By Brandon Moseley
Alabama Political Reporter
Anybody who can read an Excel spreadsheet understood four years ago, that the State would have a $150 to $250 million shortfall in the General Fund in fiscal year 2017 when the $150 million a year trust fund raid money was finally all gone.
This was all easily predictable. If the State was going to balance its 2016 budget through cuts the time to do that was in the 2013, 2014, and 2015 budget years. Shaving $25 to $30 million a year off of the state’s $1,800 million plus General Fund budget would not have been difficult or particularly noticeable when spread out among the myriad of State agencies. Better yet, the State could have addressed all of this in 2012, so this mess could have been avoided. There would be $437 million more in the Alabama Trust Fund (ATF) today generating at least another $15 million a year in income for General Fund programs.
But no, we the voters let the Legislature blow all of that money to the four winds with only a vague promise that it would be paid back……someday.
So, if we are really truthful with ourselves, the first bunch of incompetent people in this mess are the incompetent September of 2012 voters, who were willing partners in setting all of this in motion with that mistake to approve another ATF raid (the naive voters had already fallen for a previous trust fund raid in the Gov. Bob Riley (R) Administration of $110 million that still has not been paid back).
Okay. We have established that the Alabama voters are very nice people; but on the whole are a really gullible lot. Alabama Governor Robert Bentley (R) doubled down on that truism when the day after he was re-elected he announced that his advisers discovered that the State would have a shortfall in the 2016 budget?
I think anyone who can remember September 2012, knew that all of the State’s problems had been put off until everybody (including the Governor) got re-elected. Certainly the Alabama Political Reporter’s faithful readers all knew this was fact. Governor Bentley’s hopelessly outmatched opponent, former US Representative Parker Griffith (D), tried to make it an issue in the campaign. Bentley cruised to re-election touting his no new taxes record and his abilities to right size state government. The voters are proven to be very gullible, but they aren’t THAT gullible. I don’t think anybody really believed that Bentley was unaware that the Trust Fund money was running out and the Governor squandered a lot of good will with that incompetent handling of that announcement. Maybe the voters also deserve the blame for believing that a Republican Governor and Republican Supermajorities in both Houses of the Alabama Legislature really were going to finally right-size State government without raising taxes like they all tell us when they are campaigning for our votes.
Now, if a corporation needed to either raise $200 million or cut $200 million or some combination of the two all the necessary power people would be meeting with their people to formulate some sort of a plan to decide which option to take and how to implement that decision. Apparently none of that ever happened in Alabama. There are only 140 legislators. Why 15 House and Senate leaders did not sit down for a week with Bentley and his team to formulate a team strategy back in December or January is a question that has never been suitably answered. They didn’t and that lack of decisive cooperation by Bentley as well as by the Speaker of the House Mike Hubbard (R-Auburn) and Senate President Del Marsh (R-Anniston) led us directly to where we are today.
Instead of negotiating with legislators on what to do, Gov. Bentley announced that the state needed new revenues. Most people in state government agreed with him on that but the number they were expecting was $150 to $250 million, not the incredible $700 million a year in new taxes and ETF raids that Bentley proposed. The Governor did not involve any legislators in the process of formulating his plan and there was never any buy in from legislators in either the dollar figure or the Governor’s plan. Vastly misrepresenting the size of the problem and asking for things that weren’t ever going to happen, turned both grass roots Republicans and many legislators against him and his plan from the very beginning. The bungling by Bentley and the handful of people he actually listens to in the weeks prior to the regular session will have lasting repercussions on the Governor’s future dealings with the Legislature well beyond this latest manufactured budget crisis.
The Speaker Hubbard and Senate President Del Marsh haven’t been any better. They kept silent for months, supposedly crafting a master plan behind the scenes that never, ever materialized. Legislators and the public alike were left in the dark, likely because the dynamic duo never really had a plan coming into this session. Neither GOP leader has been able to consistently get their own Houses behind any plan; and the two have worked against each other. Both introduced gaming plans, neither of which ever were ever really debated on either House floor.
The Hubbard plan would have sold a gambling monopoly to the Poarch Creek Band of Indians (PCI) for taxes on their existing casinos and a one-time payment of $250 million to get us to next year. The Governor (who was supposed to negotiate the plan), Marsh, apparently a majority of members in each House and, according to polling, the people of Alabama all oppose giving PCI any monopoly.
The Marsh plan, which is heavily based on a plan put forward by House Democrats, would direct Bentley to negotiate a compact for Class III gaming with PCI (a difficult sticking point with both plans as Gov. Bentley has been steadfastly opposed to any gambling solution), authorize gaming at the four dog tracks, and pass a State lottery. Sen. Marsh never got enough support to bring his pet bill to the floor of the Senate in the regular session and Speaker Hubbard mocked it as, “A waste of time” in the squandered Special Session which mercifully ends on Tuesday. The Marsh plan has lots of support in the business community and with the public; but it does not help the 2016 budget situation one little bit. Marsh has said that if his plan passes it would go to the voters on March 1 of 2016 and it would be another 12 to 18 months for the gaming commission to get organized before revenues could start flowing in. That does nothing for the 2016 budget, but it has dominated much of the conversation.
Speaker Hubbard and Chairman Steve Clouse (R-Ozark) then introduced a wholes series of tax increases. Taxes on cigarettes, lube oil, car leases, car sales, raising the maximum business privilege tax, etc. Conservatives in the House revolted and that plan went nowhere in the Regular Session. The House eventually passed an austerity budget that included no revenue measures. That $1.62 billion SGF cut the troubled Alabama Medicaid program, failed to finance the prison reform package the legislature just passed, cuts Corrections which are already at 194 percent capacity, and imposes across the board cuts to every other SGF program including the Department of Mental Health and state parks, which Bentley has threatened to close most of even though they are 84 percent self-funded. The Senate balked at that budget from the House; but tax increases have to begin in the House and efforts by Senators to transfer funds from the ETF to the SGF failed as time was running out on the regular session. These kinds of epic debacles are the sort of things that happen when you fail to plan before the session begins and you squander weeks of legislative time waiting to see how the political winds blow.
Reluctantly, the Senate passed a much modified version of the austerity budget, but displaying jaw-dropping legislative incompetence adjourned to go on their delayed Summer vacations without using their last legislative day. This move forced the House to accept the Senate version of the budget without being able to make any changes. It also meant that Governor Bentley could veto the SGF budget and the Senators, off on some beach somewhere, were completely helpless to do anything about it. NOW everybody had the crisis that they wanted.
The House and Senate both formed small groups to study the situation. There is nothing at all complicated about any of this for anyone to study: To fully fund the SGF the State needs $198 million, either in new taxes, or raided from the much healthier ETF. If you balk at new revenues or raiding education, then you need to cut $198 million from the budget and let the department heads sort that situation out.
Conservative groups across the State have come out in favor of making the estimated 10.9 percent cuts to the SGF. The Foundation for Limited Government has released radio ads saying to voters: “They don’t need more money. They need to better spend what we have already given them. State General Fund spending for Medicaid has tripled since 2004. And this is when emergency room treatment of Medicaid patients has escalated where only 20 percent of Medicaid emergency room visits are for emergency treatment. Instead of ballooning Medicaid spending, the governor and bureaucrats need to put some meaningful restrictions on the over usage of health care. And prisons? The Governor has requested almost $520 million for Corrections, or 70 percent more than just 10 years ago. This is happening while the cost for the no-bid crony prison medical contract has tripled in 12 years to a huge $80 million a year. Has your income tripled or gone up 70 percent? Of course, the answer is no. State politicians need to get spending under control. If they need more money, then they need to find it somewhere else besides raising taxes and raiding the Alabama Trust Fund again. Tell your legislator to keep their promise not to raise taxes, any taxes.”
Ignoring the growing anti-tax sentiment of the voters as well as whatever the legislature’s committees were supposedly doing, Gov. Robert Bentley and his small cadre of trusted advisors led by Rebekah Mason were crafting plans for a Special Session. Everyone was working from the assumption that the Special Session began on August 17. Perhaps showing just how isolated from everyone else the Governor is: he shocked everyone by calling the Special Session over a month before that. An angry legislature came back from their busy vacation schedules to declare a three week recess. Everyone assumed that the legislature would come back with a plan. Everyone assumed way too much.
Gov. Bentley working separately from everybody else in the process prepared a new plan that ballooned the SGF to over $1.9 billion, raised income taxes, raised cigarette taxes, raided the ETF, and generated $301 million in additional taxation dollars for the State. That plan died like his previous plan died without ever even getting to the floor of either House.
In the midst of all of this, Alabama Attorney General Luther Strange (R) and Gov. Bentley announced a settlement in the “Deepwater Horizon” oil spill disaster case with BP. The state would get $1 billion from BP. None of that money would go to the two Gulf Coast counties. Instead it would go into state coffers and the SGF. Budget problem solved!! Not! The money is going to be trickling in over 17 years and Gov. Bentley and the legislature have committed that they will use that to pay down the state debts so none of that money helps either in the 2016 budget or the Gulf Coast.
On August 3, the Legislature returned from their lengthy recess and we all waited to see what their masterplan was. Chairman Clouse unveiled an ambitious plan that would strip most Alabama taxpayers of their federal FICA tax deductions, raise the business privilege tax, and the cigarette tax. That $172 million tax increase plan went down in flaming defeat when the Democrats joined conservative GOP House members to block the cigarette tax in committee. This effectively killed the House leadership plan for this session. The conservatives are for cutting the budget and Democrats want a lottery at all costs and won’t support a tax increase unless they get a lottery. Hubbard was not amused.
In the Senate, Del Marsh proposed transferring $220 million to $240 million of use taxes from the ETF to the SGF. The ETF has a projected $110 million in a stabilization fund and is projected to grow that account by another $240 million in FY 2016. In theory, education could lose a quarter billion dollars in 2016 and be okay……if this economy performs as expected. Both Bentley and Clouse had proposed transferring those funds to the SGF, but they backfilled most of that money with hiked State income tax collections through the elimination of the federal income tax and/or FICA tax deductions. Marsh proposed moving that money without backfilling the ETF with anything. Marsh said that growth in the ETF would negate the loss of the missing quarter billion dollars a year. State School Superintendent Tommy Bice alerted school boards, PTAs, and principals across the State. The education advocates objected to the raid on educations and a very weak group of Senators caved and killed Marsh’s Use Tax transfer plan.
The House with no plan passed a SGF budget on Wednesday that cut $153 million from Alabama’s troubled Medicaid program. A 23 percent cut to the state’s Medicaid program will also cost the state $500 million in lost federal matching dollars. With the Alabama Hospital Association, the doctors, the pharmacies, and advocates for the poor all upset, the Senate killed that plan as well.
The Senate substituted a budget very similar to the original austerity budget that passed the legislature. That budget went back to the Alabama House of Representatives where the House inexplicably killed that budget on Monday.
If the House had passed the Senate budget, then the State would actually have a budget in place for State department heads to work with while legislators and the Governor’s Office worked on coming back with some sort of a compromise or at least a plan on what is about to happen; but no the House leadership wanted to turn up the pressure and make this an even bigger crisis. Crisis is generally considered a bad thing: In business, in a marriage, in a family, in international relations, at an airport, etc. Some Alabama legislators apparently find some sort of enjoyment out of crisis or they would have ended this one by now or never would have manufactured it in the first place.
Barring some sort of spectacular legislative wizardry on Tuesday, August 11, the 2016 Special will end as an utter disaster. The people are overwhelmingly opposed to new taxes. The special interests all want their favorite programs protected. State employees would like to have jobs come October 2. The Federal government could take over the prison system if the State does not address the overcrowding situation. Rural hospitals may close if the State imposes deep Medicaid cuts. The courts could slow to a crawl with more layoffs in circuit clerk offices. The State’s mental health system would likely go back to court.
At some point, Gov. Bentley is going to call back legislators for a second Special Session. They will be tasked with solving this mess. There are a half dozen different options that could solve this; but they all come with a political price. Legislators will have to do something but based on past actions most of them do not know what that something is yet.