and increase the prison population than the changes at the parole board and the decisions made at the parole board,” said Carla Crowder, executive director of Alabama Appleseed.

Legislators have also rejected bills to release those who have been incarcerated for decades and aged to the point that they are less likely to recidivate.

House Republicans stalled HB 29 , sponsored by Rep. Chris England, D-Tuscaloosa, that would have allowed those who remained in prison for 25 years to have their cases reviewed.

“People don’t agree with the idea of warehousing their neighbors for extremely long periods of time,” said Monica Smith, associate director of policy and advocacy with Vera’s Beyond Jails initiative. “There’s no research that shows states are getting a return on their investment with these tough-on-crime laws and really harsh penalties.”

Methodology

To determine how Alabama lawmakers decided to fund the government, the Alabama Reflector obtained the budget spreadsheets for each fiscal year dating back to 2002 found on the Legislative Research Service website.

Specific departments were selected for analysis, those that provide both medical and mental health services to residents as well as law enforcement agencies. The spending for each agency for each fiscal year was transcribed onto a spreadsheet, as well as the state’s total General Fund allocation for each fiscal year.

Charts were then made, tracking the amounts for each of the departments, and percentages were taken for each department relative to the entire budget.

The figures do not encompass all the state government’s spending. The Reflector’s analysis did not review the supplemental appropriations of the General Fund, which provides agencies with money for projects for a single year. The Reflector also did not review the Educational Trust Fund budget, which funds all the education and educational support functions for the state.

The analysis also does not account for capital investments made by lawmakers for a particular department, federal funding doled out by the Legislature, or funding that has been earmarked for specific purposes.

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