2017 Legislative Update: Week 3

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The Alabama Legislature met two days this week in the capital for the fifth and sixth days of the 2017 Regular Session. Although the week was a busy one—especially on Wednesday, when twenty different committees met to debate and vote on bills—in general, both bodies are operating fairly smoothly thus far. There are, of course, more difficult days ahead as significant legislation, particularly with respect to prisons and the budgets, advances.

Prison Construction

Senator Cam Ward’s (R–Alabaster) proposed legislation to finance the construction of four modern mega-prisons will receive a public hearing this coming Wednesday in the Senate Committee on the Judiciary. The committee, which is chaired by Senator Ward, is likely to vote on SB59 at the meeting, although the bill almost certainly will not be ready for action by the full Senate right away. The bill is the major legislative initiative of Governor Robert Bentley this session. It would close most of the state’s existing facilities, and consolidate inmates into four large prisons. The anticipated cost of the project is $800 million, which would be financed with the anticipated savings that would result from the consolidation.

Although it is not disputed that Alabama has a legitimate prison problem, and that something must be done to alleviate crowding, legislators have expressed significant skepticism over the Governor’s plan. Some members are troubled by the possible closure of existing facilities in their district—often one of the largest employers for the surrounding areas. Others have concerns that the estimated $50 million in savings each year, which is needed to finance the debt on the construction, will not materialize. A third line of questions hinges on the Governor’s plan to utilize a design-build method for the construction. The Governor contends that the design-build method is needed to achieve significant savings, but critics have argued that it may have the effect of limiting the companies that could compete for the work.

Recently, discussions of a smaller scale version of the Bentley plan, which would build fewer than four new facilities, have begun. There is also some discussion of using county-based facilities to house state inmates as well. In the 2016 Regular Session, a smaller version of the Governor’s prison construction plan fell just short of passing on the last night.

Budgets

Both the Education Trust Fund and the General Fund Budgets have been introduced in the House and Senate, but neither has begun to move as of yet. Based on discussions among the members it appears that the budgets will begin to move during the week of March 13th. That week may be a three legislative day week in order to get each budget out of its house of origin in time for the legislative spring break, which is currently scheduled to begin the week of March 20th.

Taxes:

Mandatory Unitary Combined Filing

As anticipated, a tax bill that most in the economic development community say would severely damage Alabama’s ability to recruit and retain companies to the state was introduced in the Senate at the outset of this year’s session. SB67 is sponsored by Senator Linda Coleman-Madison (D–Fairfield), co-sponsored by General Fund Budget Chair Senator Trip Pittman (R–Montrose), and in the past has had the support of Revenue Commissioner Julie Magee. Opponents argue that the Mandatory Unitary Combined Reporting (“MUCR”) legislation would amount to a tax increase on multistate businesses. Last year, estimates were that the bill would raise taxes on businesses by approximately $30 million per year overall by altering the manner in which taxes are calculated on separate, related enterprises. The bill has been assigned to the Senate Committee on Fiscal Responsibility and Economic Development. It has not yet been placed on a committee agenda.

Infrastructure Investment & Improvement (Gas Tax)

As with prisons, there appears to be a general consensus that Alabama needs to do something to address its dilapidated infrastructure. But as with prisons, there does not seem to be much agreement on what, if anything, will actually be done. The business community has been advocating for infrastructure improvements—to be financed through an increase to the gas tax—for the past two years, and recently formed the Alabama Alliance for Infrastructure (“AAI”). The AAI is chaired by Tuscaloosa Chamber of Commerce CEO Jim Page and is run on a day to day basis by Drew Harrell, who moved from the Business Council of Alabama to head up the project. The state’s gas tax was last increased in Alabama almost 25 years ago. With increases in fuel efficiency and inflation, this means that funding for roads and bridges from that tax has effectively gone down over the past two decades. This year, the Association of County Commissioners threw its support behind a $0.03 per gallon increase in the gas tax to be used to finance construction and repair in each county and to be divvied up based on population. Although the proposal is estimated to cost the average Alabama driver only $2.50 per month, the bill has not yet been introduced and is already creating some anxiety among the members of the Legislature who ran on a “no new taxes” platform. Although the timing may be difficult, Republicans in Alabama may receive some cover on this issue from President Donald Trump, who has advanced the idea of a possible massive infrastructure program to be undertaken by the Federal Government. Such a program could include some form of matching requirement on the part of the state.

Sales Taxes on Groceries

On Tuesday this week, Governor Bentley signed an Executive Order to create a task force to examine how the state could eliminate the sales tax on groceries. Such an idea has been advocated for many years by some members of the Legislature, most especially Representative John Knight (D–Montgomery) and Senator Gerald Dial (R–Linville). Alabama is one of only 13 states that imposes a sales tax on groceries at all; and it is one of only seven states that imposes the full amount of the tax on food items. The task force will be chaired by Revenue Commissioner Magee, who has stated that the tax on groceries generates revenue of about $350 million for the Education Trust Fund.

Historic Tax Credits

A bill that would re-institute the Alabama Historic Tax Credit is expected to be introduced this coming week in both the House and the Senate. The popular program was allowed to expire last year. It was the subject of a study this fall requested by Senate President Pro Tem Del Marsh (R–Anniston), which found the program to be effective, while recommending some changes. Under the reconstituted program, it is expected that the credits will be made refundable and isolated to the Education Trust Fund (and not the General Fund). There will also likely be a new evaluation process that looks at the relative benefits of particular projects. Previously, credits were reserved on a first-come, first-served basis. The total amount of the credits available each year will remain at the level previously set under the law: $20 million.

Alabama Accountability Act

On Thursday, the Senate passed legislation sponsored by Senator Marsh that would add a type of available credit that could be used to make contributions to scholarship granting organizations (“SGOs”) under the Alabama Accountability Act. Prior to the change, individuals and corporations could receive a credit against their income tax liability for contributions made to SGOs. Under Senator Marsh’s bill, the total dollar amount of credits—$30 million per year—would remain the same, but taxpayers with at least $100,000 per year in utility tax liability could take a credit against that tax. The Marsh bill also allows individuals to contribute up to the entire amount of their state income tax liability to SGOs. The law currently restricts such contributions to 50% of their tax liability. SB123 passed the Senate by a margin of 17-15. It has been assigned to the House Committee on Ways & Means Education, chaired by Representative Bill Poole (R–Tuscaloosa).

Healthcare Mandate

Momentum in Washington continues in the direction of removing healthcare mandates from businesses and individuals (i.e., the Affordable Care Act/Obamacare). But at least two measures have been introduced in Alabama this session that would go the other way, and would impose mandated coverage on businesses and individuals. SB164, sponsored by Senator Tom Whatley (R–Auburn), would require small business insurance plans in the state to provide coverage for a specific therapy used to treat autism. Currently, Alabama law requires that such treatments by offered as an option. Going much further is HB284, by Representative Jim Patterson (R–Meridianville), which would require all plans in Alabama—other than those governed by Federal laws such as ERISA, but including the plans provided to teachers and state employees—to provide coverage for these treatments. Senator Whatley’s bill has been assigned to the Senate Banking and Insurance Committee. Representative Patterson’s bill was sent to the House Insurance Committee. As yet, neither bill has been placed on its respective committee’s agenda.

Adoption Licensing & Religion

The Senate Health Committee approved a measure on Wednesday that would prohibit the state from taking any adverse action against a child placement agency that discriminated on the basis of religion. More specifically, SB145, sponsored by Senator Bill Hightower (R–Mobile), would prohibit state agencies from taking action against a placement service when that service acted pursuant to its “sincerely held religious beliefs.” Although most of the discussion during the public hearing on the bill addressed the ability of these entities to refuse to place children in same-sex households, the legislation is not limited to such decisions, and it would appear to allow, for example, a Catholic service to refuse to place children with a Baptist couple. Proponents argue that faith-based organizations should not be forced to act in a manner that contradicts that faith. Opponents of the bill have raised concerns that—because the measure appears to allow discrimination based on religion—it violates federal law and could result in the loss of as much as $25 million in annual federal funding for adoption and foster care programs in the state. The House companion to SB145 has also been reported out of committee and could be taken up by the full House at any time.

Childcare Inspections

A bipartisan bill that would require all daycare facilities in Alabama to be licensed and inspected has been introduced in both the House and the Senate. A group of 32 House members (18 Republicans and 14 Democrats) led by Representatives Pebblin Warren (D–Tuskegee) and K.L. Brown (R–Jacksonville) have signed on to HB277, or the “Child Care Safety Act,” which was filed on Tuesday. Senator Ward introduced the companion, SB236, in the Senate on Thursday. Under current Alabama law, a church-affiliated day care center is not required to be licensed, and the Department of Human Resources has no authority to conduct safety inspections of their facilities.

Judicial Override

The Senate passed a bill on Thursday by a margin of 30-1 that would eliminate a Judge’s authority to override the jury’s sentencing recommendation in death penalty cases. SB16, sponsored by Senator Dick Brewbaker (R–Montgomery), would end so-called “judicial override.” Alabama is the only state in the country that allows a judge to impose a death sentence even when the jury recommends a life sentence. Senator Brewbakers’s bill has been assigned to the House Committee on the Judiciary. Representative Chris England (D–Tuscaloosa) is sponsoring a similar bill this session, HB32. The major difference between the England and Brewbaker legislation is that the England bill would also require a unanimous vote by the jury in order to impose the death penalty. Brewbaker’s legislation would allow for a death sentence on the vote of ten or more of the twelve jurors. Representative England’s bill has already been reported out of the House Judiciary Committee and is scheduled to be debated by the House on Tuesday this week.

Redistricting

On Tuesday, the Permanent Legislative Committee on Reapportionment met for the first time this quadrennium and elected Senator Gerald Dial and Representative Randy Davis (R–Daphne) as co-chairs. The Committee must draw new district lines for at least nine House seats and three Senate seats as a result of last month’s ruling by a three-judge federal panel that race was impermissibly used as a factor in setting those district lines. Of course, the lines of more than just those twelve seats are certain to be impacted by the committee’s work, which eventually must be approved by the full Legislature. The Committee will next meet on March 1st.

Impeachment

There were two developments in the ongoing issue of impeachment for Governor Bentley in the past two weeks. First, after a meeting last week with the State’s new Attorney General, Steve Marshall, House Judiciary Chair Mike Jones (R–Andalusia) indicated that he expected his committee to resume its investigation and to complete its proceedings—including a recommendation to the full House on whether or not to impeach the Governor—by the end of this session. If the Committee recommends impeachment of the Governor, a 3/5ths majority of the House would have to vote for the impeachment in order for it to proceed to a trial in the Senate.

The second development was the appointment of a subcommittee of the Senate Judiciary Committee to draft rules for any possible impeachment trial. Judiciary Committee Chair Senator Cam Ward appointed Senator Phil Williams (R–Rainbow City) to chair the subcommittee. Also appointed were Senators Albritton (R–Range), Hank Sanders (D–Selma) and Bobby Singleton (D–Greensboro). The subcommittee will recommend rules related to the process of an impeachment trial in the Senate. If approved by the full Judiciary Committee, those rules would then have to be voted on by the Senate to be adopted.

Conclusion

The House and Senate have each met a total of six legislative days thus far. There are therefore 24 legislative days remaining in the 2017 Regular Session. The House will reconvene in Montgomery on Tuesday, February 28 at 1:00 p.m. The Senate will reconvene on Tuesday at 2:00 p.m.

If you have any questions or would like to reach out for more information, please contact Edward A. "Ted" Hosp or Edward A. O'Neal. To read more about Maynard's Governmental and Regulatory Affairs Practice, please click here.

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