Friday, April 15th, 2016

In every legislative session there comes a time when you can just tell that many, if not most, of the members don’t much want to be in Montgomery anymore. It appears that we may now have reached that point. The Legislature met in session two days this past week—unusually on Tuesday and Wednesday. Perhaps most importantly, the Legislature came one step closer to completing the one remaining required action before it can adjourn: passing the Education Trust Fund budget. The Legislature has now met for 22 of their constitutionally permitted 30 session days, leaving just 8 days remaining. Many in Montgomery, however, do not believe that the Legislature will use all 30 days, and there has even been some speculation that a motion for final adjournment could come as soon as this week—at least in the Senate.

The Education Budget

A revised Senate version of the Education Trust Fund budget passed the Senate this week with very little debate and no controversy. The budget includes a 4% pay raise for: all K–12 education employees who earn less than $75,000 a year; all principals and assistant principals; and all employees of the state’s two-year college system. The Education Trust Fund budget has more than $6.3 billion in total spending, making it the largest education budget that Alabama has passed since 2008. The vote in the Senate to approve it was 32–1. The budget is expected to be sent to a conference committee made up of three Representatives and three Senators to work through the differences in the two versions and present a final compromise budget to both bodies. The conference committee could report a proposed final budget as soon as next week.

Prison Construction

On Wednesday, the House Committee on Ways and Means General Fund held a public hearing on SB287, which would allow for an $800 million bond issue to construct four new mega-prisons in Alabama. The construction plan is an initiative of Governor Robert Bentley, and it would rely on savings to cover the debt service on the proposed 30-year bonds. The largest portion of the projected savings, almost $21 million per year, comes from the reduced need for overtime pay for corrections workers. Alabama’s prisons are generally believed to be operating at close to double their design capacity, and SB287 is intended to alleviate those overcrowding concerns and ward off possible federal intervention in the system. The bill is scheduled for a committee vote this coming Wednesday. If it is approved by the committee, it can be passed by the full House and sent to the Governor for his signature.

Streaming Video Taxes

On Tuesday, the House passed HB349, a bill that would prevent the Commissioner of Revenue from reinterpreting existing law in order to impose a consumer tax on streaming video and digital downloads. The bill, sponsored by Representative Ed Henry (R–Hartselle), has moved to the Senate but has not yet been assigned to a committee. Early last year, the Department of Revenue proposed an amended regulation that would have altered the definition of “tangible property” in order to impose sales, use, and rental tax on streaming video and digital downloads. Under pressure from members of the Legislative Council, the proposed rule was eventually withdrawn. Earlier this session, Senator Trip Pittman (R–Montrose) introduced a bill in the Senate that would have imposed the tax. That bill was voted down in committee. Representative Henry’s bill would clarify the issue and ensure that the Department of Revenue cannot reinterpret the law unilaterally in order to expand the existing tax.

Medicaid and the RCO Transition

There was a significant shift in Montgomery this week with respect to discussions of a possible special session this summer to address Medicaid funding. Last week, the Legislature overrode Governor Bentley’s veto of the General Fund budget. According to Alabama Medicaid Commissioner Stephanie Azar, the $700 million provided to her agency in that budget is approximately $85 million short of what it would need to maintain its current level of service. At the time Governor Bentley vetoed the budget it was generally expected that he would call the Legislature back for a special session to readdress funding Medicaid at $785 million. This week, however, Governor Bentley indicated that his intention is to have Medicaid implement a series of cuts in order to “live within our means.” Senator Del Marsh (R–Anniston), the President Pro Tem of the Senate, also indicated that a special session is not likely in the near future. Senator Marsh stated that he believes that the cuts proposed by Medicaid should go into effect before the Governor makes any effort to bring the Legislature back into session. It is therefore likely that a special session, if there is one at all, would not take place until the fall—possibly after the October 1 start of the fiscal year. The cuts that have been discussed thus far include the discontinuation of prescription drug coverage, elimination of outpatient dialysis, and scrapping the transition of Medicaid from a fee-for-service program to a managed care program run by Regional Care Organizations (“RCOs”).

The transition to RCOs was planned for October 1 this year. In response to the funding crisis and the possibility that the transition would at least have to be delayed, however, bills were introduced in both the House and Senate this week that would allow the Medicaid Agency to delay implementation of the plan at its discretion. HB530, the version introduced in the House, has already been reported favorably by the House Committee on Health.

Beginning this Wednesday, a joint House and Senate Committee will begin hearings to examine the Medicaid issue and the funding crisis.

Infrastructure Improvement

On Wednesday, the House passed SB180, a bill that would distribute any revenue from a possible new gas tax, and sent it to the Governor for his signature. The bill, which would require any revenue generated by a gas tax to be spent exclusively on road and bridge projects, is part of the infrastructure improvement package supported by a wide coalition of business interests under the umbrella group Alliance for Infrastructure. The more important piece of this package, HB394, sponsored by Representative Mac McCutcheon (R–Capshaw), has been reported out of committee in the House but has not come up for a vote on the House floor yet. HB394 would raise the current Alabama gas tax by $0.06 per gallon and would thereafter index the tax to the average tax imposed by surrounding states.

Deceptive Trade Practices Fix

The House Committee on the Judiciary favorably reported SB270, which is designed to remedy a recent 11th Circuit Court of Appeals decision, on Wednesday. The plain language of Alabama’s Deceptive Trade Practices Act specifically prohibits private class action lawsuits under the Act. Nevertheless, in 2015, the Federal Court of Appeals held that the availability of a class action lawsuit was a procedural issue—rather than a matter of substantive state law—and that therefore the Court would apply federal law, which would permit class actions. The Court thereby opened up the Deceptive Trade Practices Act to private class actions in federal court. SB270, filed by Senator Phil Williams (R–Rainbow City), specifies that the prohibition of private class actions is a matter of substantive Alabama law, in an effort to ensure that federal courts will apply the plan language of the Alabama statute and prohibit class actions from being brought under the Act. The bill now moves to the House for final passage.

Patient Malpractice Recovery

A proposal to alter the way that patients injured by medical malpractice seek recovery was introduced on Wednesday in the Senate by Senator Pittman. SB413, would convert the existing malpractice system into an administrative proceeding, much like workers compensation in other states. Proponents of the plan note that as many as 80% of the patients who are injured by medical error never receive any compensation for their injury under the current tort system because their injuries, and so their legal damages, are considered too small for an attorney to take their case. Further, the cases that are tried in court often take five or more years to resolve. Furthermore, studies have shown that doctors’ aversion to being sued for malpractice can result in the costly and unnecessary practice of defensive medicine. The additional tests, procedures, and prescriptions that result dramatically drive up healthcare costs for both private businesses and government programs such as Medicaid. SB413 has been assigned to the Senate Health Committee, but has not yet been scheduled for a hearing.


The House of Representatives returns to Montgomery on Tuesday, April 19 at 1:30 PM for the 23rdlegislative day of the session. The Senate will convene on the same day at 2:00 PM. The Legislature is expected to meet in session on Tuesday, Wednesday, and Thursday next week.

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