By Danny Garrett
As you are aware, the Alabama legislature passed a General Fund budget and ended the second special session of 2015 on Sept. 16. I did not accept expense reimbursement for either the first or second special sessions.
As I discussed in previous articles, the 2015 regular session was actually one of the more productive and successful sessions on record, with the glaring exception of failure to pass a General Fund (GF) budget. The session started on a rocky note, with the governor initially proposing –to the surprise of almost everyone — tax increases of $700 million. The Republican-controlled legislature was unwilling to support tax increases anywhere near this magnitude in the regular session. The House and Senate planned to work together to develop a solution and pass a budget expediently in the first special session. The governor, however, abruptly called for the special session to begin before the legislators had time to develop a plan and reach a consensus. The legislature was more prepared by the time the second session began, but the tax increase proposals – then reduced by the governor to $250 million – continued to be contentious with Republicans.
Alabama is one of two states with two budgets: a General Fund ($1.8 billion) and an Education Trust Fund (ETF) ($5.9 billion). By provision of the constitution or statute, the ETF benefits from a number of growth revenue taxes, while the General Fund is hampered by declining tax revenue sources. In addition, the GF expenditures for Medicaid and prison reform have escalated in recent years. The state must fund both of these categories in order to avoid intervention by the federal government. With a declining revenue base and increasing expenditures, the GF was a major challenge for legislators in all three sessions.
The priorities for most Republicans during all three session were to fully fund five areas: (1) Medicaid, in accordance with the legislature’s plan to establish Regional Care Operations throughout the state; (2) Prison reform adopted in the Regular Session to avoid federal takeover of state prisons; (3) Mental health; (4) The unified judicial system; and (5) The Department of Human Resources (DHR). The Republicans were also focused on continuing to reform and reduce the cost of state government at all levels.
Tax increases presented during the three sessions for the legislature to consider included increases in sales tax, soda tax, lubricating oil tax, car rental tax, cigarette tax, business privilege tax, gasoline tax, nursing home provider tax, pharmacy provider tax, increase in automobile tax fees, pornography tax, increase in car title fee, increase in boat license fee, increase in corporate income taxes via combined reporting and the elimination of the FICA deduction for individuals on state income tax returns.
In the end, the legislature passed three tax measures, totaling $82 million in revenue, and cut appropriations to all GF agencies other than the five fully funded areas above by $120 million, or a manageable 4.5 percent. However, in order to fully fund Medicaid and prison reform, an additional $80 million had to be allocated to these areas. The net result of the legislature’s actions was to reduce the cost of state government by almost $100 million.
The budget cuts will not directly impact the residents of District 44. There has been much publicity about driver’s license and state park closings in some rural parts of the state. It is my understanding that less than 5 percent of driver’s license issues will be affected. The five state parks that have been closed are in very remote areas and are not highly utilized. It is my understanding that some local communities may take control of some of these small parks.
The only tax increase I supported was a $.25 per pack increase on a pack of cigarettes. At the eleventh hour, the GF budget was $60 million short of meeting the Medicaid funding requirement and the only viable options were to (1) Increase cigarette taxes; or (2) Permanently transfer $60 million annually from the ETF. I did not believe it appropriate to take money and resources away from Pre-K and K-12 classrooms, the two year colleges (which are focused on career and technical training and workforce development), and teachers in order to meet the Medicaid funding requirement. There is a direct linkage between smoking and Medicaid expenditures and I believed it was more appropriate for cigarette consumers to provide this additional funding.
Legislators made other moves made to shore up GF revenues, including transferring growing excise tax revenue from the ETF. In addition some technical changes were made to the ETF which will allow education dollars for current spending to continue to increase. However, the GF will continue to struggle as health care costs continue to rise. The GF was “patched” in 2015; the legislature must continue working to “fix” the GF permanently.
Since the conclusion of the second special session, bi-partisan legislative committees have been meeting to study (1) Reforming of the state’s pension system; (2) Un-earmarking appropriations in the both the ETF and GF; (3) Reforming the state’s tax structure; and (4) Reforming the Alcohol and Beverage Control system. The ETF and GF committees are also planning work sessions to prepare in advance for an expected turbulent 2016 Regular Session.
Based upon recent public comments by the governor and several legislators, the legislature will certainly be discussing other significant issues in 2016, including consolidation of the ETF and GF budgets, additional tax increases (per the governor’s recent comments), legalizing gambling (a major concern for me) and continued cost-cutting at all levels of state government. In addition, along with other colleagues, I will be advocating comprehensive budget, tax and pension reform.
Our challenges are complicated by well-publicized issues and concerns regarding the governor, the Speaker of the House and several legislators. We will need strong and steady leadership in the days ahead in order to build a consensus among 140 legislators and pass legislation to effectively move our state forward. I will continue resisting tax increases and supporting reforms to: enhance the long-term fiscal viability of our state, improve education, and develop a workforce to meet economic development opportunities which will benefit all Alabamians.
It is an honor to serve as your representative.