There is a sense within the State House that the 2018 Regular Session has rounded third and is headed for home. The budgets, which have moved through both chambers with almost no controversy, may both be considered for final passage as early as next week. There is less and less talk of newly introduced legislation, and more of a focus on moving bills through committees and onto the House and Senate’s calendars. While the House has continued to experience more difficulty than the Senate at avoiding controversy—it bogged down for several hours on Tuesday over a bill, which eventually passed handily, clarifying that economic development employees are not lobbyists, and it ground very slowly all day on Thursday—neither chamber has yet experienced an irredeemable shutdown this session. The general productivity has helped to keep alive leadership’s hopes, which look more and more attainable, for a session that will conclude by the end of this month.

Budgets

While it is not a requirement, it is tradition that the two chambers of the Legislature take turns focusing on each of the state’s two budgets. This year the House was responsible for generating the state’s Education Trust Fund budget, and the Senate generated the state’s General Fund budget. While the bulk of the work on each budget was done in the budget committees in the chamber of origin, both budgets have crossed over to their respective second chambers. As is typically the case, tweaks and amendments are inevitable at this stage of the process. Nevertheless, both budgets are gliding towards final passage with uncharacteristically little controversy.

Education—Everything but the Budget

The Senate Committee on Finance and Taxation Education met twice this week to consider a total of 17 bills relating the Education Trust Fund budget. The committee intends to meet next week to address the budget itself, but by focusing on the rest of the budget package this week, it has cleared its agenda of everything else. Among the bills that the committee favorably reported were: HB174, sponsored by Representative Bill Poole (R–Tuscaloosa), that would give 2.5% pay raise to public education employees; HB179, also sponsored by Representative Poole, that makes supplemental appropriations to this year’s education budget, including $2 million to the community college system, a total of $15 million to many of the state’s four-year colleges, and $41 million to the Advancement and Technology Fund; and SB323, sponsored by Senator Trip Pittman (R–Daphne), that would allow the state to use the Budget Stabilization Fund to cover the costs of school security.

The committee plans to meet to take up the budget on Tuesday of next week, which would allow the budget itself to be up for a final vote on the following legislative day.

General Fund Budget Poised for Final Passage

The House Committee on Ways and Means General Fund passed the state’s General Fund budget on Wednesday after relatively brief debate. The General Fund budget, SB178, sponsored by Senator Trip Pittman (R–Daphne), allocates all non-educational state spending for next year. It now moves to the floor of the House for final passage as soon as next Tuesday.

The General Fund budget as passed by the committee is substantially similar to the one passed by the Senate last week. The lack of controversy surrounding the budget is attributable to several factors. Last year, the Legislature set aside roughly $92 million towards this year’s budgeting process. Additionally, roughly $40 million more in revenue is projected to be collected for next year. As a result, the state was able to budget a total of just more than $2 billion for next year—roughly $158 million more than the budget for this year, and the most the state has budgeted in a decade. The largest part of the additional funds will go towards a roughly $55 million increase to the budget for the Department of Corrections. This increase is expected to be used largely for prisoner healthcare and for the hiring of additional staff. The Department faces several lawsuits relating to the treatment of prisoners, including one that is currently in the remedy phase—with liability already having been found—over the quality of mental healthcare provided to inmates. Other key funding increases include an additional $8.9 million for the Department of Mental Health, an additional $4.7 million for the Department of Economic and Community Affairs, and an additional $3.2 million to be used to hire 30 new state troopers.

The committee also favorably reported SB185, sponsored by Senator Clyde Chambliss (R–Prattville), which gives state employees and some county employees a 3 percent pay increase. This increase is the first cost-of-living adjustment for non-education state employees in 10 years.

Bill Designed to Eliminate Medicaid Fraud and Waste Carried Over Twice

Alabama’s Medicaid Agency has—for the first time in several years—actually requested less money for the next fiscal year than for the current one. Nevertheless, several bills currently before the Legislature would seek to reduce the agency’s overall costs. This week, the Senate twice took up, and then twice carried over SB140, sponsored by Senator Arthur Orr (R–Decatur). The bill would require Medicaid to verify the eligibility for coverage of individuals currently enrolled in the plan, and authorize the agency to contract with a third-party vendor to do the research necessary to ensure that eligibility. The bill would also establish a semiannual review of continuing eligibility for Medicaid recipients.

As introduced, the bill also established a detailed set of work requirements for some recipients. The work requirement met with opposition from the Democratic Caucus and generated concern that the Centers for Medicare and Medicaid Services (“CMS”), which is the federal agency responsible for administering Medicare and Medicaid, might not approve of the plan. As a result, the Senate Committee on Fiscal Responsibility & Economic Development substituted the bill earlier in the session, removing the specifics of the work requirement and instead requiring the state’s Medicaid agency to request a waiver from CMS for a work requirement that is “the firmest but nonetheless most reasonable . . . allowed by CMS.”

On the floor of the Senate, Senator Orr amended the bill to eliminate even the requirement that Medicaid seek a work waiver. Nevertheless, the body was unwilling to pass SB140 on either Tuesday or Thursday.

While SB140 as amended would no longer require the state’s Medicaid Agency to seek a work requirement waiver from CMS, the Agency has already begun the process. The Agency will hold public hearings over the course of the next month as part of the formal procedure to request a work requirement waiver.

Tax Cut Receives Final Passage

The House unanimously passed SB76, sponsored by Senator Del Marsh (R–Anniston), on Thursday. The bill, which is part of the Senate Republican Caucus agenda, would raise the threshold for claiming the maximum exception for state income taxes for low- and middle-income earners. For married couples filing jointly, heads of households, and single filers, the income threshold for claiming the maximum exception would be raised from $20,000 to $23,000. For married couples filing separately, the threshold would be raised from $10,000 to $10,500. The overall impact of the bill is projected to be a $4 million savings for taxpayers annually. The Republican Caucus has cited increased fiscal discipline at the state level and the improving economy as the reasons for the cut. Proponents champion the bill’s targeted relief for individuals and families who earn the least. The bill now goes to Governor Ivey for her signature.

“Dark Store” Legislation Goes to Governor

On Thursday, the House unanimously passed a bill that addresses the process used for commercial property valuations. SB182, sponsored by Senator Phil Williams (R–Rainbow City), is a response to some challenges brought to lower property taxes in various states, including Alabama. In so-called “dark store” challenges, property owners argue that the value of their property should be lowered to the value of the store if it were not an operating business, but rather a “dark store,” on the grounds that the custom built buildings are essentially valueless for any other application. The version of the bill that passed, which was the result of weeks of negotiations between businesses and counties, requires parties to disclose more information—including whether a property was occupied or if it had any deed restrictions—when they use comparable sales or leases as part of an argument to lower a tax valuation. The bill now only awaits the Governor’s signature.

Data Breach Nears Final Passage

On Wednesday, the House Committee on Technology and Research favorably reported a bill that would create penalties for failure to notify affected individuals that their personal data has been compromised. SB318, sponsored by Senator Arthur Orr (R–Decatur), and which is known as the Alabama Data Breach Notification Act, requires both public and private entities that hold sensitive information to establish reasonable security measures for protecting that information. Furthermore, the bill would require any entity that has been breached to conduct an investigation and, upon determining that any breached information is “reasonably likely to cause substantial harm” to notify the affected individuals as “expeditiously as possible,” but in no case later than 45 days after discovery. Under the proposed law, knowing or willful failure to notify could result in the imposition of significant penalties under Alabama’s Deceptive Trade Practices Act of up to $500,000. The current version of the bill would also largely exempt entities that are subject to federal regulations or requirements in the event of a breach from many of the law’s requirements. Alabama is one of only two of states that do not have some form of data breach law on its books. Proponents of the legislation, including Attorney General Steve Marshall, have worked with the business community and other branches of state government to craft a bill that is widely seen as fair and reasonable. The version of the bill favorably reported by the committee included a series of technical changes made in an amendment requested by the state’s counties.

Conclusion

The Legislature has used 18 of its available 30 meeting days for the 2018 Regular Session. The House will reconvene on Tuesday, March 6th at 1:00 p.m. The Senate will reconvene on the same day at 3:00 p.m. Next week is anticipated to be a two legislative day week, with Wednesday reserved for committee meetings.

If you have any questions or would like to reach out for more information, please contact Edward A. "Ted" Hosp or Edward A. O'Neal. To read more about Maynard's Governmental and Regulatory Affairs Practice, please click here.

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