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Last updated 6:43PM ET
April 22, 2021
Ruling Opens New Gap in General Fund
(APR - Alabama Public Radio ) - A Montgomery judge opened a $63 million hole in the state General Fund budget Tuesday by agreeing with a Tuscaloosa businessman who argued that the governor improperly transferred money to the budget.

Circuit Judge William Shashy issued a preliminary injunction against the transfer and ordered the money restored to a state savings account known as the Alabama Trust Fund.

Tuscaloosa real estate developer Stan Pate, who had sued Riley, praised Shashy's ruling.

"What happened here is the people of Alabama have won a great victory where the judge ordered the governor not to rob the Alabama Trust Fund to cover his fiscal mismanagement," Pate said in a phone interview.

Jeff Emerson, the governor's communications director, said Riley would appeal immediately and seek to keep the money in the General Fund budget.

The $63 million at issue is equal to 3 percent of the General Fund budget, which finances non-education programs. It is more than the entire appropriation the Legislature is considering giving itself and the state's appellate courts in the new fiscal year.

"We're going to be short again," Sen. Larry Means, D-Attalla, said. He said the ruling may increase support for pending legislation that would allow electronic bingo games at the dog tracks in Jefferson and Mobile counties and levy a state tax on the games.

The litigation stems from Alabama's long-running lawsuit against Exxon Mobil over royalties due from natural gas wells the company drilled in state-owned waters along the Alabama coast. The state won a $3.6 billion verdict in 2003, but the Supreme Court threw out most of that in November.

Alabama ended up with $121.5 million. Nearly half of that was compensatory damages for royalties that weren't paid by Exxon Mobil, and the remainder was a penalty.

After taking off legal expenses, Riley put the remaining compensatory damages into the Alabama Trust Fund, which receives royalties paid from the natural gas wells along the coast. But he put $63 million from the penalty into the General Fund to help balance next year's budget during an economic slowdown.

At a court hearing Thursday, Pate's attorneys argued that the state constitution requires the entire amount minus any legal expenses to go into the trust fund, where it is saved for future generations.

The state attorney general's office argued on Riley's behalf that he acted correctly.

The judge disagreed with the governor's actions.

The state constitution "clearly requires that all proceeds of any 'Oil and Gas Capital Payments' must be paid directly into the Alabama Trust Fund as part of the permanent capital thereof," the judge wrote.

The Alabama Trust Fund now has more than $3 billion derived from natural gas wells drilled in state-owned waters along the Alabama coast. It is invested and the earnings are used to support the state General Fund budget.

Pate has been a frequent critic of Riley since he first ran for governor in 2002. In the past, Pate has considered running for governor, but has never done it.

When asked about the 2010 race for governor, Pate said Tuesday, "I have no interest."

He said that at 50, he's more interested in starting a family than pursuing public office.

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