With only eight legislative days left, time is running out for lawmakers to agree on a solution to the General Fund crisis. In the last week, the House, after hearing the Senate would not approve any tax increases, put forth a stripped-down budget proposal that includes severe cuts but no revenue increases. House leaders have maintained the proposal is a vehicle by which the Senate can put forth possible solutions. Senators continue to debate proposed gambling legislation, even though if successful, such an expansion would not address the current General Fund crisis. Governor Robert Bentley does not support either legislative proposal and continues to advocate his $541 million tax package, a proposal that has received little to no support in the Statehouse. With no agreement between state leaders as to the best approach to address the crisis and no apparent consensus in discussion, a special session is increasingly likely.
House Changes Course And Approves General Fund Budget With Significant Cuts and No Revenue Increases
Last week, the House Republican Caucus released their proposal to solve the General Fund crisis, including an agreement with the Poarch Creek Indians, targeted tax increases, consolidation and revenue shifting. Portions of the plan were scheduled to come up for a vote before the full House on Tuesday. After discussions with Senate leadership, who made it clear any revenue measures sent their way had no chance of passage, the calendar was pulled. House Ways and Means General Fund Chairman Steve Clouse, R-Ozark, issued a statement that said, “With few legislative days remaining, it is time to send the General Fund budget to the Senate and allow lawmakers there a chance to send us a solution that they find satisfactory.” To that end, the House budget committee approved a drastically-cut $1.6 billion General Fund in a voice vote. The approved proposal would cut appropriations to Medicaid, the Department of Mental Health, the Department of Human Resources and state prisons by 5 percent. Other state functions would be cut by 9 percent. Total cuts would be approximately $204 million.
Governor Robert Bentley still advocates his $541 million tax package but has found little support in either house for his proposal. As required by the State Constitution, revenue proposals have to be approved by the 25th legislative day of the session. There does not appear to be any willingness to do so in the next week.
He called the House committee’s budget “unworkable” and has promised to veto the austerity General Fund budget, claiming it would be devastating. There could be layoffs of more than 1,000 state workers, severe cuts to Medicaid and the consolidation of state prisons, which is already struggling with one of the greatest overcrowding problems in the country. Lawmakers recently approved a proposal to address the prison crisis. Sen. Cam Ward, R-Alabaster, stated he has been given assurances from leadership that the estimated at $23 million to $26 million a year price tag would be available.
Gambling Legislation Clears Senate Committee
On the other side of the General Fund debate, Senate President Pro Tem Del Marsh, R-Anniston, continues to push his bill to allow for a statewide lottery and expansion of gambling in four locations that have dog tracks. Marsh maintains such measures would generate approximately $400 million in revenue, with the vast majority coming from the lottery. On Tuesday, the Senate Committee on Marketing and Tourism held a public hearing on the issue, invoking passionate pleas from both sides, but did not take a vote. Two day later, the committee approved the measure by a 5-3 vote.
The bill could be presented to the full Senate early this week. It would require a three-fifths of the Senate and the House of Representatives and then approval by the voters.
After Senator Marsh proposed his gambling bill, the Poarch Band of Creek Indians offered to bail the state out of its current crisis in exchange for exclusive rights to gambling in Alabama. As of now, there has been no acceptance of that offer.
Governor Bentley maintains that even if the gambling bill were to pass the Legislature, it would have no effect on the current fiscal crisis. The constitutional amendment would go before voters in September and would not allow enough time to see any revenue generated by fiscal year 2016, which begins on October 1.
House Education Budgets Puts More Money Into The Classroom
The House Ways and Means Education Committee will consider a $5.9 billion budget that provides more money to the classroom for supplies, textbooks and other daily expenses. For the most part, the House followed the Senate’s lead, including $13 million more for textbooks, $5 million more for transportation and level funding the Public Education Employee Health Insurance Plan (PEEHIP). The House version differs most notably in the elimination of a Senate provision to hire an additional 70 teachers for middle school.
Neither budget included a pay raise for teachers and education employees.
A committee vote could occur on Tuesday with a vote by the full House of Representatives the following Thursday. If approved by the lower chamber, the budget would have to go back to the Senate for concurrence or a conference committee.
House Committee Approves Final Economic Incentive Bill
The House Ways and Means Education Committee passed a substitute version of the Alabama Renewal Act, which would authorize a port credit, create the Growing Alabama Act tax credit and add provisions to the Alabama Jobs Act, which became law this year.
If the Alabama Renewal Commission approves the port credit, it would be granted to users of Alabama’s publicly owned ports and would be based on qualifying increased cargo shipments. The credit would offset a company’s income tax liability. The port credit has an aggregate annual cap of $8 million.
The Growing Alabama Act would allow individual and corporate contributors of funds or property to economic development organizations to receive an income tax credit that is the lesser of 50 percent of the contributor’s tax liability or the full amount of the contribution. The aggregate contribution cap would increase from $5 million in 2016 to $10 million in 2017 and top out at $15 million in 2018 and each year thereafter. Purposes that would qualify under the legislation would include promoting the state, acquiring industrial sites, public infrastructure projects, downtown revitalizations, expansion of the missions of Alabama’s military bases and educational technology, and placing high technology equipment in Alabama classrooms.
Finally, companies receiving the Alabama Jobs Act incentives and employing veterans totaling between 12 percent and 22 percent of their workforce would receive an additional jobs credit of 0.5 percent of wages paid to veterans.
Birmingham Water Works Legislation Signed and In Effect
With the Governor’s signature on the legislation, a new law to limit the Birmingham Water Works Board pay, requires public hearings and public votes on rate increases and discussion about travel expenses went into effect immediately. Beginning in January 2017, the five-member board will be expanded to nine members; six from Birmingham, and one each from Jefferson, Shelby and Blount counties. Birmingham will maintain a supermajority on the board but will not have exclusive authority to appoint. In addition, Board terms will be reduced from six years to four years. Board members will be limited to two terms.
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