Alabama’s current budget

Governor Kay Ivey released her FY 2026 budget proposal and gave the state of the state address in February 2025. The FY 2026 budget was enacted in May 2025.

Alabama enacted its FY 2025 budget in May 2024. The budget reported $9.3 billion in Education Trust Fund spending and $3.4 billion in general fund spending, an increase of 6 percent and 12 percent respectively over the previously enacted budget. (Alabama and Utah are the only states with separate education and general fund budgets. NASBO combines the two under “general fund spending” when describing Alabama’s recent expenditure totals.) In 2025, Alabama passed significant tax reforms, including raising the business tangible personal property tax exemption and establishing a 30-day tax exemption period for nonresident employees. In 2024, Alabama passed a cap on property tax increases. Alabama passed a tax cut in calendar year 2023, both lowering its sales tax rate on groceries and sending residents a one-time tax rebate.

Under the American Rescue Plan, Alabama received $2.1 billion in direct state fiscal aid and $1.4 billion in local government aid from the federal government. As of January 2025, Alabama had fully allocated its state ARP. States must spend the funds by Dec. 31, 2026.

According to the National Association of State Budget Officers (NASBO), Alabama’s total expenditures in fiscal year FY 2025 were $40.6 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2025 were $2.9 trillion, ranging from $5.4 billion in Wyoming to $413.8 billion in California.

According to NASBO, Alabama’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:

• FY 2025: $15.7 billion/$43.9 billion
• FY 2024: $13.5 billion/$38.1 billion
• FY 2023: $13.8 billion/$40.6 billion
• FY 2022: $11.5 billion/$38.0 billion
• FY 2021: $10.0 billion/$31.9 billion
• FY 2020: $10.2 billion/$31.5 billion
• FY 2019: $9.0 billion/$28.9 billion

For more on Alabama’s budget, see

• the Alabama Department of Finance,
• the Alabama Comptroller, and
• the Alabama Legislative Services Agency.

Alabama’s budget institutions, rules, and constraints

Alabama uses an annual budget. The legislature must pass a balanced budget and is prohibited from carrying a deficit into the following year. There are no further tax and expenditure limits. Alabama does limit its total authorized debt (but not debt service).

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Overview of Alabama’s state and local expenditure and revenue sources

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Alabama’s combined state and local direct general expenditures were $51.0 billion in FY 2022 (the most recent year census data were available), or $10,053 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $12,083.

Alabama’s largest spending areas per capita were health and hospitals ($2,094) and elementary and secondary education ($1,960). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Alabama’s combined state and local general revenues were $60.8 billion in FY 2022, or $11,976 per capita. National per capita general revenues were $13,619. Alabama uses all major state and local taxes. After federal transfers, Alabama’s largest sources of per capita revenue were charges ($2,748), such as state university tuition and highway tolls, and general sales taxes ($1,465).

Alabama’s economic trends

Alabama’s per capita income (per the Bureau of Economic Analysis) was $56,684 in 2024, ranking 48th among the states. It was below both the national average of $72,425 and the Southeast regional average of $61,546. The state’s median household income (five-year estimate) was $63,999 in 2024, ranking 45th among the states and below the national average of $80,734. Alabama’s poverty rate was 15.6 percent in 2024 (five-year estimate), above the national rate of 12.5 percent.

Although Alabama’s averages tell a story about the entire state, Alabama is composed of diverse localities. For example, the city of Bessemer’s median household income was $39,613, and its poverty rate was 27.9 percent; the city of Mountain Brook’s median household income was $201,479, and its poverty rate was 3.2 percent.

Alabama’s unemployment rate historically tracks the national rate. The state’s rate was slightly above the national average following the Great Recession, but it has closely tracked the US rate for the past few years.

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Alabama, the average unemployment rate in 2024 was 2.7 percent for white residents, 3.7 percent for Black residents, and 2.9 percent for Hispanic or Latino residents.

The major industries that contributed the most to Alabama’s gross domestic product (GDP) in 2024 were finance, manufacturing, government, professional services, and social services (i.e. health and education). Manufacturing and government contributed more to Alabama’s GDP than they did to the nation’s and region’s GDP, while finance, professional services, and social services were less important to Alabama than they were to the nation and region in 2024.

Looking at more specific industries, among those that accounted for at least 1 percent of Alabama’s GDP in 2023, state and local government produced more for the state than for the nation, contributing 9.8 percent to Alabama’s GDP and 7.6 percent to the nation’s. Other industries that overperformed in Alabama relative to national averages in 2023 were motor vehicle manufacturing, primary metal manufacturing, the federal government, and utilities.

Alabama’s politics

Governor Kay Ivey, a Republican, was elected in 2022 with 67 percent of the vote. The next gubernatorial election is in 2026.

Republicans control both the House of Representatives (76 Republicans to 29 Democrats) and Senate (27 Republicans to 8 Democrats), with veto-proof majorities in both houses. Control of the governor’s mansion and each house of the legislature gives Republicans a trifecta in Alabama. The entire legislature is up for election in 2028 because both representatives and senators serve four-year terms.

Alabama’s demographics

As of July 2024, Alabama’s population was 5,157,699. That was up 7.8 percent from 2010. The state’s population growth rate was slower than than the nation’s 9.9 percent growth over the same period. The Urban Institute estimates the state’s population will increase 10.5 percent between 2010 and 2030, less than the nation’s estimated growth rate of 16 percent.

Additional resources

• The State and Local Finance Initiative’s Backgrounders explain the tax and spending issues highlighted in these briefs.
  
• The State Economic Monitor presents updated data and customized visualizations of state economic indicators.
  
• State and Local Finance Data: Exploring the Census of Governments allow users to sort, customize, and download the Census of Governments State and Local Finance series data featured in these summaries.
  
• The State Tax and Economic Review series provides quarterly reports on state tax collections and underlying economic trends in all 50 states.
  
• The Urban Institute’s State Tax Data Subscriptions provide access to up-to-date revenue data in all 50 states.