Now that the Alabama Legislature’s 2019 regular session has come to a close, we’ve turned our focus to the expected special session on the state’s prison crisis later this year. In our latest video, Arise’s Jim Carnes explains how Medicaid expansion is an essential component of fixing the state’s prison crisis and increasing economic opportunity for all Alabamians.
Issue: Budgets
Arise legislative recap: June 7, 2019
Arise’s Robyn Hyden looks back at some important policy wins — and previews what’s still to come — following the conclusion of the Alabama Legislature’s 2019 regular session.
The 2019 session that was, and the one yet to come
Alabama legislators ended their 2019 regular session last week. But they’re not done yet.
Amid the threat of federal intervention, the Legislature likely will hold a special session this fall to address horrendous conditions in our state’s overcrowded prisons. This summer, Arise will continue making the case that meaningful prison reform must include Medicaid expansion. This move would cut state health care costs and help former inmates stay healthy and productive after release. And it would help people stay out of prison by strengthening treatment for mental illness and substance use disorders.
Arise will renew our call to fund these needed investments by fixing Alabama’s upside-down tax system. With high sales taxes and big tax breaks for rich people, this broken system is the worst of both worlds. It pushes struggling families deeper into poverty, and it doesn’t bring in enough money to provide adequate funding for corrections and other vital services. Untaxing groceries and ending the state’s deduction for federal income taxes would be two huge steps to undo that damage.
Breakthroughs on civil asset forfeiture, voting rights
Arise members’ advocacy led to progress on civil asset forfeiture and voting rights this year. Lawmakers voted unanimously for SB 191, sponsored by Sen. Arthur Orr, R-Decatur, which will increase transparency around forfeitures in Alabama. And they approved SB 301, sponsored by Sen. Rodger Smitherman, D-Birmingham, which will expand access to absentee ballots.
Our supporters were key in stopping numerous proposals to erect harmful new barriers to Medicaid and food assistance under the Supplemental Nutrition Assistance Program (SNAP). We also saw major breakthroughs on several recent Arise issue priorities and endorsements:
- HB 225, sponsored by Rep. Adline Clarke, D-Mobile, will forbid pay discrimination based on race or sex.
- SB 30, sponsored by Sen. Cam Ward, R-Alabaster, will ensure that inability to pay filing fees won’t block low-income Alabamians from pursuing their rights in court.
- SB 228, sponsored by Orr, will increase jail food funding and prevent sheriffs from pocketing any leftover money.
Two other topics dominated the headlines at the State House this year. Legislators moved quickly to pass an abortion ban that is certain to face a lengthy, expensive court challenge. They also hustled to pass a 10-cent gas tax increase for infrastructure improvements during a special session in March.
The work that remains undone
But lawmakers showed much less urgency when it came to investments in human services. While Alabama’s funding for K-12 and higher education is increasing, it’s still well below 2008 levels. Similarly, General Fund (GF) revenues are rising. But it’s not nearly enough to reverse decades of underinvestment in Medicaid, mental health care, child care and other services.
The Legislature also waited until the session’s final week before finally deciding the GF, rather than the education budget, would pay for the state’s share of the Children’s Health Insurance Program. CHIP supports coverage for more than 170,000 Alabama kids.
Some climbs remain steeper than others. Reforms of payday lending and the death penalty struggled to gain traction this year. So did proposals for automatic voter registration and early voting. But Arise members – unafraid and undeterred – will keep working for those changes and others to promote opportunity, prosperity and justice for all Alabamians.
Alabama’s prison reform solution must include Medicaid expansion
Alabama’s prison crisis is about more than overcrowding and understaffing. It’s about the generational impacts of a criminal justice system warped by racism, chronic poverty, inadequate education and poor health.
The solution will require both new revenue and broad policy reform. And one essential step is to extend health coverage to uninsured Alabama adults with low incomes. Expanding Medicaid would address the prison crisis in four ways:
- Untreated mental illnesses and substance use disorders are major contributors to Alabama’s over-incarceration problem, and Medicaid expansion would tackle these challenges head-on. Strengthening these services would help more people stay out of prison.
- When a person leaves prison, it’s hard to get a job that offers health coverage. But to get and keep a job, you need to be healthy. Medicaid expansion would help former inmates become productive members of the workforce.
- Federal funding would cover 90% of the cost of Medicaid expansion. That would slash state costs for hospitalizing prisoners.
- A stronger education system creates economic opportunity that, in turn, reduces crime. As new federal dollars for Medicaid expansion flowed into the economy, they would generate major new state and local tax revenues for schools.
Bottom line
Alabama is one of only 14 states that have not yet accepted Medicaid expansion. The 36 states that have embraced it show how this single policy decision can strengthen the health care system, make the population healthier, reduce racial health disparities and shore up state budgets.
Alabama’s legacy of failure on all four counts is a major contributor to the prison crisis. And Medicaid expansion is an essential part of the solution.
Arise legislative recap: May 24, 2019
The uncertainty over 2020 CHIP funding showcases the fundamental problem with Alabama’s budgets: Our state doesn’t bring in enough money to fund basic needs adequately.
Arise’s Carol Gundlach explores that topic in this week’s legislative recap.
CHIP funding uncertainty shows a core problem in Alabama’s budgets
The Alabama Legislature has yet to decide how to fund health coverage for more than 170,000 children next year. And that’s a symptom of a fundamental illness that has plagued our state’s budgets for decades.
The Children’s Health Insurance Program (CHIP) is one of Alabama’s most successful programs. Through Medicaid and ALL Kids, CHIP supports health coverage for 14% of Alabama’s children. Alabama’s 1997 adoption of CHIP and its later decision to expand eligibility to children in households that make up to 317% of the federal poverty level (nearly $68,000 for a family of three) has made our state a leader on children’s health coverage in the South.
Alabama’s investment in CHIP ensures that kids can get the health care they need to learn and thrive. And CHIP is a great deal for our state. For every $1 Alabama spends on CHIP, the federal government provides more than $3 in matching money. (CHIP parents pay an annual fee and copays that can’t total more than 5% of their annual income.)
Unfortunately, Alabama often struggles to provide its share of CHIP funding, even during a “good” budget year. Gov. Kay Ivey recommended that CHIP’s state match for 2020 be paid out of the Education Trust Fund (ETF), which receives most of the “growth tax” revenue from sales and income taxes. But the Senate balked at this idea and removed CHIP from the ETF budget it passed last week. Meanwhile, the General Fund budget that the House passed in April also includes no CHIP funding.
In the next couple of weeks, both chambers are expected to take up the budget that the other one passed. In the meantime, the parents of more than 170,000 Alabama children wait to learn whether their kids will still have health insurance this fall.
It’s time to stop lurching from one crisis to another
CHIP is one of Alabama’s most popular programs, and we fully expect the House and Senate to fund it. But the uncertainty illustrates the central problem of Alabama’s budgets: We don’t bring in enough money to meet basic needs. In past years, Medicaid has been the subject of funding crises. This year, the threat of a federal lawsuit over abominable conditions in state prisons may force a special session. And in 2021, CHIP may be at risk as a temporary boost to the federal matching rate ends.
Every year, Alabama seems to have at least one essential service that it struggles to fund adequately. And every year, the Legislature juggles too little money, robs Peter to pay Paul, or grasps at another source of one-time funding to squeak through another year. Barely maintaining the status quo is no way to promote shared prosperity. And it’s no way to make life better for everyday Alabamians.
Alabama Arise has a solution to break the cycle of uncertainty and invest in our state’s future. And it’s a solution that’s beginning to interest lawmakers as they consider how to pay for CHIP, Medicaid, corrections and other necessities.
Ending the FIT deduction would strengthen Alabama’s future
That solution is to end Alabama’s income tax deduction for federal income taxes (FIT). It’s a loophole that only two other states – Iowa and Louisiana – allow in full. (Three other states allow a partial deduction.) And it’s a skewed tax break that primarily benefits the richest households among us.
For those who earn $30,000 a year, the FIT deduction saves them about $27 on average. But for the top 1% of taxpayers, it’s worth an average of more than $11,000 a year. Closing this tax loophole would bring our state’s upside-down tax system closer to balance. It also would allow Alabama to end the state sales tax on groceries without cutting school funding.
Ending the FIT deduction would bring in an additional $719 million a year. That’s enough to pay for Medicaid expansion, secure long-term CHIP funding and invest in education, corrections and other pressing needs.
And this new revenue wouldn’t be just one-time money. It would be there every year to help Alabama meet the needs of the state and its people.
As one legislator told us recently: “This is the only plan that makes sense.” We think so, too, and we’re working hard to convince more lawmakers that they need to support this proposal, for the sake of our children’s health and for all of us.
Not back yet: Alabama’s K-12, higher education funding still lower than 2008
Alabama children who entered first grade in 2008 will get their high school diplomas next year. And they’ll graduate from an education system that still gets less state support than it did when they were first learning how to add and subtract.
The $7.1 billion Education Trust Fund (ETF) budget that the Alabama Senate passed 28-2 Thursday contains substantial funding increases for K-12 schools, two-year colleges and four-year universities. (Read the excellent coverage from AL.com’s Trisha Powell Crain and the Montgomery Advertiser’s Brian Lyman for the full details.) The budget’s sponsor, Sen. Arthur Orr, R-Decatur, called it “the largest ETF budget in history.”
In terms of raw dollar amounts, that’s true. But it’s not the full story. To compare funding across the years on an apples-to-apples basis, you need to adjust for inflation. And adjusted for inflation, Alabama’s education funding is still much lower than it was in 2008, before the Great Recession hammered state revenues.
The math: ETF increases aren’t keeping up with inflation
Alabama allocated $6.7 billion to the ETF in 2008, which is equivalent to $7.8 billion in today’s dollars. That means the Senate’s $7.1 billion budget for next year still would be 8.6% below the ETF’s 2008 level.
The story is similar for both K-12 and higher education, both of which are on track to fall far short of their inflation-adjusted 2008 funding levels. Under the Senate budget, K-12 schools would get 6.9% less than they did in 2008, while higher education funding would be 17.2% below where it was that year.
Even so, the 2020 Senate budget would be a move in the right direction. This plan would provide $4.9 billion for K-12 schools and $1.9 billion for higher education. Those amounts would be 6.8% and 10% increases, respectively, over this year’s allocations. That is significant, praiseworthy progress toward returning to 2008 levels.
But it’s also important not to look at 2008 through rose-colored glasses. Though that budget was the ETF’s recent high-water mark, it still didn’t invest adequately in a range of important services. State officials at the time identified hundreds of millions of dollars of unmet needs in reading and math education, distance learning, need-based tuition assistance and other areas. As time has passed and inflation has continued to outpace state funding increases, Alabama’s unmet educational needs have only grown.
How Alabama can fund needed investments
Our state’s education funding isn’t an uncontrollable force of nature like the weather. Policy choices determine the amount of money that Alabama raises – or doesn’t raise – for education. And lawmakers have a range of choices to bring in more money for investments in our schools, colleges and universities.
One option would be to modernize Alabama’s income tax rates, which haven’t changed since 1935. The state’s 5% top rate kicks in starting at just $3,000 of taxable income. That means the marginal rate that multimillionaires pay is no higher than the one that applies to many families who struggle to make ends meet.
Another approach would be to close tax loopholes that disproportionately benefit large corporations and wealthy households. Alabama’s deduction for federal income taxes (FIT) is one example of that kind of skewed tax break. For those who earn $30,000 a year, the FIT deduction saves them about $27 on average. But for the top 1% of taxpayers, it’s worth an average of more than $11,000 a year.
Ending the FIT deduction would raise $719 million a year. That’s money Alabama could use to invest in education, end the state sales tax on groceries and take other steps to make life better for everyday folks.
Budget and tax decisions reflect what we value as a society. Alabama could continue to cling to a tax system that delivers lavish tax breaks to wealthy people while making it harder for struggling families to get ahead. Or our state could choose instead to prioritize stronger investments in education, health care and other services that benefit everyone.
Arise legislative recap: April 26, 2019
A state Senate committee approved a bill Wednesday to cut new holes in Alabama’s safety net.
Arise legislative recap: April 19, 2019
“The grocery tax is a tax on a basic necessity of life. It’s a tax on survival. And it’s time for Alabama to bring this tax to an end.”
Arise communications director Chris Sanders discusses a recent bill by Rep. Chris England that would be a major step forward on untaxing groceries. The video also details Arise’s plan for how Alabama could end the state grocery tax and expand Medicaid without cutting a dime from the education budget.
Removing the FIT deduction would allow Alabama to untax groceries, expand Medicaid
Alabama’s federal income tax (FIT) deduction provides a huge tax break for high-income individuals – but at what cost? $719 million to be exact.
The FIT deduction is one big reason Alabama’s tax system is upside down. For those who earn $30,000 a year, the deduction saves them about $27 on average. But for the top 1% of taxpayers, the FIT break is worth an average of more than $11,000. The higher the income, the more the FIT deduction is worth for those who can most afford to pay more to fund education, health care and other vital needs.
Only two other states offer a full FIT deduction like Alabama does. (Three other states offer a partial deduction.) Ending the FIT deduction would bring in an additional $719 million a year, the Institute on Taxation and Economic Policy estimates. That would be enough to allow Alabama to remove the state sales tax on groceries. For most people in our state, the net result would be a tax cut.
This proposal would make it easier for everyday Alabamians to make ends meet, but its benefits wouldn’t end there. Alabama also could use the new revenue to expand Medicaid, ensure full funding for the Children’s Health Insurance Program (CHIP) in 2021 and make critical investments in education and other areas. CHIP supports health coverage for more than 170,000 children through Medicaid and ALL Kids.
Alabama’s constitution dedicates income tax revenue to education, and the FIT deduction is written into the document as well. So this plan would require the Legislature and the public to approve a constitutional amendment. But ending the FIT deduction would be a good way for Alabama to begin prioritizing public investments that benefit everyone over tax breaks that primarily benefit a select few.