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Senate Passes Tax Increases: Budget Deal Appears In Sight

By Brandon Moseley
Alabama Political Reporter

On Tuesday, September 17, the Alabama Senate passed a tax increase on cigarettes as well as taxes on nursing home beds, and pharmacies.  Tax increases on car titles and auto rentals appear likely when the Senate convenes on Wednesday. The cigarette tax, HB3, was passed on a 21 to 13 vote.

Efforts by Senate Conservatives to filibuster the bills were ultimately crushed by their establishment foes.

State Senator Bill Holtzclaw (R-Madison) said, “Cigarette tax passed 21-13. Today is the day the Republican brand in Alabama changed. You either change your party or you change with it.”

Sen. Paul Sanford (R-Huntsville) said afterwards, “Disappointing day in the Alabama Senate with Republicans passing three bills raising taxes by a total of $82 million.  The Gang of Nine (it was eight yesterday) held the line for hours today to no avail. We at least prevented $26 million in other taxes from being extracted from hard working Alabamians.”

State Representative Ed Henry (R-Hartselle) posted on Twitter, “Taxmageddon 2015 wins the day in the Alabama Senate. Sad day for Alabama Citizens.”

Senator Gerald Dial (R-Lineville) carried the cigarette bill in the Senate.  Dial (77) has already announced that this will be his last term in the Senate.

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Earlier in the day a conference committee approved an education trust fund raid of about $80 million after the Senate passed a $100 million raid and the House passed a $50 million raid.  Both houses concurred with the Conference Committee report and HB30 is headed to the Governor.

Representative Christopher John England (D-Tuscaloosa) said Tuesday night, “The House and Senate have both adjourned. When we return tomorrow, the Senate will consider the final consumer tax bills and hopefully the General Fund budget.  If all goes to plan, this session could be over tomorrow. However, this is the Alabama Legislature so don’t count those chickens just yet.”

If the whole $105 million tax plan passes plus the $80 million Trust fund raid taken with the previously passed bill to allow State agencies to raise fees with minimal oversight most of the Trust Fund hole is likely to be filled in the final budget that gets approved on Wednesday or Thursday.

Medicaid, Corrections, the courts, DHR, mental health are all likely to be fully funded by this budget.  Other state agencies will take a smaller hit (likely four percent or less).

This budget however does very little going forward.

State Finance Director Bill Newton told the Senate Finance & Taxation Committee on Monday that the Governor’s original $700 million plan would have dealt with the fiscal crisis for a decade or more and would have allowed the state to address major capital needs including building new prisons.

Newton said that the Governor’s next plan of $310 million might have dealt with the situation until the end of his term.  This plan however will just deal with the fiscal issues in the Fiscal year 2016 budget.

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The structural problems all remain.  There is not enough growth taxes in the State General Fund (SGF).  The State’s economic growth of .6 percent is so anemic that revenue growth is insufficient to even keep up with inflation.  Unemployment remains higher than the national average.  Additionally vast numbers of the state’s population are out of the labor force or are underemployed meaning that they require expensive government services like Alabama Medicaid, prisons, DHR, the Department of Public Health, and mental health; and there is not enough people making enough income to support State government.  Over a million people in Alabama are on Medicaid and an estimated another 250,000 would qualify if it were expanded; while the costs of those services are growing far faster than inflation or the Alabama economy.  The prisons are still at over 180 percent capacity and are rapidly approaching the end of their cost effective service lives.  If current trends continue more state revenues are going to be needed for the Department of Corrections, for Alabama Medicaid, for DHR, for mental health and it is hard to see where the growth is to cover these growing needs.  The State is likely to be faced with another budget crisis next year or the year after that……..and likely the year after that.  If (when?) the national economy is hit with recession and tax collections go down the fiscal situation could become dire.


Brandon Moseley is a former reporter at the Alabama Political Reporter.

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