With 100 percent of the precincts reporting Tuesday, 866,623 people, or 68 percent, opposed Gov. Bob Riley's $1.2 billion tax plan, while 416,310, or 32 percent, voted for it.
The governor was expected to call the Legislature into special session Monday to deal with the red ink. The new fiscal year begins Oct. 1.
Riley and several leading lawmakers have said they would follow the voters' wishes and make cuts if need be. The governor has said cuts could include releasing 5,000 inmates, ending nursing home care for hundreds of elderly citizens, and curtailing prescription medicines for the mentally ill.
State Sen. Hank Sanders, chairman of the Senate education budget writing committee, said he can't imagine legislators raising taxes now.
Roger McConnell, co-chairman of the anti-tax Tax Accountability Coalition, said voters will keep a close eye on the special session.
"The electorate is much smarter than people realize and they are fed up with Montgomery and the way politicians spend money," he said.
State schools Superintendent Ed Richardson said Tuesday night that the results could mean cuts in everything from textbooks to football for Alabama schools.
"We're looking at possibly a four-day school week and at charging fees for everything that's not required for graduation," Richardson said. He said that would include charging a fee for students to play football or to play in the band.
During a whirlwind campaign around the state, Riley, a Republican, promoted the tax package — the largest percentage tax boost proposed in any state — as the way to get Alabama off the bottom of many national education rankings.
But opponents, including leaders of Riley's own party, said Alabama politicians need to cut their wasteful spending rather than raise taxes. Voters agreed with them by a 2-1 margin statewide and even wider margins in heavily Republican counties.
At polling places across the state, voters voiced their distrust of politicians.
"If the money they have now was spent wisely, we wouldn't need this," said Adie Ward, a 74-year-old retired state employee from Montgomery.
Voter turnout for the special election was strong, with about 53 percent of Alabama's 2.4 million registered voters participating. That was better than the 45 percent who turned out to defeat a state lottery four years ago.
Riley's plan was built largely on higher income and property tax payments from the middle and upper classes. Low-income families were viewed as major beneficiaries of the plan, but polls showed only mixed support among blacks and lower-income voters.