Alabama Department of Finance


The Alabama Department of Finance is the executive and administrative department that enables the governor to exercise direct control over the state's finances. The agency was established by the state legislature in the Department of Finance Act of 1939. The act enabled the governor to address financial problems resulting from ineffective, inefficient, and nonexistent financial administrative controls within the state's separate commissions, boards, agencies, and departments.

Alabama's first constitution in 1819 required the governor to be elected and also provided the governor with veto power. Although these provisions were considered very progressive at the time, most agency directors were appointed by the legislature, leaving the governor limited power The Alabama Department of Finance is an agency Alabama Department of Financeto manage the state. From 1819 until the end of the Civil War, Alabama, like other state governments, was largely managed by its legislature. Revisions of the constitution in 1868 and 1901 strengthened the separation of powers and extended the term of governor from two years to four years but did not improve the financial administration of the state, which remained decentralized. No one person in the executive branch had the powers and duties of a comptroller. Instead, financial information was gathered and reported separately by each department, board, and commission in the format of their preference, and financial information was provided only when the oversight board or commission deemed it necessary. At the same time, 85 percent of revenues were earmarked for specific uses, leaving the governor and the legislature little ability to control agency revenues and expenditures.

Gov. Benjamin Meek Miller took office in 1931 during the Great Depression, when Alabama was experiencing extreme financial difficulties. For the 20 years prior to Miller's election, the state had not had sufficient cash to pay its year-end obligations, despite the legislature having raised taxes and issued bonds. Governor Miller was committed to correcting these financial problems. His recommendations to the legislature included commissioning a detailed outside study of government and an independent audit of the state's financial condition, increasing taxes on gasoline, and adding new taxes on income and inheritances.

In accordance with the governor's recommendations, the legislature commissioned the Institute for Government Research of the Brookings Institution, based in Washington, D.C., to study the administrative structure of state government and review the state's existing financial condition, financial operations, system of financial administration, and political subdivisions.

The Brookings Report identified problems of fiscal control such as the absence of a comptroller position to oversee expenditures and audits, an inadequate budget system, the earmarking of particular categories of receipts to particular expenditures, and an ineffective system of accounting, reporting and auditing. These deficiencies most likely contributed to the state overspending its budget. The independent audit commissioned by Governor Miller confirmed the state's balance sheet as of September 30, 1931, which reported a consolidated deficit of $13,096,633. Most of Miller's recommendations were quickly advanced, with the exception of the income tax. Miller continued to pursue the tax each year in office, and it became law in the last year of his term.

The Brookings report, the first major study on reorganizing the state, became a platform in Frank Dixon's successful 1938 gubernatorial campaign. He pledged to restore public confidence in the state government. Governor Dixon's legislative agenda in 1939 included a reorganization of state government and the establishment of the Department of Finance and a state-employee merit system. The legislature passed the Department of Finance Act that year, mandating that the agency fall under the direction, supervision, and control of the director of finance, an official appointed by the governor. This individual serves as the chief financial officer of Alabama and principal advisor to the governor and legislature on financial matters and is tasked with protecting the financial interests of the state. The director is outside the merit system and serves at the pleasure of the governor.

Under the 1939 act, the Department of Finance consisted of five divisions: the Division of Control and Accounts, headed by the comptroller; the Division of the Budget, headed by the budget officer; the Division of Purchases and Stores, headed by the purchasing agent; the Division of Service, headed by the chief of the division; and the Division of Local Finance, headed by the chief of the division. The director, with the governor's approval, can establish other divisions within the department as needed. Minor reorganizations have occurred as subsequent governors took office and the size of state government increased. Most modifications were necessary to satisfy the ever-changing administrative needs within the department. For example, in the latter half of the twentieth century, the department added divisions for information systems and telecommunications. In the early twenty-first century, the department eliminated the division of printing and publication as a result of the new capabilities of office computers and electronic documents. Currently, the Department of Finance has 10 divisions: Accounting and Administration, Budget, Comptroller, Debt Management, Information Services, Legal, Purchasing, Risk Management, Service, and SMART (which stands for Specific, Manageable, Accountable, Responsive, Transparent) Governing. The agency's headquarters is located in Montgomery at the Alabama State Capitol, 600 Dexter Avenue. There are approximately 500 employees in the Department of Finance, with a funded appropriation in 2006 of $119,368,000.

Additional Resources 

Alabama Laws (and Joint Resolutions) of the Legislature of Alabama Passed at the Special Sessions of 1950, Organizational Session 1951, Special Session 1951, Regular Session 1959, Vol. 1. Act No. 8, § 1. Montgomery, Alabama: Brown Printing Company, 1951.

Code of Alabama 1975. Volume 1. Art. III, § 1, § 2. Charlottesville, Virginia: The Michie Company/Bobbs-Merill Law Publishing, 1977.

General Laws (and Joint Resolutions) of the Legislature of Alabama Passed at the Session of 1939. Act No. 112. Birmingham: Birmingham Printing Company, 1940.

General Laws (and Joint Resolutions) of the Legislature of Alabama Passed at the Session of 1939. Message of Governor Frank M. Dixon. Birmingham: Birmingham Printing Company, 1940.

Smith, Elton C. and Henry C. Byrum. Alabama Reorganizations. Auburn, Alabama: The Office of Public Service and Research, 1978.

Judith A. Kamnikar
Auburn University at Montgomery


Published October 30, 2007
Last updated February 11, 2013