The Alabama Legislature’s Regular Session has been dominated by forecasted budget shortages and the consequences of significant cuts in state agencies and departments or the possibility of increasing revenue. From the Governor’s office to the Statehouse, leaders are focused on the General Fund Budget and the best options to balance it as required by the Alabama Constitution.

Taxes, Cuts Or Both?

Layoffs. Closed parks. Released inmates. These are just a few of the scenarios that lawmakers are grappling with as they debate and discuss the anemic General Fund. Governor Robert Bentley has repeatedly warned of dire consequences if the Legislature refuses to raise taxes. He said the cuts could include the end of 17,000 subsidized daycare slots, the closure of 15 state parks, reductions in services for the mentally ill and intellectually disabled, the closure of a state morgue, reductions in food stamps and a possible release of state prisoners. Thus far, the Governor’s tax proposals have received a cool reception from lawmakers. None of the bills have come up for a vote in the House or Senate.

Senator Arthur Orr, R – Decatur, Chairman of the Senate’s General Fund committee, recently asked General Fund agencies to submit plans for how they would deal with budget cuts of 15 percent and 30 percent. He and House Budget Chairman Steve Clouse, R – Ozark, circulated draft budgets last week that assumed no new revenues and cut most agencies by 11.5 percent. Few lawmakers expect a budget so drastically cut to pass unchanged.

According to Commissioner Nancy Bucker, the Alabama Department of Human Resources would have to eliminate subsidized child care services for almost 17,000 low-income children if cut 15 percent. It would also have to eliminate the $2.3 million adult day care program, which would place 404 needy adults in danger of being placed in nursing homes on Medicaid. A 15 percent cut in the Mental Health’s General Fund appropriation, a reduction of $15.8 million, would reduce the agency’s state and federal funding by $52.7 million. The result could be the elimination of community-based services to 583 people with intellectual disabilities. If cut by 15 percent, Alabama’s state court system would reportedly have to lay off about 530 employees.

State prisons would not be cut as significantly as other agencies but even a single digit reduction could be devastating. Currently, prisons are at almost 190% capacity, a level that could lead to federal intervention and the release of inmates. Corrections Commissioner Jeff Dunn has stated budget cuts would require the closure of smaller facilities, which would increase crowding to over 220 percent of capacity. Dunn said that number heightens the likelihood of court-ordered intervention and poses greater risk to security staff.

With a 3% cut, the smallest of any, State Health Officer Don Williamson said Alabama’s Medicaid program would likely no longer be viable. Reductions would eliminate all services not mandated by the federal government, such as outpatient dialysis, adult eyeglasses and hospice.

Governor Bentley has stated his willingness to call multiple special sessions over the budget should his revenue measures fail in the Regular Session.

Education Trust Fund Passes Senate Committee

Senate budget leaders quickly approved a $5.99 billion Education Trust Fund Budget, $5 million less than the total recommended by Governor Bentley but almost $60 million more than the current fiscal year. The proposed education budget includes a $13.5 million increase for the state’s pre-kindergarten program and additional funding to hire 70 new middle school teachers. It does not provide a pay raise for teachers and level-funds insurance. There were other increases from the current fiscal year: Student Assessment, $6 million; Postsecondary dual-enrollment, $5.2 million; Distance Learning, $2 million; and Advanced Placement, $500,000. The committee version will also increase funding for textbooks by $13 million and transportation by $5 million. Universities would see an increase of only about $3 million to their $1-billion-plus spending. The committee version does not move money to the General Fund as the Governor has recommended. Committee Chairman Trip Pittman, R – Daphne, said the committee needs to get the budget to the Senate floor soon and could be introduced to the full Senate as early as this week.

Third Incentive Bills Passed

By a House vote of 94-5, lawmakers gave final approval to the Alabama Veterans and Targeted Counties Jobs Act, as amended. Under the bill, companies that create at least 25 jobs in a county with a population of 25,000 or less will get an extra 1 percent job credit from the new employee wages after the first year, for a period up to 10 years. The credit is paid out of state funds from utility taxes. The bill also gives new employers an extra 0.5 percent jobs credit for hiring veterans and veterans composing 8 percent of the company workforce. The bill now awaits Governor Bentley’s signature. A fourth bill, HB 304,
​by Representative Phil Williams, R – Huntsville, the innovation tax credit bill, is in the House Technology and Research Committee. It would establish the Alabama Innovation Act providing research and development tax credits un to $2 million per company for those meeting the criteria.

Bill Would Revise Restrictive Covenant Law

The House Judiciary Committee amended and favorably reported HB 352, a bill that would replace current law on restrictive covenants between employers and employees. It would replace an existing statute with a more definite list of protectable interests and reasonable restraints on length-of-time and geographic area. Senator Phil Williams, R – Gadsden, has also introduced a version of this bill, SB 367, the Senate.

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)