By Brandon Moseley
Alabama Political Reporter
Tuesday, May 16, 2017, the Alabama Joint Legislative Task Force on Budget Reform will meet on Tuesday morning at the Statehouse and vote on an interim report, which will be sent to Governor Kay Ivey (R) and the entire State Legislature.
Committee Co-Chair Senator Clyde Chambliss (R-Prattville) said in a statement, “The fourteen members of the budget task force have been working diligently over the past six months to craft a sustainable path forward for Alabama’s State budgets. This interim report recommends specific reforms on everything from tax credits and exemptions to un-earmarking. I am grateful that Governor Ivey has indicated broad support for many of the report’s recommendations.”
This is the fifth meeting of the committee, which was set up by the Legislature during a Special Session in September 2016.
According to the statement the committee is considering un-earmarking proposals, evaluating existing deductions and exemptions in the tax code, and formulating a plan of action for requiring all State departments to undergo more intensive performance reviews in the budgeting process.
State Representative Danny Garrett (R-Trussville) is the other Co-Chair. State Representatives: Anthony Daniels, Allen Farley, John Knight, Chris Pringle, Kyle South, and Rich Wingo also served on the Task Force along with State Senators Greg Albritton, Linda Coleman-Madison, Bill Hightower, Bill Holtzclaw, Bobby Singleton, and Phil Williams.
Governor Ivey (R) attended and participated in several of the meetings of the JTF as Lt. Governor. Governor Ivey stated that she “is eager to participate in the discussion and formulation of solutions in our quest to Steady the Ship of State. I will continue to work with the Joint Task Force and pledge the coordination and assistance of my office to accomplish this all-important task.”
The task force also met with State Finance Director Clinton Carter; Michael Gamble with the Revenue Department; Deputy Revenue Commissioner Joe Garrett; State Auditor Jim Zeigler; State Treasurer Young Boozer; Senator Arthur Orr, T Senator Trip Pittman; Representative Steve Clouse; Representative Bill Poole; American Legislative Exchange Council (ALEC) Vice President Jonathan Williams and Public Works LLC President Vice President Eric Schnurer.
While most people believe that Alabama State government is too large, the task force found that Alabama State government in relation to state gross domestic product has never exceeded five percent of GDP since 1975. According to the JTF, since the Great Recession State government has actually been less than four percent of Alabama’s GDP.
Also plummeting since the Great Recession has been the state tax burden as a percentage of household income. Pre-Great Recession the state was averaging about six percent. Since then it has dropped to about 5.2 percent….the forty year low.
Alabama is one of the few states to have two budgets; the Education Trust Fund (ETF) and the State General Fund (SGF). Since 2001 the ETF has soared from a low of ~$3.7 billion in 2001 to over $six billion today, although there was a significant dip following the Great Recession. ETF revenue however has grown from just under $1 billion in 2001 to approximately $1.5 billion.
The State has total revenues of $22 billion, of which $9 billion comes from the Federal government. While so-called growth revenues go to the ETF, since 2012 the rate of revenue growth in the two funds has actually been similar.
Alabama earmarks more than 90 percent of the funds appropriated in the two State budget, by far more than any other State. The average among the other 49 states is approximately 30 percent. About 50 percent of earmarks are statutory and can be modified by the legislature; however about 50 percent of the earmarks are constitutional and require a vote of the people for any change.
According to the JTF, each year, the State allows taxpayers to take advantage of approximately $4.5 billion of tax credits, exemptions, deductions, and preferential tax rates.
Over the last fifty years, State sales taxes as a percent of State revenue has declined from 37 percent to just 22 percent. Meanwhile state income tax collections as a percentage of state revenues have increased from 22 percent of revenues to 46 percent. Sales tax revenue has been averaging increases of just six percent per year; however income tax revenues have been increasing at a rate of eight percent per year.
The State owes $646 million in general revenue bonds and another $4,061 million in revenue bonds. The Alabama Trust Fund (which was raided in 2012) meanwhile has a balance of just $3 billion. The State has paid back $284 million of the $437 million that was raided in 2012. $184 million is still owed. Servicing the general obligation bonds is costing the State $71 million this year; but should soar to over $79 million a year beginning with the 2018 fiscal year and will remain that high for the next four years before dropping. Servicing the State’s outstanding revenue bonds is costing $435 million this year; but will climb to $468 million in the 2018 fiscal year before dropping.
The JTF Study Group on the Budget Process was Chaired by state Representative Kyle South (R-Fayette). The Study Group recommends that in order to improve the budget process the Legislature should: consider adjusting the budget year to better align with the State fiscal year and the public school calendar; work with the Executive Branch and citizens to formally define the role of State government; work with the Executive Branch and citizens to formally identify the essential services that should be provided by State government; establish spending priorities based upon the identified essential services of State government; replace the current incremental budget approach with an approach based upon priority spending and identified needs; he Legislature should consider TOTAL FUNDS RECEIVED by each agency from ALL SOURCES when determining annual amounts to be appropriated to each agency by the Legislature; require the Legislative Fiscal Office provide charts and graphs depicting funds received by both the ETF and SGF and each agency for a rolling 15-year period; and develop a formal process to understand and address unspent appropriations.
The JTF Study Group on Agency Review was chaired by Senator Phil Williams (R-Rainbow City). The Study Group recommended that the Legislature: require that annually, no later than the first day of each Legislative Session, each agency must submit the following information to the Legislative Fiscal Office: federal dollars received by each agency; detail of fund balances carried over by each agency; a detailed plan for use of carryover funds. The JTF Study Group on Agency Review also recommended that a standing committee be established to review all proposed carryovers of funds by an agency and that wherever possible, carryover dollars should only be used for capital items and not for operational expenses.
The Joint Task Force Study Group on Unearmarking was chaired by State Representative Allen Farley (R-McCalla). The Study Group found that the major reason why there is so much earmarking in Alabama is that the voters of Alabama do not trust the State legislature. “The Study Group recommends that the Legislature establish a standing committee to review earmarks as a matter of standard practice, with a mission to make specific recommendations for reducing the number of earmarks so that budgets can be better focused on needs and priorities. The Legislature should place first priority on addressing statutory earmarks.”
The JTF Study Group on Tax Credits, Exemptions, Deduction, and Tax Preference was chaired by State Senator Bill Holtzclaw (R-Madison). The Study Group actually recommended that the Legislature form yet another Joint Committee to review the Report on Alabama Expenditures in detail and make appropriate recommendations to the Legislature at the beginning of the 2018 session including whether or not the Committee should be made permanent. The Study Group also recommended that the Legislature adopt a Joint Rule that requires that all bills that contain a credit, exemption, deduction or preferential tax rate include a Sunset provision.
The JTF Study Group on Tax Relief was Co-Chaired by state Senator Bill Hightower (R-Mobile) and state Representative John Knight (D-Montgomery). The JTF Study Group recommended that future guiding principles for Alabama should include: simplicity; transparency; economic neutrality; equity and fairness; help maintain a healthy relationship between the state and local governments; competitiveness with other states reliability; spur greater economic growth and greater wealth creation while minimizing micro management and political favoritism. The Study Group also recommended: minimizing or eliminating special tax treatment, while at the same time lowering overall rates, across-the-board; place all credits, exemptions, and deductions on the budgetary side of the fiscal ledger; and giving each element visibility and subject existing credits, exemptions, deductions or preferential tax rates to rigorous reporting standards to ensure transparency, and conduct a critical analysis of whether these measures are creating tangible economic growth.
House passes General Fund Budget
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.
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.
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.
Day Care bill delayed for second time on Senate floor, may be back Thursday
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.
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.
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.
Fantasy sports bill fails on Senate floor
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.
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.
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.
House OKs bill to clarify consulting contracts by state legislators
By Brandon Moseley
Alabama Political Reporter
Tuesday, the Alabama House of Representatives passed a bill to try to clarify how legislators accept consulting contracts under Alabama’s 2010 ethics law. Some pundits have suggested that House Bill 387 is actually designed to weaken the existing ethics law.
Sponsor state Rep. Rich Wingo, R-Tuscaloosa, argues that the legislation is merely a clarification and is intended to prevent legislators from inadvertently crossing the line into illegality.
Wingo said that his bill would require legislators to notify the Alabama Ethics Commission that they have entered into a consulting agreement in an area outside of their normal scope of work.
State Rep. Paul Beckman, R-Prattville, said, “I have never understood why members of this body were allowed to take contracts as consultants or counselors.”
Wingo said, “Never do I use the word counselor in my bill; it is consulting.”
Beckman asked, “Are we going to be getting into an area where every time we turn around we create a bureaucratic nightmare where we have to go get an opinion. These opinions whether it is orally or written don’t hold up in a court of law.” Beckman said, “We are serving the people here but we get this admonition that we can still be a consultant if we get an opinion.”
Wingo said, “This does not apply to professions where a member is currently licensed.”
Beckman said, “I would like to see more opinions coming out of the Ethics Commission. Right now we have the Ethics Commission competing with the Attorney General’s office over who has more authority.”
State Rep. John Rogers, D-Birmingham, said,”This happened to a friend of mine. He just got out of prison. He was a state senator and had a written letter from the Ethics Commission which his lawyer read at trial and the jury convicted him anyway.”
Rogers never named his friend, but reporters think he was talking about former state Sen. Edward Browning ‘E. B.’ McClain who spent over 22 years in the legislature until he was convicted on 47 counts of conspiracy, mail fraud, bribery, and money laundry in 2009.
A federal jury found that McClain and the Rev. Samuel Pettagrue were guilty in a scheme where McClain would secure public funds for Pettagrue’s community programs and then receive a kickback once the funds were in hand. McClain was sentenced to five years and ten months in prison. McClain was not prosecuted under the Alabama ethics law as the state has a much weaker ethics statute then. The current ethics law was passed in 2010.
Rogers said, “If they offer me a consulting contract for a field like aerospace engineering that I know nothing about they are trying to pay me off. If you can already be a consultant for something you know about why would you seek a consulting contract for something you don’t know about.
Rogers this is how they can pay you off for your vote.”
State Rep. Artis “A.J.” McCampbell said, “I don’t like making changes to things like this because we get into things called unintended consequences.”
McCampbell was reading from the bill and Wingo said, “You are reading from the original version it has completely changed.” “We worked tirelessly on this bill with the Ethics Commission this is not a fly by night bill.”
“If a member of the legislature enters into a contract to do a consulting contract outside of their normal field of work this bill requires that they consult with the Ethics Commission first,” Wingo said. “It is up to the member to notify the Ethics Commission not to the company or person offering them the money.”
State Representative Pebblin Warren, D-Tuskegee, said, “Everybody but legislators are allowed to do contract work up to $30,000.”
Rep. Wingo said, “This is not intended to be a roadblock.”
State Representative Arnold Mooney, R-Indian Springs, said, “The whole purpose of this is not to prevent members from doing work in your field.” “What you are doing is offering to protect me.”
State Representative John Knight, D-Montgomery, asked Wingo what the Alabama Attorney General said about this legislation.
Wingo replied, “I have not contacted the Attorney General.”
Knight responded, “Something from the Ethics Commission does not carry a lot of protection from the Attorney General. We have seen that in the past. I think the Attorney General and the Ethics Commission should be in agreement in the working on this.”
Wingo answered, “Maybe this is a first step.”
Rep. Laura Hall, D-Huntsville, asked, “Do we have anybody doing work outside of their regular scope of work?”
Wingo answered, “Yes I think so.”
Wingo said, “If we had had this bill four or five years ago maybe we could have been spared the embarrassment that this body experienced with the former Speaker.”
Wingo was referring to former Speaker of the House Mike Hubbard who was convicted of 12 counts of felony ethics violations in June 2016. Ironically, Hubbard is largely responsible for creating the ethics law that he was found guilty of violating 11 times in his relentless pursuit of outside contracts and personal wealth.
Unlike McClain, however, Hubbard has not yet served any of this sentence.
House Bill 387 passed 67-0 with 26 legislators abstaining.
The bill now moves to the Senate for its consideration.
(Original reporting by the Alabama Media Group’s Lisa Osborn in 2009 was consulted in this report.)