2015 Legislative Update: Week 5

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Since Republicans gained control of both houses of the Legislature in 2011, annual legislative sessions have followed a pattern. The first several weeks of every session are a flurry of activity, as the House and Senate majorities work to move major items that they have selected as their agenda for the year. In the middle of the session, there is a lull during which it might appear to casual observers that very little of consequence is done. After that lull, which can last several weeks, there is another period of intense action when the Legislature deals with the budgets. Thus far, the 2015 session appears no different from the four that preceded it.

The past weeks—and likely the next few—fall for the most part into that middle stretch where it seems as though little is being done. In fact, however, this “calm before the storm” period is extremely active. It is the time when negotiations are underway and compromises are being made on the most important things that the Legislature has responsibility for: taxes and spending. What happens in this period of apparent calm determines the State’s finances for the next year, if not beyond.

The Budgets
The Education Trust Fund (ETF)
As most are aware, this year the ETF budget, by far the larger of the two state budgets, is in relatively good shape. The ETF budget began its move through the legislative process this week with a hearing in the Senate Finance & Taxation Education Committee. On Wednesday, the ETF budget, proposed and shepherded through by Senator Trip Pittman (R – Daphne), was reported out of Committee and sent to the Senate floor for debate. There were some objections in the Committee over a number of issues—in particular, there was repeated objection by some members that they had not received copies of the Budget with sufficient time to review it before the Committee vote. The specifics of the ETF budget are likely to undergo some changes when addressed by the full Senate, then again in the House, and finally (possibly) in a conference committee. However, as currently drafted, the budget calls for the hiring of about seventy additional teachers, as well as more money for pre-K programs and textbooks. The budget does not contain any funds for teacher pay raises, however.

The General Fund
In contrast to the ETF budget, there is an estimated $250 million to $750 million hole in the State’s General Fund budget. In budget hearings this week, General Fund agencies began reporting to the Legislature on the possible impacts on their operations if the Legislature chooses not to pass any revenue increasing measure this year. Under that worst-case scenario budget proposed so far, most agencies would face cuts of 15–30%.

Medicaid and the Department of Corrections, the two agencies that together consume more than 50% of the General Fund Budget, would receive cuts of “just” 3%, but even those comparatively smaller cutbacks would result in massive upheaval at those agencies, according to their chiefs. The new Corrections Commissioner, Jefferson Dunn, sworn in just a little more than a week ago, indicated that his agency would be forced to close one prison and one work center and relocate as many as 2,000 inmates. State Health Officer Dr. Don Williamson said that a 3% cut could threaten the viability of the State’s Medicaid program. The Governor has sought a $110 million increase in the Medicaid budget for the coming year.

The budget hearings will continue on Wednesday of this coming week.

Governor’s Tax Package
Because of the budget hearings, there was no action on the Governor’s Tax Package this week. Action is not expected this coming week either as the Legislature concludes its budget hearings.

A description of the specific proposals contained in the Governor’s Package were included in last week's update.

Governor’s Economic Incentives Package
The third bill in the Governor’s economic development package received final passage this week after a conference committee agreed on revisions, and those revisions were signed off on by both bodies. The Alabama Veterans and Rural Jobs Act, House Bill 57 sponsored by Rep. Elaine Beech (D – Chatom), provides additional incentives for projects that are either located in rural areas or that employ a specified percentage of veterans. The bill as passed set the definition of “rural county” as one with a population of 25,000 or less.

Meanwhile, House Bill 214, sponsored by Rep. Victor Gaston (R – Mobile), was reported out of the House Committee on Ways & Means Education this week. That bill would extend the tax credit for the use of historic structures by seven years. The bill now goes to the floor of the House for a vote. It is expected that the bill will face significant opposition in the Senate, however. The Alabama Innovation Act, House Bill 304 sponsored by Rep. Phil Williams (R – Huntsville), is also in line for final passage in the House. The bill establishes research and development tax credits for certain businesses. The last bill in the Governor’s economic development package was introduced at the end of last week. That bill, HB 416, the Alabama Renewal Act by Rep. Chris Pringle (R-Mobile), is pending in the House Ways & Means Education Committee.

Prison Reform
The House did not act on the prison reform bill sponsored by Sen. Cam Ward (R – Alabaster), which was passed last week by the Senate. The bill is pending in the House Judiciary Committee, chaired by Rep. Mike Jones (R – Andalusia).

Data Breach Legislation
Senate Bill 106, sponsored by Sen. Arthur Orr (R – Decatur) and known as the Alabama Information Protection Act of 2015, was favorably reported this week by the Senate Judiciary Committee. The bill, which requires businesses that maintain databases of personal information to report data breaches, is now in line for final passage by the Senate.

Alcohol Sales – Privatization
A bill that would have phased out the retail liquor operations of the Alabama ABC Board was heard in the Senate Finance and Taxation General Fund Committee this week and failed to receive a report by a vote of 6-7. Senate Bill 115, by Senator Arthur Orr (R – Huntsville), was actively opposed by the owners of the property leased by the State for the existing State stores, by the State Employees union, and by the ABC Board itself.

Schedule
The Legislature has met for twelve of the thirty days permitted as part of its Regular Session. The House of Representatives is scheduled to reconvene for the thirteenth day on Tuesday, April 14 at 1:00 PM. The Senate will reconvene on the same day at 2:00 PM.