2015 Legislative Update: Week 4

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The Alabama Legislature returned from its week-long break and met this week for the ninth and tenth legislative days of the 2015 Regular Session.

Governor’s Economic Incentives Package
Several pieces of Governor Robert Bentley’s economic development package made progress towards becoming law this week. Most important, the centerpiece of the Governor’s package, House Bill 58, sponsored by Rep. Alan Baker (R – Brewton) and known as The Alabama Jobs Act received final passage and was sent to the Governor for his signature. The legislation would provide tax credits for job creation and capital investment in new projects in Alabama, as long as those projects meet specific, targeted job-creation goals.

House Bill 57, sponsored by Rep. Elaine Beech (D-Chatom) and known as The Alabama Veterans and Rural Jobs Act, would provide added incentives for projects that are either located in rural areas or that employ a specified percentage of veterans. That bill was amended in the Senate and sent back to the House, which must decide whether to concur in the Senate changes or send the bill to a conference committee. The sticking point on HB57 remains the definition of “rural” – set by the Senate at a population of 25,000 or less.

The two remaining pieces of the Governor’s economic development package were addressed in House Committees this week. A public hearing was held in House Bill 214, sponsored by Rep. Victor Gaston (R – Mobile). The bill extends the tax credit for the use of historic structures by seven years. HB214 is scheduled to be voted on by the House Committee on Ways and Means Education next Wednesday, April 8. House Bill 304, sponsored by Rep. Phil Williams (R – Huntsville) and known as The Alabama Innovation Act, was reported out if Committee and is ready to be passed by the House of Representatives. HB394 establishes research and development tax credits for certain businesses.

General Fund Budget Woes
On Wednesday, both the House and Senate General Fund Budget Committees, Chaired by Representative Steve Clouse (R-Ozark) and Senator Arthur Orr (R-Decatur) released what many have referred to as “worst case” budget numbers, or the austerity budget. These documents set forth proposed General Fund Agency allocations if no additional revenue measures are passed this session.

Under the austerity budget, the budget would be cut by $240 million, or roughly 11.5%. Under the illustration, the cuts would not fall evenly, though. For example, prisons and Medicaid, the two largest portions of the General Fund budget, would be cut by only 3%. DHR, however, would be cut by close to 30%, and ADEM would receive no state funding at all.

Governor’s Revenue Proposals
Despite the bleak picture painted by the austerity budget, there was no movement this week on the Governor’s revenue package. All of the bills are pending in House Committees and none have a scheduled hearing date yet. A hearing on many of the bills had been scheduled for Wednesday April 1, but that hearing was postponed to allow the members to proceed with budget hearings in order to get a more complete sense of the nature of the budget shortfall in the General Fund. Budget Hearings for General Fund Budget Agencies will take place over the next two weeks. While he has stated that he expects the Legislature to make change to his proposed legislation, Governor Bentley has remained steadfast that the amount needed in additional review is $541 million.

As noted in prior newsletters, the Governor’s proposals include:

Corporate Income Tax, House Bill 142, sponsored by Rep. Mike Hill (R – Columbiana)
Estimated increase in revenue – $20 million
Requires combined income reporting for corporations that do business in other states.

Financial Institution Excise Tax, House Bill 201, Rep. Lynn Greer (R – Rogersville)
Estimated increase in revenue – $1 million
Removes the credit that financial institutions receive for sales taxes paid.

Insurance Premium Tax, House Bill 277, sponsored by Rep. John Knight (D – Montgomery)
Estimated increase in revenue – $25 million
Removes the credit for state privilege tax paid by insurance companies.
Removes the credit for ad valorem tax paid by insurance companies.
Removes the office facilities and real property investment credits made by insurance companies.

Individual Income Tax, House Bill 240, sponsored by Rep. Ken Johnson (R – Hillsboro)
Estimated increase in revenue – $12 million
Eliminates income tax withholding exemption certificates.

Sales Tax for Automobiles, House Bill 268, sponsored by Rep. Steve Clouse (R – Ozark)
Estimated increase in revenue – $200 million
Increases the rate for automobile sales to 4%.

Rental Tax for Automobiles, House Bill 267, sponsored by Rep. Steve Clouse (R – Ozark)
Estimated increase in revenue – $31 million
Increases the rate for automobile rental to 4%.

Cigarette and Tobacco Tax, House Bill 139, sponsored by Rep. Steve McMillian (R-Bay Minette)
Estimated increase in revenue – $205 million
Increases the tax per pack by $0.825 to $1.25.
Increases tax on other tobacco products proportionately.
Does not change wholesalers’ discount.

Public Utilities License Tax, House Bill 276, sponsored by Rep. Chris England (D – Tuscaloosa)
Estimated increase in revenue – $47 million
Removes exemption that applies to municipal utilities.

Prison Reform
Senate Bill 67, sponsored by Sen. Cam Ward (R – Alabaster), received final passage by the Senate after several hours of debate and numerous amendments on the Senate floor on Tuesday. In the end, the bill, which is designed to alleviate overcrowding in the State’s Corrections facilities, was passed by a margin of 31-2. The bill now goes to the House where it will be referred to the House Judiciary Committee, chaired by Representative Mike Jones (R-Andalusia).

Data Breach Legislation
There was no action this week on Senate Bill 106, sponsored by Sen. Arthur Orr (R – Decatur) and known as the Alabama Information Protection Act of 2015. The bill, which would require businesses and governmental entities that maintain databases of personal information to report data breaches, has gone through many changes since its introduction. It is pending in the Senate Judiciary Committee. Alabama is currently one of only three states without a data breach notification law.

Schedule
The Legislature has twenty (20) of its constitutionally limited thirty (30) legislative days remaining. The House of Representatives is scheduled to reconvene on Tuesday, April 7 at 1:00 PM. The Senate will reconvene on the same day at 2:00 PM.