Alabama Legislative Update
The Alabama Legislature convened for its second week of the 2015 Legislative Session. Legislators moved swiftly to tackle the priorities laid out by legislative leaders.
Alabama Charter Schools Closer To Reality
On Tuesday, the Alabama Senate passed its first bill of 2015: legislation to allow charter schools in Alabama. After four hours of debate, SB 45, sponsored by Senate President Pro Tem Del Marsh, R-Anniston, passed by vote of 22-12. Charter school legislation has been a top priority for the Republican legislative leadership in the Senate and House after several years of failed attempts. The Senate vote broke largely on party lines.
SB 45 allows for 10 “start-up” charter schools per year. The state could approve up to 50 charter schools in the next five years with an unlimited number allowed after that five-year period. To create a start-up charter school, a nonprofit group would first apply to the local school system for a charter. The bill would allow local school boards to choose whether to approve charter schools within their districts. If denied, they could appeal to a state board comprised largely of appointees selected by legislative leadership and the governor. There will be a rotating position to represent the local system where the applicant is from. The charters must be awarded to a nonprofit, but they can contract with for-profit companies. The bill also allows for unlimited conversion schools, where public systems convert existing schools into charter schools.
Charter schools are publicly funded but they can operate outside of traditional rules and regulations. The bill prohibits charter schools from basing acceptance of students on academic proficiency or financial means. Charter schools will also be prohibited from having religious themes. Under the legislation, charter school teachers do not have to be certified. Schools do not have to offer them tenure. Funding for the schools will be based largely on the same per-student school funding system in place now, though some local funding, including money committed to capital projects, will stay with traditional systems.
The day after clearing the Senate, the House Education Policy Committee held a public hearing on SB 45’s counterpart, HB 192, sponsored by Representative Terri Collins (R- Morgan County), Chairwoman of the Committee. After heated debate, the committee, by a vote of 8-3, approved a slightly revised version of the bill but left the substance intact. The new version increases the number of members who would be on the Alabama Public School Charter Commission from nine to eleven.
The House and Senate versions are expected to be combined this week and a final vote taken in the House. Alabama is one of eight states that do not allow charter schools.
House Approves Incentives Bills
As part of the Republican House Caucus legislative agenda as well as the “Made in Alabama” jobs incentives package proposed by Governor Robert Bentley, three bills aimed at economic development moved through the House of Representatives.
Although Democrats filibustered against the bills, they were unsuccessful in stopping their passage.
The Alabama Jobs Act is a performance-based pay-as-you-go incentive program for certain businesses that create new jobs in Alabama. Incentives will only be given when jobs are created and the state has started receiving the economic benefit. Companies must create at least 50 new jobs to be considered for these incentives. Companies that would create high-wage jobs in chemical manufacturing, data centers, engineering, design and research projects do not have to meet that job minimum. Once the jobs are created, companies will receive a jobs credit of 3 percent based on their previous year’s gross wages and other incentives. The credit can be claimed as a cash rebate or a tax credit and is paid out of state funds from utility taxes. Companies would receive an investment credit of 1.5 percent of a company’s investment into the construction, equipment or development that create new jobs for a period of 10 years. Tourist destinations not open all year long will be included in an amendment to the bill. Before passage, the House included an amendment from Rep. John Knight, the leader of the Black Caucus, which would ensure the legislative advisory committee providing oversight will be made up of lawmakers and reflect the racial diversity of the state. The bill passed 101-0.
The Alabama Veterans and Rural Jobs Act, sponsored by Rep. Elaine Beech, D-Chatom, increases a company’s job credit and investment credit when businesses hire veterans or when businesses develop new projects in rural parts of the state. The bill will give eligible companies the ability to receive an additional .5 percent jobs credit incentive if they hire veterans to fill newly created jobs. At least 12 percent of the new workforce must be a veteran to receive the credit. Under an amendment sponsored by Rep. Ainsworth, R- Guntersville, rural municipalities are defined as those with a population under 25,000. Business in thoseareas can receive an additional 1 percent jobs credit incentive for the wages paid to new employees. Rural companies must create 25 jobs.
Companies that locate in rural areas are eligible for five additional years of investment credit if they sell their products or services to another company within 50 miles of its location. Companies also would be eligible for loans to help in site preparation work and other work to develop their projects capped at $2 million. The bill passed with 102-1.
The final incentive bill, the Alabama Reinvestment and Abatements Act, provides tax abatements and worker training for existing industries for capital reinvestment projects.
Under the bill, companies that spend $2 million or more to upgrade or expand their facilities will be eligible for tax abatements for: all non-educational construction-related transactions, increased portion of non-educational property taxes due to project and the increased portion of utility taxes due to the project for a 10-year period. It extends the abatement period for state and local non-educational property tax abatements from 10 to 20 years. The bill passed 101-0. All three economic development bills now go to the Senate for consideration.
Senate Committee Approves Birmingham Water Works Bill
State Sen. Jabo Waggoner, R-Vestavia Hills, is once again pushing a bill to change the membership and operating rules of the Birmingham Water Works Board. The legislation would cap board member pay to $500 a month, limit board service to two terms, and require public votes before board members travel. The most politically charged measure, however, is the expansion of the current five-member board to seven members: three Birmingham residents, two Jefferson County residents and two outside county members serviced by the Water Works. Such a change would eliminate the City of Birmingham’s majority on the Board. Currently, the City Council appoints all five members. Democrats also want to expand Board membership. They advocate increasing the number to 11, with seven of those being Birmingham residents. Two members would come from other parts of Jefferson County, while two others would come from Blount and Shelby Counties. The City of Birmingham would keep its majority but there would be additional representation on the Board. Democrats propose voiding the terms of all five current board members and giving the Birmingham City Council the ability to name replacements or reappoint.
The Senate Fiscal Responsibility and Economic Development Committee approved Senator Waggoner’s measure. He brought the bill to the Senate floor on Thursday but did not call for a vote as he and fellowJefferson County legislators continue to negotiate a compromise bill. The Senate could take it up as early as this week. A version of Waggoner’s bill passed the Senate in the 2014 Legislative Session but died in the House on the last day of the session.
Senators Discuss Changes to Alabama Accountability Act
The Senate Finance and Taxation-Education Committee held a public hearing to listen to those who support and oppose the Alabama Accountability Act. The architect of the Act, President Pro Tem Del Marsh, is seeking to revise the legislation. The bill would raise the cap of the $25-million-a-year scholarship fund to $35 million. Marsh contends waiting lists for scholarships indicate the demand exceeds the cap.
The Accountability Act currently limits scholarship eligibility to families earning up to 150 percent of the state’s median household income, which comes to about $64,500.
Changes to the bill would cap that amount to twice the federal poverty level, which is about $48,500 for a family of four. Businesses and individuals who donate to the fund receive income tax credits for donating scholarship funds.
Currently, schools designated as “failing” are those ranked in the bottom 6 percent of test scores in three of the past six years. The bill would expand that definition to include more schools by classifying as “failing” the bottom 10 percent of schools based on results from the state’s new standardized testing in two of the past four years. The new definition also states that to be designated as “failing,” schools must not have shown progress at least equal to the progress of the state’s schools as a whole. The bill would also move up the cutoff date for students from non-failing schools to apply for scholarships. Currently, after Sept. 15, anyone meeting the income criteria can apply, regardless of their school zone. Scholarship Granting Organizations contend the September deadline, when the school year already has started, creates uncertainty for families. Revisions to the bill would change that date to May 15. Students who are zoned to attend a failing public school are given priority for the scholarships, even if they do not attend that school. Senator Marsh asked the committee for time to address concerns before bringing the bill for a vote.
Innovator Liability Bill Clears House and Senate Committees
The Senate Judiciary Committee by a vote of 6-0 gave approval to innovator liability reform legislation. The House version, HB 110, sponsored by Rep. Jack “J.D.” Williams, R-Vestavia Hills, was approved by the House Judiciary Committee and received a second reading on Thursday. In order to strengthen the bill, the House committee adopted language similar to that of the Senate. The bill would reject innovator-liability theory, which maintains that a manufacturer can be held liable for a product that it neither made nor sold. Both bills were forwarded to their respective chambers for consideration.
Senate Committee Addresses Data Breaches in Business
The Senate Judiciary Committee considered the The Information Protection Act of 2015. SB 106 would require specified entities, mainly businesses but also government entities and third-party agents, to notify the Attorney General and the individual owners of personal information if a data breach occurs. The committee adopted a substitute and carried the bill over to give members time to study its provisions. The bill includes business penalties for violation.
More of Governor Bentley’s Tax Package Introduced
- HB 139 would increase the tax on cigarettes and other tobacco products and adjust the discount allowed on tobacco stamp purchases.
- HB 142 would establish mandatory unitary combined reporting for Alabama corporations.
- HB 201 would eliminate the credit for sales and use taxes for financial institutions (primarily banks) that are subject to the excise tax.
- HB 267 would increase the motor vehicle rental tax from 1.5 percent to 4 percent.
- HB 268 would increase the sales and use tax on motor vehicles from 2 percent to 3 percent.
- HB 276 would require any public, private or municipal utility corporation to pay a state license tax equal to 2.2 percent on each $1 of gross receipts.
- HB 277 would repeal tax credits for facilities and real property that are applied to the insurance premiums tax.
Alabama Legacy Trust Fund Considered
SB 231 would create the Alabama Legacy Trust Fund, which would provide for any future legal settlement dollars obtained by the state is kept in a new fund that would first pay off money the state has borrowed from its trust fund and then support the General Fund. The bill would send settlement money under $2 million directly to the General Fund. Any settlement over $2 million would go to the Legacy Fund.
Settlement proceeds would first be used to repay the $161.5 million transferred from the Alabama Trust Fund rainy day account to the General Fund in 2010 as well as the $437 million used in 2013, 2014 and 2015 to shore up the General Fund. After that, distribution of investment income would be divided among the General Fund, receiving 80 percent; the Alabama Capital Improvement Fund, which helps pay for economic incentives offered to new companies locating in the state, 10 percent; and the remaining 10 percent cycling back into the legacy fund. Legislators are exploring options to fix an anemic General Fund. Once healthy enough, the fund could provide steady revenue for the General Fund. Currently, its shortfall is estimated at a minimum of about $260 million. Governor Bentley is proposing about $541 million in tax and revenue increases to solve the problem. The bill would require constitutional amendment approved by voters in 2016.
Minda Riley Campbell
Bob Riley and Associates
3530 Independence Drive
Birmingham, Alabama 35209
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