Thursday, January 16th, 2014

The Alabama Legislature convened the 2014 Regular Session on Tuesday, January 14, in Montgomery. As legislative leadership had promised, it was a very busy week that included the Governor’s State of the State address, the introduction of both of the Governor’s proposed budgets, and the first three meeting days of the Session.

The Governor’s State of the State

On Tuesday evening, Governor Robert Bentley gave his fourth State of the State address to a joint session of the Legislature in the Old House Chamber of the Capitol. His speech focused extensively on jobs and the need for continued job creation in Alabama. After highlighting several new or expanded projects, the Governor announced the creation of a Small Business Advisory Council that would address the specific needs of Alabama’s small businesses, and he previewed proposed legislation to form a Statewide Workforce Council of business and industry leaders to advise educational leaders regarding the workforce needs of business.

The portion of the Governor’s speech that attracted the most attention was his emphatic [re-]declaration that he would not expand the Alabama Medicaid program, as currently constituted, under the Affordable Care Act as some have urged him to do. As stated by Governor Bentley, “[w]e will not bring hundreds of thousands into a system that is broken and buckling.” While the Governor acknowledged that there was a problem with access to healthcare in the United States, he also stated that “putting 300,000 more people into a broken system that will cost taxpayers billions and drive up this nation’s debt is not the answer.”

Budget Matters

General Fund: Released on Wednesday, the Governor’s General Fund (“GF”) budget proposes spending approximately $1.82 billion for FY2015, a slight increase over the current fiscal year’s appropriations. More notable, however, is that the Legislative Fiscal Office previously estimated that the General Fund would have approximately $80 million less to spend in 2015. Thus, the Governor’s budget proposal is in about $100 million more than many expected. A good bit of the difference results from the Governor’s inclusion in his figures of several transfers into the GF from a variety of sources – transfers that were not included in LFO’s estimates.

The GF budget proposed by the Governor would spend an additional $70 million on Alabama’s Medicaid program, with most other agencies receiving level funding. While the $70 million increase is significant, it is still approximately $15 million less than Public Health Officer Don Williamson, who is charged with overseeing and overhauling Alabama’s Medicaid program, has indicated is necessary to maintain the program.

The Governor also included a conditional appropriation that would provide a 4 percent raise for state employees. The conditional appropriation, if adopted by the Legislature, would only be released if sufficient revenues are received into the General Fund.

One continuing area of concern in the GF is the State’s prison system. It is generally agreed that the system is at approximately double its design capacity, and some fear that the federal government will intervene at some point and require costly upgrades and/or expansion. Senator Cam Ward (R-Alabaster), the Chair of the Senate Judiciary Committee, has spent a great deal of time examining this issue and stated recently that “we are dealing with a box of dynamite in our prison system.” This week, Senator Ward introduced a resolution to form a Prison Reform Task Force, and this week the Senate gave approval to that resolution. The measure has been sent to the House for its consideration.

Education Trust Fund: The Governors Education Trust Fund (“ETF”) budget was also higher than anticipated – in this case by approximately $90 million. Under the 2011 Rolling Reserve Act, there is a cap on ETF spending for the 2015 fiscal year of $5.9 billion. The additional $90 million in spending included in Governor Bentley’s proposed budget relies in part upon direct appropriations from revenue streams that bypass the ETF, thereby avoiding the cap. This approach was used in FY 2013, but it is not clear whether the Legislature will agree to this method again for FY 2015.

As highlighted in his Tuesday speech, the Governor included a $10 million increase in funding for the State’s pre-kindergarten program, which could expand that program to nearly 2,000 additional children. Finally, the Governor has proposed a 2 percent COLA for education employees, as also promised in his State of the State. The 2 percent cost-of-living adjustment carries with it a cost of approximately $73 million. Unfortunately, projections are that increased costs of the education employees’ insurance program (“PEEHIP”) may result in a $220 million shortfall in that fund. As a result, the Legislature, the Governor’s office and the RSA all are attempting to balance these increase costs with their desire to provide a COLA to education employees.

House Caucus Agenda

In the House of Representatives, the members immediately went to work on the House Republican Caucus’ “Commonsense Conservative” Agenda. The package, which consists of nine bills, were (with the exception of local bills and a measure relating to overseas absentee ballots), the first order of business addressed by the body, and significant progress was made on each measure.

Taxpayers’ Bill of Rights, Rep. Paul DeMarco, R-Homewood, HB105:

The Taxpayer Bill of Rights, which would create an independent administrative hearing process for tax appeals, passed the House on Thursday and was sent to the Senate. The bill was assigned to the Committee on Fiscal Responsibility and Accountability, and is set for a public hearing at 10:00 AM on Wednesday, January 22.


The Small Business Tax Relief Act, Rep. Barry Moore, R-Enterprise, HB151:

The bill to raise the threshold at which a sales tax payment must be made by a business in advance from $1,000 per month to $2,500 was passed by the House on Thursday. It has been sent to the Senate and referred to the Committee on Finance and Taxation – Education. The Senate has already passed its own version of this bill.


Business Tax Streamlining Act, Rep. Greg Wren, R-Montgomery, HB108:

Would create a new online filing system for filing business personal property taxes, and allow certain businesses to file a short form for personal property tax has been approved by the House. It has not yet been received by the Senate, and therefore has not been assigned to a Committee in the Senate.


Tax Elimination Act, Rep. Jim Patterson, R-Meridianville, HB97:

Would give the Alabama Department of Revenue the authority to suspend taxes and fees when the cost of collecting the tax exceeds the amount of revenue the tax brings in. The bill passed the House, but has not yet been received in the Senate.


Alabama Taxpayer Audit Protection Act, Rep. Wayne Johnson, R-Ryland, HB42:

Would prohibit the State Department of Revenue from targeting organizations for audits based on their politics. It has been reported favorably from the Committee on State Government, but was temporarily carried over on the floor of the House on Thursday.


The Healthcare Rights of Conscience Act, Rep. Becky Nordgren, R –Gadsden, HB31:

Would allow health care workers to refuse to perform or participate in a health care service that violates their conscience. It was reported favorably from the Health Committee, and is pending final passage in the House.


Adoption Tax Credit Act, Rep. Paul Lee, R-Dothan, HB48:

Would give residents who adopt an Alabama child a one-time, $1,000 tax credit. The bill was approved by the Ways and Means Education Committee and is pending final passage in the House.

Statutory Immunity for Teachers and State Employees, Rep. Mike Jones, R-Andalusia, HB64:

Would provide statutory immunity to teachers and states employees from being sued while acting in their official capacity. The bill received a favorable report from the House Judiciary Committee and is pending final passage in the House.


Revolving Door Act, SB36, Senator Del Marsh (R-Anniston):

Though included in the House package as a priority, this bill to strengthen the State’s “revolving door” statute by clarifying how it applies to retiring members of the House and Senate will come from the Senate. The bill was approved by the Senate Committee on Constitution, Campaign Finance & Elections and is awaits final passage in the Senate. It was brought up on the Senate floor and then carried over on Thursday so that issues regarding a proposed amendment by Senator Hank Sanders (D-Selma) could be addressed.


Other Issues to Watch

Economic Development: During the State’s brief courtship of Boeing at the end of 2013, it was widely acknowledged that the State needed additional economic development legislation in order to successfully recruit and retain businesses. Boeing’s decision to remain in Washington State relieved some of the urgency for the creation or expansion of economic incentives, and perhaps as a result, no significant economic development bills have been introduced this session so far. It is possible that legislation will be introduced later in the session, but there also has been some talk of a special session in the future to deal specifically with economic development issues.

Bid Laws: There have been a large number of bills that would, in general, make minor changes to Alabama’s bid laws. These include measures that would raise the threshold for triggering bid requirement for many entities (SB213, Waggoner and HB269, Gaston), bills that would increase the length of time for which a bid contract could be let from three to five years (SB42, Dial), and others.

Of particular interest, however, are four bills that have been introduced – two in each body – that would grant a mandatory preference to in-state companies of 5 percent on competitive bids. In other words, under the proposed legislation, in the event an in-state company was within five percent of the lowest bid, the contract would be awarded to the in-state business. All four bills are pending in Committee in their chamber of origin.

The Week Ahead

The Legislature will reconvene on Tuesday, January 21, for its fourth legislative day. The Senate will go into session at 2:00 PM, and the House will convene at 1:00 PM. It is anticipated that the legislature will meet three days again this week this coming week. Pursuant to the Alabama Constitution, the Legislature is permitted a total of 30 meeting days within a 105-day period.

According to the schedule put forth by Legislative leadership prior to the Session, the third week of the legislative session (beginning January 27) will be a two-day legislative week, followed by two consecutive three-day meeting weeks. As noted by both Speaker Hubbard and President Pro Tem Marsh, though, the proposed schedule is subject to change.

Maynard Cooper & Gale will send out updates throughout the Legislative Session. If you have any questions about the matters discussed above, or if there is a particular matter in which you or your business has an interest or concern, please do not hesitate to contact us: