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What is a Governor to Do?

By Graham L. Champion

Imagine that you are the Governor of the State of Alabama. You issue an “invitation” to 140 of your closest friends to come to Montgomery for a Grand Ball that all who were invited had been expecting but you decided that you would move the date of that Grand Ball up five weeks earlier than anyone had expected. As we all know when you are “looking forward” to such a grand event there is a great deal of planning that goes into getting ready and if your timetable is moved up that much, what are you to do. You have not made your reservations for a place to stay, dinners have not been arranged with close friends and colleagues, other plans that you have must be rearranged. Complaints and grumbling can be heard from across the entire state about the “promise” the Governor had made about when the Grand Ball would be, but wait, the Governor states that he never “agreed” about when the Grand Ball would be held. He only “listened and indicated that five weeks later sounded good” but he never “agreed”.

Fast forward a few days and examine the plight of the Governor in preparing for his Grand Ball. He has issued a surprise invitation on Friday for the Ball on Monday yet he has no entertainment (Sponsors) for the Ball. Few, if any, can be found to lay out the Governor’s plans for the event. When the appointed time for our Grand Ball arrives, the guests assemble, look around and realize that it will not be the Grand event that had been promised and say to one another, “this does not look like it is going to be fun. I am going home and will be back for the party we all thought we would have when we started planning it.’

That would make for a good story line for television except for one thing – it is essentially, what we have just witnessed in Alabama. The Alabama Legislature convened in Extraordinary Session at 4:00pm on Monday, July 13, 2015 at the Call of Governor Robert Bentley. As was witnessed during the 2015 Regular Session of the Legislature there was no consensus among the Governor, the Senate or the House as to how to begin solving the State’s budget problems or on where additional revenue might come from. The Governor, since the adjournment of the Regular Session, has been emphatic that any Call for a Special Session would be very limited. Let us see just how limited the Call was:

❖Basic Issues – He has proposed a revised General Fund Budget and indicated that all gambling issues were specifically excluded. In his reference to gambling the Governor states in the Call that it will require a 2/3 vote to pass any gambling legislation. That is incorrect on its face since gambling legislation requires a Constitutional Amendment and the Alabama Supreme Court has ruled that even though a Proposed Constitutional Amendment might not be in the Governor’s Call other provisions of the Alabama Constitution only require a 3/5 vote to approve.

❖Budget Reform – The Governor has proposed four different concepts on budget reform. His first shifts more than $210 million from the Education Trust Fund (ETF) to the General Fund. While that sounds good in theory Members of the Legislature are not about to let that happen without first backfilling the hole that would be created by the move. His plans for a backfill (see below in “Increase in Growth Revenue) have two chances of passage and to borrow an old saying “the two chances are Slim and None and Slim is on the way out of town”. There are also proposals about how to use the settlement money from the BP Settlement. SB 1 and SB 2 both address the use of the funds with SB 1 being slightly more specific and expansive in how to use the money. SB 13 by Senator Gerald Allen mentions, among other settlements, the BP Settlement and proposes a Constitutional Amendment setting up a new Trust fund. As proposed, any settlements payable to the State in excess of $2 million, the funds would be deposited into this new Trust Fund. While that might sound good on the surface think about the multimillion-dollar settlements received by the state that include restitution. That would mean that in a settlement of say $50 million that included say $30 million in restitution $2 million would be paid to the victims and the other $28 million of the restitution would be paid to the State General Fund. Can you say unintended consequences?

❖Increase in Growth Revenue – There are five different revenue (tax) matters included in the Call. The first is a change to the Business Privilege Tax that benefits many small businesses (as the Governor said on Monday at a civic club speech) if you have a number of small LLCs, as I (the Governor) do you will no longer have to pay that tax. It will only hit the big corporations. Estimated increase $35 million+. He is also proposing a tax on tobacco products equal to $0.25 per pack of cigarettes and an equivalent tax on other tobacco products and e-cigarettes. Estimated increase $75 million+. To help backfill the hole in the ETF he is giving the Legislature an option – 1) eliminate the deduction for FICA taxes on your state income tax return or 2) pass a tax on soft drinks and fruit juices equal to $0.05 per 12 ounce equivalent. There would be no tax on bottled water or milk products. Each of these increases produce an estimated $183 million+. In addition, his final increase removes an ability from exemption from withholding on employees who file and exemption certificate with their employer. Estimate increase $12 million+.

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❖Economic Development – At a time when we cannot level fund state government this legislation creates an Authority to issue Bonds to finance the construction of a major resort hotel complex at Gulf State Park. While this is a very worthwhile project, the optics of borrowing money to build a hotel while your house is burning does not make the greatest political sense.

As the Legislature adjourned on Monday the House of Representatives, which is the body in which all revenue measures must start, there were no pieces of legislation introduced. By law, the Legislature has a maximum of 12 Legislative Days (LD) within a 30 Calendar Day (CD) period to complete its business in a Special Session. Monday was Legislative Day 1. They have adjourned until August 3, which will be Calendar Day 22. At best, the schedule may look something like what is outlined below:

❖Monday, August 3 – LD 2, CD 22 – House introduces revenue measures. Senate could take Second Readings on legislation reported out of Committee.

❖Tuesday, August 4 – LD 3, CD 23 – House takes Second Readings on revenue or other measures. Senate CAN begin debate of legislation receiving a Second Reading on August 3 and any legislation passing the Senate could get its First Reading in the House.

❖Wednesday, August 5 – LD 4, CD 24 – House CAN begin debating revenue and other measures if there are any that received their Second Reading on August 4. Any measure passed by the full House could get its First Reading in the Senate. Senate legislation reported from House Committees could get a Second Reading in the House.

❖Thursday, August 6 – LD 5, CD25 – House legislation reported out of a Senate Committee could get its Second Reading in the Senate. Senate legislation that has received its Second Reading in the House could reach final passage and be sent to the Governor.

❖Friday, August 7 – LD 6, CD 26 – House legislation that is reported out of Senate Committee could receive final passage in the Senate and be on its way to the Governor. If all necessary items are passed, the Legislature could adjourn Sine Die.

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❖Saturday, August 8 – LD 7, CD 27 – More of the same in both the House and Senate

❖Sunday, August 9 – LD 8, CD 28 – More of the same in both the House and Senate. Last day for legislation to pass the House of Origin and have a mathematical chance of final passage.

❖Monday, August 10 – LD 9, CD 29 – More of the same in both the House and Senate

❖Tuesday, August 11 – LD 10, CD 30 – More of the same in both the House and Senate. Final day permitted by law for the Special Session to meet.

The schedule above assumes that all legislation can move simultaneously and that there will be cooperation among Members of the House and Senate and within their own bodies. The truth of the matter is that before a General Fund budget can be considered and passed there is going to have to be movement and adoption of revenue increases as well as backfilling the ETF or the budget proposed by the Governor is dead in the water. Another complicating factor for the Governor is that he needs to find Sponsors for his legislation. As of adjournment Monday afternoon, there were still a number of Bills without a loving, or for that matter any, Sponsor.

The bottom line as seen here is that the Governor believes there is widespread support within the Legislature for his package, is totally opposed to gambling as a solution and that the problem is with the Leadership in the Legislature as he expressed on Monday. The Senate is looking to gambling rather than taxes to solve the financial crisis and the House appears to be opposed to gambling as proposed in the Senate. The House is reportedly considering some combination of new revenue and a compact with the Poarch Creek Indians. At the end of the day, it will be a total surprise if anything productive comes out of this Special Session. Look for the Legislature to be called back for at least one, if not more, Session(s).

The Alabama House will reconvene at 5:00pm on Monday August3, 2015.

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The Alabama Senate will reconvene at 4:00pm on Monday August 3, 2015.

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