Week six of the 2018 Regular Session continued a theme of quiet productivity in the Senate and intermittent discord in the House. On Tuesday, the Education Trust Fund budget passed the House after only minor debate, marking a significant milestone for the session. But on Thursday, a disagreement over Jefferson County legislation shut the chamber down until late into the evening and long past when the Senate adjourned for the week. Nevertheless, the session has remained remarkably organized and focused overall. With both budgets now working through the Legislature, leadership’s hopes for concluding the session by end of next month seem more and more within reach.

The 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 is responsible for generating the state’s Education Trust Fund budget, and the Senate will generate the state’s General Fund budget. While each will still be subject to scrutiny and amendment in the other chamber, the bulk of the work is done in the budget committees in the chamber of origin.

Education Trust Fund Budget

The Education Trust Fund (“ETF”) budget, which came out of committee last week, passed the House unanimously on Tuesday after a few hours of debate. This version of the budget, HB175, sponsored by House budget committee Chairman Bill Poole (R–Tuscaloosa), is expected to be largely similar to what will eventually pass into law.

Due to the gradually improving economy in the state, this year’s $6.63 billion ETF budget is $216 million larger than last year’s and the largest that the state has had since the start of the Great Recession. Nearly half of the increase would fund a 2.5% pay raise for K–12 and community college educators. The state’s Public Education Employee Health Insurance Program, known as PEEHIP, would also see an increase in funding, which should ensure that teachers’ premiums do not rise this year and so cut into their raises. Among various other smaller increases to specific programs, the state’s widely celebrated Pre–K system would receive $20 million in additional funding under the proposed budget. The ETF budget now moves to the Senate, where it is expected to be taken up by the Senate ETF budget committee in the coming weeks.

General Fund Budget

The Senate Committee on Finance and Taxation General Fund favorably reported the General Fund budget on Wednesday, starting the state’s other budget on its corresponding path. The General Fund budget, SB178, sponsored by Senator Trip Pittman (R–Daphne) allocates all non-educational state spending for next year.

Like the ETF budget, the General Fund budget is in better shape than it has been in recent years. 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. These two major factors, combined with several other smaller ones, allow the state to budget a total of just more than $2 billion—roughly $158 million more than the budget for this year. The bulk of the additional funds will be appropriated to a 3% cost of living increase for state employees and a $50 million increase to the Department of Corrections. The increase to the Department of Corrections 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. A supplemental appropriation bill that would set aside more money for the Department for the current fiscal year, SB175, also sponsored by Senator Pittman, was carried over by the committee. The budget now moves to the Senate as a whole for its consideration.

Statewide Uber and Lyft Bill Receives Final Passage

The Senate unanimously passed HB190, sponsored by Representative David Faulkner (R–Mountain Brook), on Tuesday. The bill would allow the state directly to regulate transportation network companies—such as Uber and Lyft—through the Public Services Commission. In essence, the bill would allow services like Uber and Lyft to operate statewide, rather than working out individual agreements with various municipalities or authorities. The bill has been introduced for each of the past few years, but has generated opposition from some municipalities that already have agreements with the companies and that are resistant to a loss of direct oversight. Alabama is one of only six states in which transportation network companies operate that does not have such a law. The bill now moves across the street to the Governor’s signature.

Tax Amnesty

On Wednesday, the Senate Committee on Fiscal Responsibility and Economic Development favorably reported a bill that would create an amnesty program for all taxes other than motor fuel, motor vehicle, and property taxes. HB137, sponsored by Representative Ken Johnson (R–Moulton), would create a three-month window—from July 1st through September 30th of this year—during which Alabama taxpayers could pay any taxes owed from before January 1, 2017 without penalties or interest. In order to be eligible for the program, the participating taxpayer cannot have already been audited or contacted about the unpaid taxes by the Department of Revenue. The taxpayer would also be required to waive any right to dispute the amount of the taxes owed. The bill now moves to the Senate as whole for final passage.

New Version of Simplified Seller User Tax Bill Introduced

On Tuesday, Senator Trip Pittman introduced a new version of a bill that would make changes to the Simplified Seller Use Tax Remittance Act (“SSUT”), which passed the Legislature in 2015. SSUT allows for online sellers, such as Amazon, to lock in a lower sales tax of 8% if they opt in. SB307 would clarify that sellers remain eligible to pay the lower rate even if they acquire a brick-and-mortar presence in the state, but clarifies that purchases at those brick-and-mortar locations do not qualify for SSUT. The introduction of the bill was prompted by Amazon’s acquisition of Whole Foods last year, which triggered a review of whether the online retailer could continue to pay the flat 8% tax.

Data Breach

Senator Arthur Orr (R–Decatur) and Representative Phil Williams (R–Huntsville) introduced identical bills on Tuesday that would create penalties for failure to notify affected individuals that personal data has been compromised. SB318 and HB410, both known as the Alabama Data Breach Notification Act, require both public and private entities that hold sensitive information to establish reasonable security measures for protecting it. Furthermore, the bills 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.” Under the proposed law, knowing or willful failure to notify could result in the imposition of significant penalties under Alabama’s Deceptive Trade Practices Ac of up to $500,000. Alabama is one of only a handful of states that does 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 Senate version is expected to be heard in committee this coming Wednesday.

Alabama Partnership Act

On Tuesday, the Senate unanimously approved HB72, sponsored by Representative Bill Poole (R–Tuscaloosa), which would repeal and replace the Alabama Partnership Act. As part of an ongoing process to modernize Alabama’s business entities statutes, the Alabama Law Institute has been working with the Legislature to develop Alabama versions of model laws relating to the formation, dissolution, governance, and powers of business entities. The Legislature has already rewritten the sections of the Code relating to limited liability companies and limited partnerships, and has now turned its attention to general partnerships. HB72 brings Alabama’s laws relating to general partnerships more closely into line with other states’, significantly increasing the ease of doing business across state lines both for in-state and out-of-state businesses. The bill now moves to the Governor for her signature.

House Bills for Veterans Pass Senate

Immediately before recessing to join the House for a joint session honoring the military on Thursday, the Senate passed three bills relating to veterans: HB58, sponsored by Representative Dickie Drake (R–Leeds), which would provide free admission to any state park managed by the Department of Conservation and Natural Resources to all active and retired military personnel; HB83, sponsored by Representative Connie Rowe (R–Jasper), which would raise the tax credit for businesses that hire unemployed veterans from $1000 to $2000 as well as extend the credit to businesses that hire combat veterans, even if they are not unemployed at the time of hiring; and HB88, sponsored by Representative Drake, which would grant preferred vendor status to businesses owned by veterans that bid on government projects. The Senate amended both HB58 and HB83 before passing them, so those two bills will be sent back to the House for concurrence. HB88, however, received final passage and now goes to the Governor for her signature.

Civil Asset Forfeiture

The Senate Committee on the Judiciary favorably reported SB213, sponsored by Senator Arthur Orr on Wednesday after a lengthy public hearing. The bill, known as the Alabama Forfeiture Accountability and Integrity Reform Act, would establish the exclusive process for asset forfeitures in the state. Civil asset forfeiture is a process by which police may seize personal property that they suspect has been used in the commission of a crime. Current law does not require that there be an underlying criminal conviction—nor even a criminal charge—for the seizure to take place. The bill, along with an identical companion in the House that is sponsored by Representative Arnold Mooney (R–Birmingham), would require a criminal conviction before property can be seized, a clear and efficient process for innocent parties to challenge a forfeiture, and increased reporting and transparency from law enforcement about the seizures. Similar bills were introduced last year, but were strongly opposed by the law enforcement community, which denied that the process is abused in Alabama. Proponents of the bill, representing both ends of the political spectrum, have completed a thorough year-long study of the practice and have gathered considerable evidence that there is such abuse.

Conclusion

The Legislature has used 12 of its available 30 meeting days for the 2018 Regular Session. While the Legislature has a 105 calendar day window in which to meet, hopes remain high that the session will conclude by the end of March. The House will reconvene on Tuesday, February 20th at 1:00 p.m. The Senate will reconvene on the same day at 2:00 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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