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Monday, April 25th, 2016
LEGISLATIVE UPDATE WEEK 12

Will This Be the Second to Last Week, or the Last?

The 2016 Regular Session of the Alabama Legislature is rapidly coming to its conclusion. This past week, the Legislature met for three days in Montgomery, its 23rd, 24th, and 25th legislative days. From this point forward bills will die each day, as insufficient time remains given the anticipated schedule for the next two weeks. It takes a minimum of five legislative days to pass any piece of legislation, because the Constitution requires that each bill must be “read” three times in each house, and the only two steps that can be completed on the same day are final passage in the first house and a first reading in the second. That means that with five days remaining it is procedurally possible for a bill introduced on this coming Tuesday to achieve final passage before the end of the session. Nevertheless, what is technically possible is not necessarily likely. Furthermore, bills cannot be introduced any longer in the Senate due to Senate rules prohibiting their introduction after the close of the 24th day of the session, which was last Wednesday.

The Legislature is expected to meet this coming Tuesday, Wednesday, and Thursday, and then meet the following week on Tuesday and Wednesday. Therefore, there is only one regular committee day remaining—next Wednesday. As a practical matter, absent special sittings of committees (and there will likely be several), most bills that have not passed their first chamber by the end of Tuesday’s Session will be dead. The focus from here on will therefore be on House bills that have made it to the Senate, and Senate bills that have made it to the House.

Education Trust Fund Budget

The Legislature checked a big box this week when both bodies concurred in the conference report on the Education Trust Fund Budget on Thursday by large margins. The $6.3 billion budget for education is the largest since 2008. The relatively healthy revenue streams for the Education Trust Fund—as opposed to the perpetually anemic General Fund—made the Education Trust Fund budget largely uncontroversial. Both bodies also approved a 4% pay increase for all principals, assistant principals, 2-year college educators, and all other education employees earning less than $75,000 per year. All other education employees will receive a 2% raise. The 2016–17 Education Trust Fund budget also increases the spending for the state’s voluntary pre-kindergarten program to $68 million—an increase of $16 million. There are also modest increases for textbooks, technology investment, and school supplies. The spending ratio between K-12 and Higher Education in the budget sent to the Governor—a contentious issue in some years—remains the same as last year at 73% to 27%. Governor Robert Bentley is expected to sign the budget, although it could also become law without his signature at the end of next Thursday.

Importantly, with the passage if the budget by both houses, the procedural requirement of the Budget Isolation Resolution, or BIR, is eliminated in both House and Senate for the remainder of the session. Prior to the full passage of both budgets, a vote on a BIR is required in order to bring up any piece of legislation other than the budgets. The BIR requires a 3/5ths super-majority vote—the same margin required to end a filibuster with a cloture petition. The BIR therefore acts in some ways as a hurdle that prevents any bills without broad support from being brought to the floor. The super-majorities held by Republicans in both houses have made the BIR somewhat less relevant in the past several years, but it can still present an issue. Once the ETF budget has been sent to the Governor, which happened last Thursday, all that is required to bring up and pass any bill in the House and Senate is a simple majority.

Medicaid and Medicaid Funding

Although the General Fund budget has been passed, vetoed, and then re-passed, Medicaid funding and spending continues to be a major focus of discussion in the Legislature. On Wednesday this week, the Senate Committee on Finance and Taxation General Fund, chaired by Senator Trip Pittman (R–Montrose), approved a modified hospital assessment bill. HB191, sponsored by Representative Steve Clouse (R–Ozark), re-authorizes the assessment paid by hospitals in Alabama in order to help fund the state’s share of the Medicaid match and to draw down federal dollars for the program. The bill was substituted in the Senate committee with a new version that would shorten the re-authorization. This change is meant to account for the uncertainty facing Alabama Medicaid, and in particular the uncertainty surrounding the implementation of the Regional Care Organizations (RCOs) scheduled to take place October 1st of this year.

The RCO reform program is intended to move the state from a standard fee-for-service program to a managed care model with provider-run RCOs. Medicaid Commissioner Stephanie Azar has indicated that the current level of funding for the Medicaid Agency in the General Fund budget would require her to scrap the RCO plan, cut some existing services—such as out-patient dialysis treatments and prescription medications—and likely decrease provider reimbursements. HB191, which as introduced would have extended the hospital assessment for three years, would now extend the assessment for just one year.

Meanwhile, the House gave final passage to HB530, sponsored by Representative April Weaver (R–Alabaster), which would give the Medicaid Commissioner the authority to extend the implementation date of the RCO program beyond October 1st at her discretion. The Senate companion to the bill, SB387, sponsored by Senator Greg Reed (R–Jasper), was favorably reported by the Senate Committee on Health on Wednesday. Representative Weaver’s bill will likely be heard in the same committee on Tuesday or Wednesday of this coming week.

Finally, in an effort to more fully explore the financial issues that face the Medicaid program, the Legislature began a series of joint hearings on Wednesday afternoon. An overflow crowd heard Commissioner Azar and other members of her leadership team discuss the details of the program, including eligibility thresholds, the populations served, and the reasons for the cost increases that have led to the program accounting for 38% of the General Fund Budget. Commissioner Azar also explained that, given how minimal Alabama’s program is compared to many states, there is very little ability to cut the program and remain eligible for federal matching funds. As the program currently stands, the General Fund only provides 11% of the total $6 billion spent in Alabama, and federal funds account for significantly more than two-thirds of the money in the program. The joint Medicaid hearings are expected to go for several weeks, depending on a number of factors including the date of adjournment of this year’s Regular Session. This coming Wednesday, the hearing is expected to examine issues facing Alabama’s Hospitals.

BP Settlement Funds

On Wednesday of this past week, the House Committee on Ways and Means General Fund delayed a vote on SB267, which would allocate BP settlement funds. The bill, sponsored by Senator Bill Hightower (R–Mobile), would use the coming $1 billion in payments from the settlement to issue bonds allowing the state to receive a lump sum payment of about $650 million. Hightower’s plan would use $161 million to repay a portion of the funds taken from the Alabama Trust Fund to shore up the state budget several years ago. Over $500 million is technically still “owed” to that fund. SB267, which would amend the constitution and therefore would require a vote of the people if passed, would provide about $260 million for Mobile and Baldwin County infrastructure projects, with the rest of the state receiving about $230 for the same purpose. A committee meeting has not yet been scheduled for the Ways and Means committee for the coming week, so it is not yet known whether the bill will have another chance to be reported to the floor. In response to the Committee’s actions, south Alabama lawmakers engaged in a filibuster in the House on Thursday, which resulted in just two bills on the House Special Order Calendar being reached and likely killed most of the other House bills that were on that day’s calendar for this year.

Prison Construction

In contrast, the House Committee on Ways and Means General Fund approved, by a vote of 7–4, legislation that would issue $800 million in bonds to construct 4 mega-prisons in Alabama. The bill, SB 287 by Senator Pittman, calls of the construction of three men’s facilities, each of which would house as many as 4,000 inmates, and one women’s facility to replace Tutwiler prison in Elmore County. The goal of the construction plan is to reduce the level of overcrowding at the state’s facilities from more than 180% capacity to 125% capacity. The debt service on the bonds would be paid for with savings that result from switching to newer, more efficient facilities. Specifically, the Department of Corrections has estimated that it can save as much as $21 million on decreased overtime costs and $10 million on reduced medical costs annually.

The same committee also approved a bill by Representative Reed Ingram (R–Montgomery), HB556, which would raise auto title fees by $13 from $15 to $28 per title. Most of the increased cost would be dedicated to repaying the bonds used to build the women’s facility. SB287 can now be addressed by the House, but with just five days remaining in the session, it is not clear whether there is sufficient time for HB556, which must still be addressed by both he House and Senate, to pass. BP settlement legislation and the prison construction bill likely will dominate the House debate for the remaining days of the session.

Lottery Legislation

On Thursday this week, the Senate Tourism and Marketing Committee reported SB18, sponsored by Senator Jim McClendon (R–Springville), by a vote of 4–2. The bill proposes an amendment to the state’s constitution that would allow the Legislature to establish a lottery. There are few details in the legislation; specifics, including how lottery proceeds would be used by the state or what types of games the state would operate, would have to be addressed by further legislation. SB18 was filed at the very outset of the 2016 Session, and had remained in committee without a vote after an early public hearing. It appears unlikely that the legislation could make it through the rest of the process before the Legislature adjourns, though it is possible. And it may be that the goal is simply to revive the lottery for discussion as a possible revenue generator in the event that a special session is called later this year.

Payday Lending

A bill by Senator Arthur Orr (R–Decatur) that would impose restrictions and reform on short-term payday loans in Alabama was carried over on Wednesday. SB91 would cap interest rates on the loans, which today can be as high as 456%, at about 133%. It would also extend the term of the loans, which are now typically between 14 and 30 days, to six months. The bill could be scheduled for a committee vote this week and could be voted on by the full House in one of the remaining days of the Session. At this time, however, a committee meeting time has not been posted.

 

Conclusion

As noted above, there are five legislative meeting days remaining in the session. Rumor and speculation in Montgomery continues to be that the Legislature will meet for three days this coming week and then will complete the session the following week by meeting on Tuesday and Wednesday. There are still rumors that once the Education Trust Fund budget becomes law, the Legislature will immediately adjourn. Nevertheless, that seems like the less likely scenario. Without question, the focus of both bodies will necessarily narrow from here to the end of the session, as each day that pass results in the death of bills.

Both the House and the Senate will reconvene for the 26th day of the session at 1:00 PM on Tuesday, April 26.

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