Regular Session Ends With No General Fund Budget

On Thursday afternoon, the 29th day of the Legislative Regular Session, the Alabama Senate passed a severely-cut General Fund Budget by a vote of 20-13. The version passed by the Senate was as austere as the previously-passed House version, and neither version included new revenue. The budget proposed by the Senate called for $1.6 billion in spending from the General Fund, with cuts of approximately $200 million, 11 percent from this year. The loss of state dollars would have been compounded by the loss of matching federal funds for agencies like Medicaid and Mental Health.

Senators then adjourned sine die at 5:19 p.m., which effectively ended their 2015 session one day short of the permitted 30 days. After the Senate adjourned, the budget went to the House of Representatives, a body that could not change the Senate version because the Senate had adjourned. While debating the Senate’s proposed budget, the House received notice from the Governor’s office that Governor Bentley was vetoing the budget as proposed by the Senate. The House therefore was forced to concur with the Senate’s version of the budget, which had already been vetoed, and then voted to override the Governor’s veto. However, the House override was largely symbolic, as the Senate would also have had to override the veto to have any force. Therefore, the vetoed budget stands and a special session to deal with the General Fund will be called this summer, likely sometime in August, as the 2016 fiscal year starts Oct. 1. The House of Representatives was required to adjourn sine die on the same day as the Senate, and did so at 8:31 p.m. House Speaker Mike Hubbard, R-Auburn, proposed a resolution—which was adopted by unanimous vote—that all House members return to Montgomery on Thursday to begin work in preparation for the special session.

Since convening in March, various options to propose the budget shortfall have been proposed by the Governor, the Republican House Caucus and Senate President Pro Tem Del Marsh, R-Anniston. No one option, however, was supported by another decision maker. The Governor has pushed his $541 million tax increase for months, but the proposal never gained any traction in the Legislature. Republicans in the House of Representatives later proposed a much smaller tax package, one that would have provided level funding, but pulled the bills after being told the Senate would not approve the tax measures. Senator Marsh proposed a constitutional amendment to allow voters to decide whether to approve a lottery and casinos. It never reached the floor for a vote in the Senate. Governor Bentley has stated that gambling legislation would not be part of his proposals for a special session. Another Senate proposal, which would have moved $100 million from the Education Trust Fund to the General Fund, died as well. Governor Bentley said the state’s process of two separate budgets that severely limits flexibility and prioritizing would be included in the discussion during the special session.

Governor Signs Education Budget

While the General Fund budget awaits resolution, the state’s other budget has been enacted. Governor Bentley signed the Education Trust Fund Budget, which totals almost $6 billion and includes more funding for the classroom but no K-12 teacher pay raise and no increase in funding for the state’s Public Education Employee Health Insurance Plan (PEEHIP). Colleges and universities are level-funded.

The budget includes almost $50 million more in direct classroom funding, including:

• $13 million in increased funding for textbooks
• $10 million of additional funding for First Class Pre-K
• $4.5 million in increased funding for transportation
• $3 million in increased funding for classroom supplies
• $3 million in additional funding for classroom technology
• $1.3 million in additional funding for distance learning programs
• $1 million in additional funding for Advanced Placement courses

Bill To Allow State Agencies To Raise Operating Fees Passes

By a vote of 61-38, the House of Representatives gave final passage to SB 216, a bill that would authorize state agencies, boards and commissions—other than the Alabama Public Service Commission, the Alabama Banking Department, and State Parks—to increase authorized fees and use the money for operations. Any fee increase must be tied to the Consumer Price Index for the last 10 years or to when a fee was last increased, whichever is a shorter time period and will be capped at a maximum of 2 percent per year. The bill now goes to the Governor.

Legislature Approves Changes To Accountability Act

Senate Bill 71, sponsored by Senator Marsh, the architect of the 2013 Alabama Accountability Act, would raise the cap on scholarship tax credits from $25 million to $30 million statewide and restrict the income requirements for first-time scholarship eligibility to 185 percent of the federal poverty level, or $44,123 for a family of four. The bill also caps scholarship amounts, as follows: $6,000 for elementary students, $8,000 for middle school students, and $10,000 for high school students. Scholarship money is first available to students from failing schools, then to families that meet economic criteria, regardless of which public school they are designated to attend. The bill will also prevent a private school from increasing the cost of tuition for a child receiving a scholarship, cap annual donations from individuals at $50,000, and retain eligibility for current students if their poverty level threshold rises. Additionally, the legislation calls for more reporting requirements for Scholarship Granting Organizations (SGOs).

Legislature Passes Bill To Define Restrictive Covenants

A bill that would replace the existing law defining restrictive covenants with a more specific list of protectable interests and presumptively reasonable restraints on length-of-time and geographic area is on the way to Governor Bentley. According to the Business Council of Alabama, this new law would provide a guide for judges to follow in interpreting covenants and add clarity for those in the business community who not only draft these agreements but also face the potential of costly litigation over them.

Throughout the session, the Bob Riley and Associates team will monitor all proposed and pending legislation and maintain a presence in the Statehouse to protect our clients’ interests. Should you have any questions or concerns, please do not hesitate to call on us.

Minda Riley Campbell

Bob Riley and Associates

3530 Independence Drive

Birmingham, Alabama 35209

205-484-0099 (office)

mrileycampbell@gmail.com