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New prisons off-the-books, unaccountable to the Legislature and public

Bill Britt

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By Bill Britt
Alabama Political Reporter

The funding method proposed to build four new super-max-style prisons, under the Alabama Prison Transformation Initiative Act (APTI), will stop the public from voicing its opinion while keeping the almost one billion dollars borrowed off the books and in the hands of a very small group.

Under Section 14-2-6 the Alabama Corrections Institution Finance Authority governs the financial aspects of the State’s prison system. The Code of Alabama allows the Authority to create a public Corporation that has the power to issue bonds to build prisons and then lease the Prisons it owns to the Authority. The public corporation consists of the Governor, the Commissioner of Corrections, the Director of Finance, the Lieutenant Governor, and the Attorney General as determined by Code of Alabama Section 14-2-2 through Section 14-2-6

Under Section 14-2-6 the Board Members of the Authority consist of three members: Bentley who serves as the president of the authority, the Commissioner of Corrections Jeff Dunn as vice-president and the Clinton Carter Director of Finance as secretary.

The plan as proposed in APTI calls for Governor Robert Bentley and two of his appointed cabinet members to have sole authority—by statute—to not only borrow $800 million for his ambitious prison plans but to keep it from public review while giving the Governor carte blanche with no real oversight. Although the bill does add two new members to the Authority: one House member and one Senator, a majority of the members of the proposed board of directors by law constitute a quorum for the transaction of business and the majority of the board consists of the Governor and his appointees. Additionally, this bill does not address the members of the Authority in Sections 14-2-2 and 14-2-3 and 14-2-4.

Under Section 14.2.2, the power is granted to the three original Authority members to acquire land, construct and lease correctional institutions, buildings, and facilities. It also gives them complete authority to sell or lease the Kilby Correctional Facility.

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Kilby is located on 154 acres of land in Montgomery at 12201 Wares Ferry Road. It serves as the intake center for all male inmates entering State prisons. It houses approximately 1400 prisoners. Kilby is centrally situated between the Poarch Creek Indian Casino in Wetumpka and VictoryLand in Shorter.

No construction budgets have been set forward to support the $800 million budget. Whether this expensive project is bonded and constructed at one time or broken down into separate phases it is difficult to understand how any lending agent or bonding authority could secure this amount of money without a comprehensive understanding of the financials for the project.

The Bentley Administration’s plan to finance $800 million dollars for new prisons using what is known as a “lease revenue bond” which will actually be issued by the public corporation under the control of the Governor and his two cabinet appointees. Purchases under this Authority do not go through the Contract Review Committee and current legislation eliminates the need for legislative approval.

According to Investopedia, “A revenue bond is a municipal bond supported by the revenue from a specific project, such as a toll bridge, highway or local stadium. Revenue bonds are municipal bonds that finance income-producing projects and are secured by a specified revenue source. Typically, revenue bonds can be issued by any government agency or fund that is managed in the manner of a business, such as entities having both operating revenues and expenses.”

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However, prisons do not self-generate revenue. They rely on the State’s General Fund Budget for funding.

Typically a general obligation bond is used to finance government construction projects such as prisons, and customarily require approval from the voting public.

According to Investopedia, “A general obligation bond (GO) is a municipal bond backed by the credit and taxing power of the issuing jurisdiction rather than the revenue from a given project. General obligation bonds are issued with the belief that a municipality will be able to repay its debt obligation through taxation or revenue from projects. No assets are used as collateral.”

These types of bonds usually require voter approval because payments are taken from their State’s General Fund, which may have State Constitutional constraint.

Why use a revenue generating bond as opposed to the general obligation bond?

According to Forbes, “When voters began rejecting general obligation bonds for prison construction, state treasurers, along with law firms and investment bankers, worked a way around the constitutional and statutory restrictions on such debt. They began using lease revenue bonds to construct correctional facilities.”

The analysis also cites how the scheme was implemented: “The state creates an entity or agency to build the prison. The agency floats bonds to the public to cover construction of the facility. The agency then leases the right to use the completed prison to the state. The state pays the entity lease payments. The entity uses the lease payments to service the bond debt. Essentially, the state takes money from one pocket (the general fund appropriations to the prison system) and puts it into another pocket (the agency created for the facility), and then the agency distributes the money to the bondholders.”

The Bentley Administration claims the lease payments made from the General Fund Budget meets the requirements for a lease revenue bond.

Alabama Corrections Institution Finance Authority will purchase the prisons and lease them back to the State, keeping to $800 million in Bonds off the State’s books. Only the lease payment to the Authority will appear in the General Fund Budget.

California, New York, and Florida have pioneered this types of prison funding over the last several years. According to Florida’s TaxWatch, lease revenue bonds provided state government with, “easy access to investment capital allowed the commitment of thousands of new prison beds that will cost billions of dollars to operate over the coming decades while blurring the balanced budget requirement intended to keep Florida fiscally stable.”

Florida TaxWatch also found, “…it [Lease revenue bonds] obscures the true cost of prison system growth since full construction costs are not included in the yearly budgets, but are found only in a little-known government reports.”

A PDF booklet being distributed by the Bentley administration says, “Alabama Prison Transformation Initiative (APTI) provides a fiscally sound solution to addressing Alabama’s long-neglected prison infrastructure; while providing the environment conducive to delivering the necessary programs to reduce recidivism.”

Should this legislation pass as  introduced, the power given to the Alabama Corrections Institution Finance Authority to let an $800 million bond and construct prisons using alternative delivery methods (no bid on bonds, no bid on prisons) will be Codified and set a precedent going forward.

Under SB59, as it has been proposed, voters will have no say in borrowing $800 million for prisons. The Department of Corrections will have complete control over the location of any new prisons, the decision to renovate any existing prisons, and the disposal of current facilities. The Governor, with the majority vote on the Authority Board, will have complete control over the borrowing, spending and construction for prisons.

Ultimately, all of these transactions will be kept off the books except for a simple lease agreement between two State organized entities where money is taken out of one pocket and placed in the other.

 

Bill Britt is editor-in-chief at the Alabama Political Reporter and host of The Voice of Alabama Politics. You can email him at [email protected] or follow him on Twitter.

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In Case You Missed It

Tuberville calls for term limits, balanced budget and lobbying reform

Tuberville has also made a major media buy across the state to trumpet this message.

Brandon Moseley

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Republican Senate candidate Tommy Tuberville (TUBERVILLE CAMPAIGN)

Senate candidate Tommy Tuberville’s campaign began emphasizing key structural reforms that the Republican nominee hopes to advance if elected to the U.S. Senate including congressional term limits, withholding lawmakers’ paychecks unless a balanced budget is passed and a ban on former officials becoming lobbyists.

“Only an outsider like me can help President Trump drain the Swamp, and any of the proposals outlined in this ad will begin the process of pulling the plug,” Tuberville said in a statement. “Doug Jones has had his chance, and he failed our state, so now it’s time to elect a senator who will work to fundamentally change the way that Washington operates.”

Tuberville has also made a major media buy across the state to trumpet this message.

“You know Washington politicians could learn a lot from the folks in small town Alabama, but Doug Jones … he’s too liberal to teach them,” Tuberville added.

Polls consistently show that term limits are popular with people across both political parties, but the U.S. Supreme Court has ruled that imposing term limits would be adding a qualification to be a member of Congress and that can only be done by constitutional amendment.

It is an unspoken truth that when Americans send someone to Congress they never come back. They either keep getting re-elected like Alabama’s own Sen. Richard Shelby, who is in his sixth term in the Senate after four terms in the U.S. House of Representatives. On the other hand, they may become lobbyists getting paid to influence their colleagues on behalf of corporations, foreign governments or some well funded non-government organization.

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Tuberville said he would ban that practice.

A balanced budget amendment almost passed in the 1980s and again in the 1990s.

Since that failure, Congress has increasingly passed bigger and bigger budget deficits. The U.S. government borrowed more money during the eight years of President George W. Bush’s presidency than the government had borrowed in the first 224 years of the country combined.

President Barack Obama followed and the TARP program propped up the post-Great Recession economy. Rather than cutting the deficit, President Donald Trump invested billions in the military and a tax cut without cutting domestic spending. The 2020 coronavirus crisis has further grown the budget.

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The government has borrowed trillions to prop up the economy and provide stimulus while investing billions into medical research and treating the virus victims. Congress is currently debating a fifth stimulus package that would add more to the deficit.

Both a balanced budget amendment and a term limits amendment would have to be ratified by the states if passed by Congress. Tuberville is challenging incumbent Sen. Doug Jones, D-Alabama.

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In Case You Missed It

House passes General Fund Budget

Brandon Moseley

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By Brandon Moseley
Alabama Political Reporter

The Alabama House of Representatives passed the state General Fund Budget on Tuesday.

The General Fund Budget for the 2019 fiscal year is Senate Bill 178. It is sponsored by Sen. Trip Pittman, R-Montrose. State Rep. Steve Clouse, R-Ozark, carried the budget on the House floor. Clouse chairs the House Ways and Means General Fund Committee.

Clouse said, “Last year we monetized the BP settlement money and held over $97 million to this year.”

Clouse said that the state is still trying to come up with a solution to the federal lawsuit over the state prisons. The Governor’s Office has made some progress after she took over from Gov. Robert Bentley. The supplemental we just passed added $30 million to prisons.

The budget adds $50 million to the Department of Corrections.

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Clouse said that the budget increased the money for prisons by $55,680,000 and includes $4.8 million to buy the privately-owned prison facility in Perry County.

Clouse said that the budget raises funding for the judicial system and raises the appropriation for the Forensic Sciences to $11.7 million.

The House passed a committee substitute so the Senate is either going to have to concur with the changes made by the House or a conference committee will have to be appointed. Clouse told reporters that he hoped that it did not have to go to conference.

Clouse said that the budget had added $860,000 to hire more Juvenile Probation Officers. After talking to officials with the court system that was cut in half in the amendment. The amendment also includes some wording the arbiters in the court lawsuit think we need.

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The state General Fund Budget, SB178, passed 98-1.

Both budgets have now passed the Alabama House of Representatives.

The 2019 fiscal year begins on Oct. 1, 2018.

In addition to the SGF, the House also passed a supplemental appropriation for the current 2018 budget year. SB175 is also sponsored by Pittman and was carried by Clouse on the floor of the House.

SB175 includes $30 million in additional 2018 money for the Department of Corrections. The Departmental Emergency Fund, the Examiners of Public Accounts, the Insurance Department and Forensic Sciences received additional money.

Clouse said, “We knew dealing with the federal lawsuit was going to be expensive. We are adding $80 million to the Department of Corrections.”

State Representative Johnny Mack Morrow, R-Red Bay, said that state Department of Forensics was cut from $14 million to $9 million. “Why are we adding money for DA and courts if we don’t have money for forensics to provide evidence? if there is any agency in law enforcement or the court system that should be funded it is Forensics.”

The supplemental 2018 appropriation passed 80 to 1.

The House also passed SB203. It was sponsored by Pittman and was carried in the House by State Rep. Ken Johnson, R-Moulton. It raises securities and registration fees for agents and investment advisors. It increases the filing fees for certain management investment companies. Johnson said that those fees had not been adjusted since 2009.

The House also passed SB176, which is an annual appropriation for the Coalition Against Domestic Violence. The bill requires that the agency have an operations plan, audited financial statement, and quarterly and end of year reports. SB176 is sponsored by Pittman and was carried on the House floor by State Rep. Elaine Beech, D-Chatham.

The House passed Senate Bill 185 which gives state employees a cost of living increase in the 2019 budget beginning on October 1. It was sponsored by Sen. Clyde Chambliss, R-Prattville and was being carried on the House floor by state Rep. Dimitri Polizos, R-Montgomery.

Polizos said that this was the first raise for non-education state employees in nine years. It is a 3 percent raise.

SB185 passed 101-0.

Senate Bill 215 gives retired state employees a one time bonus check. SB215 is sponsored by Senator Gerald Dial, R-Lineville, and was carried on the House floor by state Rep. Kerry Rich, R-Guntersville.

Rich said that retired employees will get a bonus $1  for every month that they worked for the state. For employees who retired with 25 years of service that will be a $300 one time bonus. A 20-year retiree would get $240 and a 35-year employee would get $420.

SB215 passed the House 87-0.

The House passed Senate Bill 231, which is the appropriation bill increase amount to the Emergency Forest Fire and Insect and Disease Fund. SB231 is sponsored by Sen. Steve Livingston, R-Scottsboro, and was carried on the House floor by state Rep. Kyle South, R-Fayette.

State Rep. Elaine Beech, D-Chathom, said, “Thank you for bringing this bill my district is full of trees and you never know when a forest fire will hit.

SB231 passed 87-2.

The state of Alabama is unique among the states in that most of the money is earmarked for specific purposes allowing the Legislature little year-to-year flexibility in moving funds around.

The SGF includes appropriations for the Alabama Medicaid Agency, the courts, the Alabama Law Enforcement Agency, the Alabama Department of Corrections, mental health, and most state agencies that are no education related. The Alabama Department of Transportation gets their funding mostly from state fuel taxes.

The Legislature also gives ALEA a portion of the gas taxes. K-12 education, the two year college system, and all the universities get their state support from the education trust fund (ETF) budget. There are also billions of dollars in revenue that are earmarked for a variety of purposes that does not show up in the SGF or ETF budgets.

Examples of that include the Public Service Commission, which collects utility taxes from the industries that it regulates. The PSC is supported entirely by its own revenue streams and contributes $13 million to the SGF. The Secretary of State’s Office is entirely funded by its corporate filing and other fees and gets no SGF appropriation.

Clouse warned reporters that part of the reason this budget had so much money was due to the BP oil spill settlement that provided money for the 2018 budget and $97 million for the 2019 budget. Clouse said they elected to make a $13 million repayment to the Alabama Trust fund that was not due until 2020 but that is all that was held over for 2020.

Clouse predicted that the Legislature will have to make some hard decisions about revenue in next year’s session.

 

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In Case You Missed It

Day Care bill delayed for second time on Senate floor, may be back Thursday

Sam Mattison

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By Samuel Mattison
Alabama Political Reporter

The day care bill, which would license certain day care centers in Alabama, was once again delayed on the state Senate floor after one lawmaker requested more information.

Its brief appearance Tuesday ended with state Sen. Gerald Dial, R-Lineville, saying a compromise had not yet been worked out with the bill’s detractors.

Alabama’s Senate has been hesitant to act on the legislation because of complaints of state Sen. Shay Shelnutt, R-Trussville, who has been an opponent of the bill since its introduction last year. The bill’s delay on Tuesday marks the second time its been taken off the Senate’s agenda.

The bill has had a rocky time in this year’s session, but the bill’s sponsor state Rep. Pebblin Warren, D-Tuskegee, said she is still confident about its passage out of the Legislature.

Warren, D-Tuskegee, filed the bill this session with the support of influential lawmakers including Gov. Kay Ivey, who told reporters last year that she though all day cares should be licensed.

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Mainly sparked by the death of 5-year-old boy in the care of a unlicensed day care worker, the bill had great momentum coming into this year’ session.

Despite the growing support from lawmakers, Religious groups had concerns that the bill would increase state-sponsored reach into religious day cares in churches and non-profit groups.

Spearheading the dissenters was Alabama Citizens Action Program, a conservative religious-based PAC.

Warren, proponents, and ALCAP announced a compromise to the bill while it was still in the Alabama House.

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Announced by ALCAP originally, the new bill was a weaker version in that it did not require that all day cares in the state be regulated. Instead, religious-based day cares would only need to be registered if they received federal funds. At a Senate committee meeting in February, Warren said a similar requirement was about to come from federal law in Congress.

The bill moved through the House in a overwhelming vote in favor of the proposal and passed unanimously out of a Senate committee a few weeks ago.

Warren, speaking to reporters after its passage from the House, said she was unsure if the bill would encounter resistance in the upper chamber.

It was the Senate that killed the daycare bill last year amid a cramped last day where senators took the bill off the floor. The bill may face similar complications this year, as lawmakers seem to be preparing to adjourn within a few weeks.

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Fantasy sports bill fails on Senate floor

Sam Mattison

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By Samuel Mattison
Alabama Political Reporter

Would-be Fantasy Sports players in Alabama will have to wait to legally play in the state following a Senate vote on Tuesday.

The Alabama Senate decisively killed a bill to exempt fantasy sports from the state’s prohibition on gambling.

Not even entertaining a debate on the Senate floor, the proposal was killed during a vote for the Budget Isolation Resolution, which is usually a formality vote preluding a debate.

Fantasy sports are contests where participants select players from real teams to compete on fantasy teams using the real-world players’ stats.

Since 2016, the practice has been illegal in Alabama following a legal decision by the Attorney General’s Office that categorized it as gambling.

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The bill’s sponsor, state Sen. Paul Sanford, R-Huntsville, predicted the bill’s failure during a committee meeting two weeks ago, where the bill passed unanimously.

Sen. Paul Sanford speaks to reporters after a Senate Committee meeting on Feb. 28, 2018. (Samuel Mattison/APR)

Speaking to reporter’s after the committee meeting, Sanford said the decision to file the bill was mainly a philosophical belief that the practice shouldn’t be illegal.

Sanford, a fantasy sports player before its ban, said that fantasy sports are a way to bring people closer together and not a means to win money. The Huntsville senator is not seeking re-election.

The bill’s failure in the Senate follows its trajectory last year too. A similar version of the bill, also sponsored by Sanford, failed in the Senate during the final days of the 2017 Legislative Session.

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Since Sanford is retiring, it is unclear if the bill will even come back next session, or if it will even have a Senate sponsor.

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