The 2016 Legislative Session concluded at 12:00 Midnight on Wednesday with a flurry of last minute activity, but no action on the two major initiatives that had dominated discussions for the past two weeks. In all, more than 150 bills received final passage in the last two days of the Session, which means that close to 100 House bills and slightly more than 50 Senate bills are on their way to Governor Robert Bentley for his review. The Governor has ten days from the Legislature’s adjournment to sign a bill and deposit it with the Secretary of State. Any bill that he chooses not to sign will not become law. Immediately following the end of the session, there was talk of a possible special session to address several issues—particularly Medicaid funding and prisons. In the coming days, we will publish a general review of this session with a look forward to what may happen between now and the Legislature’s return for the 2017 Regular Session in February. For now, here is a look at what went on this week.

Prison Construction

The focus of most of the last day of the session was on the Governor’s $800 million prison construction legislation. The bill, SB269, sponsored by Senator Trip Pittman (R–Montrose), called for the construction of four new mega-prisons, three for male inmates, and one to replace the Tutwiler women’s prison. The Governor and supporters of the bill have argued that the construction is needed to relieve the overcrowding in the state’s fourteen existing facilities. Most of those existing prisons would be closed under the Governor’s plan, and the debt service on the bonds would be paid from the anticipated savings that could result from the consolidation. Prior to passing the House, a provision was added to the bill that would have required the Joint Legislative Prison Committee to produce a detailed report on the prison construction plan by the 25th day of the 2017 regular session. The Legislature would then have had to hold a second vote on the plan. The bill was sent to a conference committee which recommended modification of the report and second vote provision in a manner that would have allowed the work to proceed prior to the next Legislative Session. The conference committee met several times during the last day of the session to try to compromise on a version of the bill that could pass both the Senate and the House. In the end, the committee proposed a slightly scaled down version of the legislation, calling for bonds in the amount of $550 million and the construction of three prisons instead of four. That version passed the Senate shortly before 11:00 PM and sent it to the House. The House, however, did not bring the bill up for debate, killing the bill for the session. The failure of the prison plan is viewed by many as the primary reason that Governor Bentley might ask that the Legislature return to Montgomery for a special session later this year.

BP Settlement

As the week began, it appeared likely that a deal had been reached on a compromise measure allocating proceeds from the state’s settlement in the BP oil spill case. Under the bill passed by the House last Thursday, the State would receive a lump sum payment of approximately $650 million, instead of receiving payments spread out over 20 years. The bill, HB569, sponsored by Representative Steve Clouse (R–Ozark), would have used close to $450 million of the money to pay back funds borrowed from the Alabama Trust Fund. It would then have allocated almost $200 million for road and infrastructure projects in Mobile and Baldwin Counties. By paying back the Trust Fund, the measure would have freed up $70 million for Medicaid in next year’s budget. The Clouse bill would have thus have brought Medicaid to within $15 million of the $785 million that Commissioner Stephanie Azar has stated is needed to maintain the current level of Medicaid services without cuts. After passing the House late Thursday, the bill went to the Senate Committee on Finance and Taxation General Fund. There, the disagreement between legislators from northern Alabama and those from southern Alabama derailed the bill, killing it for the session. The breakdown on the bill leaves Medicaid funding at the $700 million level that was provided in the General Fund budget passed over the Governor’s veto earlier this session. As noted at the time by Senator Arthur Orr (R–Decatur), Chair of the Senate Committee on Finance and Taxation Education, this is an issue that could—and almost certainly would—be brought back up by the Legislature in the event of a special session.

Medicaid—RCO Delay

On Wednesday, the Senate gave final approval to HB535, sponsored by Representative April Weaver (R–Columbiana), and sent the bill to the Governor for his approval. The bill grants broad discretionary authority to Medicaid Commissioner Azar to delay the implementation of the Regional Care Organization (“RCO”) transition, which had been set by statute for October 1, 2016. As a practical matter, the funding shortfall that exists for the Medicaid program made implementation of the RCO transition on October 1st impossible. Thus, the passage of HB535 was a essentially a recognition that additional time was needed to allow a solution to be found—assuming one is even possible.

Hospital Assessment

The reauthorization of the hospital assessment, the mechanism by which substantial federal matching dollars are accessed for Medicaid, also passed on the next-to-last day of the Session. HB191, by Representative Clouse, had been carried over to the call of the Chair in the Senate. The hospital assessment has historically been reauthorized for three-year periods, but this year the reauthorization was shortened to one year. The modification was necessary due to the uncertainly of the RCO transition and the funding crisis in the Medicaid program, but it means that the assessment will have to be authorized again in 2017.

Tax Credits & Reporting

On Wednesday, the House gave final passage to SB208, sponsored by Senator Orr, which is an effort to begin an in-depth look at the impact on the State’s incentives and tax credits programs. The bill had been just one step from passage for several weeks before breaking though close to midnight on the last day. Orr’s bill requires the head of each agency that administers an incentive program or tax credit to produce a report examining the program and its effectiveness in detail. The first such report would be due to the Legislature not later than the second legislative day of the 2018 Regular Session. Several high profile and popular tax incentive programs, including the Historic Tax Credit, were held back by the Senate during this session by concerns that the state was not adequately assessing the long term return on investment of the programs.

Tax Deduction—HSA Accounts

HB109, sponsored by Representative Becky Nordgren (R–Gadsden), was passed by the Senate on Tuesday, creating a state tax deduction for Health Savings Account contributions. The bill mirrors federal law, and was sponsored in the Senate by Senator Paul Sanford (R–Huntsville). Beginning in tax year 2018, a state income tax deduction will be available for contributions limited to the annual deduction amount allowed by federal law, which today stands at $3,350 for individuals and $6,750 for families.

State Contracts with Boycotting Entities

On Tuesday, the House passed SB81, sponsored by Senator Orr, which prohibits any government entity in Alabama from entering into contracts with entities that are boycotting any jurisdiction with which Alabama enjoys free trade. The bill is part of a nationwide effort to push back against what many view as the anti-Israel “Boycott, Divestment, and Sanctions” movement, though the bill would apply beyond those companies boycotting Israel. Under the terms of the legislation, no public entity, including any political subdivision of the Alabama, as well as any state university, would be permitted to enter into a contract with a business that is boycotting any jurisdiction with which Alabama can engage in free trade. This would include all World Trade Organization members, as well as any government with which the U.S. has a free trade agreement. Similar bills have passed in several other states.

Payday Lending

An effort to reform the payday lending industry in Alabama failed to receive final passage in the last week of the session, despite its inclusion on the House Special Order Calendar for the second to last day of the session. As amended in House committee, the bill, SB91 by Senator Orr, would have required a minimum loan term of 28 days, and would lower the effective APR of the loans to about 180%. Supporters of reform in the industry were concerned that the bill was too watered down by the House changes, while many in the industry felt the bill still went too far. In the end, the House carried the bill over without a final vote.

Office of Minority Affairs

Early in the last day of the session the Senate approved HB534, sponsored by Representative John Knight (D–Montgomery). The bill was an initiative of Governor Bentley’s office and creates a cabinet level Office of Minority Affairs in Alabama, with its Director to be appointed by the Governor. Earlier this year, Governor Bentley issued an Executive Order establishing the Governor’s Office on Minority Affairs, and naming former Maynard, Cooper & Gale attorney Nichelle Nix as the director of that Office. The bill that passed on Wednesday received overwhelming bipartisan support, passing the House by a vote of 93–5 and the Senate by a vote of 26–0.

Conclusion

The 2016 Regular Session has concluded. The 30th and last day of the session was on May 4th, which was the 92nd day of the 105-day window during which the Legislature is permitted to meet by the state’s constitution. The 2017 Regular Session will begin on February 7, 2017. However, Alabama’s constitution permits the Governor to call the Legislature back to Montgomery at any time that he determines that legislative action is required. There is no question that there are important issues that remained unaddressed in this session that would justify a special session, including Medicaid and prisons. Whether a consensus can be reached such that a Special Session might be productive remains unclear, however.

For more information please contact Ted Hosp or Edward O'Neal.