Alabama lawmakers are eyeing possible tax rebates as the state sees a budget surplus of more than $2.7 billion.

Legislators will face decisions on what to do with the rare surplus, including how much to save and how to spend the rest. The state budget that funds education has a $2.7 billion surplus, according to the Legislative Services Agency. The state general fund has a smaller surplus of $351 million.

Sen. Arthur Orr, who chairs the Senate education budget committee, said lawmakers are working with Gov. Kay Ivey on a proposal but that he expects the plan to include rebate checks to taxpayers, along with tax cuts and putting money in reserves.

“We believe, after we take care of state government, at least on the education side, we have enough to send back to the people of Alabama who sent it to us in the first place. In addition to that, with the economy and with inflation, they’re struggling, and so this would be a small manner of relief to them,” Orr said.

He said lawmakers are considering $500 million in total rebates. The amount sent back to Alabamians will depend on how eligibility is defined, but he said they are looking at a minimum of $200 or $250 for individuals and $400 or $500 for married couples who file joint returns.

The Republican lawmaker said he also expects proposals for tax cuts. But he said it is important that the state put a significant amount of money into reserves. “I think everyone realizes this is a one-time phenomenon having a surplus like this, and we need to put money back because the economy is getting tighter and tighter.”

The Associated Press reported in August that at least 15 states have approved one-time rebates from their surpluses.

There has been disagreement among lawmakers on how to use the rare surplus.

“If we could do a tax rebate, we could expand Medicaid,” Senate Minority Leader Bobby Singleton said when asked about the rebate proposal.

“I think that is something more substantial than doing a tax rebate. I think the citizens would get more out of an expansion of Medicaid than they would a one-time check to be able to spend.“

Alabama is one of only 11 states that did not expand its Medicaid program under the Affordable Care Act to provide health care coverage to low-income people, according to the Henry J. Kaiser Family Foundation.

Democratic lawmakers in Alabama have long called for Medicaid expansion, arguing it would bring health care coverage to more than 300,000 people, many of them in working families who don’t have health insurance through their jobs. Republicans, who hold a lopsided majority in the Alabama Legislature, have so far opposed expansion.

Sen. Greg Albritton, who chairs the Senate general fund budget committee, said he wants to make sure the state has enough in reserves so it won’t face budget cuts during an economic downturn.

“The first priority is getting ready for hard times. I don’t know how bad, or if, a recession will occur but my job is to try to make sure that we are prepared as we possibly can,” Albritton said.

Albritton said rebates will “be on the table.” But added he would like to see the state put the education surplus in a trust to fund scholarships.

“I think that would be a better return to the taxpayers than a simple rebate,” he said.