Issue: Budgets

Medicaid cuts loom, payday reform falls just short as Alabama Legislature ends 2016 regular session

By Chris Sanders

The Alabama Legislature’s 2016 regular session, which ended Wednesday, was more notable in many ways for what didn’t happen than for what did.

Lawmakers did not agree on a revenue solution to prevent devastating Medicaid cuts that would reduce health care access for hundreds of thousands of children, seniors, and people with disabilities in Alabama. Despite enormous public support, payday lending reform didn’t cross the finish line in the House. State education funding still hasn’t returned to where it was in 2008. And proposals to expand affordable housing and reform Alabama’s death penalty system gained little traction at the State House.

Still, progress was real on several of Arise’s priority issues. With minutes left in the session, lawmakers passed a bill to expedite voting rights restoration for thousands of Alabamians. Payday lending reform made it further in the Legislature than it ever has before, with a reform bill sailing through the Senate 28-1. And the new #IamMedicaid campaign continues to remind lawmakers and the public of the real human faces behind Alabama’s Medicaid debate.

Here is a recap of what happened on each of Arise’s issue priorities this session – and the action that may yet lie ahead on them this year.

State budgets

Deep Medicaid cuts in Alabama moved much closer to reality Tuesday when a bill that would have averted most of them died in a Senate committee. HB 569 would have used BP oil spill settlement money to help free up $70 million to go toward Medicaid’s $85 million shortfall, but the bill died when the Senate’s General Fund (GF) budget committee adjourned without voting on it. Committee chairman Sen. Trip Pittman, R-Montrose, ended the meeting after his colleagues voted 9-6 to side with a proposed substitute by Sen. Arthur Orr, R-Decatur. Orr’s plan would have reduced the amount of road money in the bill and distributed those funds to all areas of Alabama instead of just coastal areas. The substitute also would have increased the share of settlement money used for debt repayment, fully repaying the Alabama Trust Fund (which receives state revenue from oil and gas drilling) for money that the state borrowed to avoid massive GF cuts in recent years.

The Legislature may return later this year for a special session to address the Medicaid shortfall, but Gov. Robert Bentley said “everybody’s got to rest a little bit” before he makes that decision. Even though the regular session is over, lawmakers are expected to continue a series of weekly hearings on Medicaid’s funding structure and importance to the state’s health care system. Meanwhile, Alabama moves ever closer to a future when deep Medicaid payment cuts could prompt many pediatricians to leave the state and could imperil many of the rural hospitals and doctor’s offices upon which Medicaid patients and privately insured Alabamians alike depend. The cuts could end Medicaid coverage for outpatient dialysis and adult prescriptions and eyeglasses as well. Also on the chopping block could be the Program of All-Inclusive Care for the Elderly (PACE) in Mobile, which saves the state money by allowing participating seniors to live independently in their own homes instead of being sent to a nursing home.

The Education Trust Fund (ETF) budget drew many fewer headlines than the GF this year, but state education funding is still about 15 percent below its pre-recession level of 2008, adjusted for inflation. (Even the 2008 funding level was insufficient to meet many of Alabama’s educational needs.) The 2017 ETF budget includes a 33 percent boost in pre-K funding and provides a 4 percent pay raise for most K-12 teachers. Universities and two-year colleges also received slight increases.

Payday lending reform

Alabama’s payday reform movement enjoyed an unprecedented breakthrough in the Legislature this year when a reform bill passed 28-1 in the Senate, but the plan came up just short of final passage. SB 91, sponsored by Orr, was on the House calendar Tuesday but never reached the floor for a vote after a long day of filibusters. Orr’s bill would have given Alabama payday borrowers a more realistic path out of debt by slashing interest rates, allowing installment payments and giving borrowers at least six months to repay. (Current state law allows payday loans to carry interest rates of up to 456 percent a year.) Arise will work with Alabama Appleseed and other advocates to build on this year’s momentum and growing public support as the reform movement continues into 2017.

Voting rights

Alabama will speed up the voting rights restoration process for thousands of people if Bentley signs a bill that the Legislature passed Wednesday. With just minutes left in the session, the House passed SB 186, sponsored by Sen. Linda Coleman-Madison, D-Birmingham, and sent it to the governor. The clock struck midnight just before the Senate could consider another voting rights bill – HB 268, sponsored by Rep. Mike Jones, R-Andalusia – which would have clarified what counts as a “crime of moral turpitude” that bars someone from voting in Alabama. Other proposals to expand voting access, including multi-day voting and same-day voter registration, died in committee.

Death penalty reform

A bill to establish a state Innocence Inquiry Commission for death penalty cases – SB 237, sponsored by Sen. Dick Brewbaker, R-Montgomery – cleared the Senate this year but died Tuesday when the House Judiciary Committee didn’t vote on it. Other proposed reforms to Alabama’s death penalty system, including a three-year moratorium on executions, went nowhere. The U.S. Supreme Court on Monday ordered further review of Alabama’s capital sentencing scheme, which allows judges to override a jury’s sentencing recommendation. A state circuit judge in March declared Alabama’s judicial override system unconstitutional, but the state has appealed that ruling.

Tax reform

Alabama’s tax system will remain upside down for another year, as the Legislature declined to consider measures to end the state grocery tax or close corporate tax loopholes. A bill to increase the state property tax won Senate committee approval but went no further. A proposed 75-cent cigarette tax increase won the endorsement of the Alabama Health Care Improvement Task Force but was never introduced in the Legislature. Lawmakers did, however, enact new tax breaks for small businesses and for increased use of state port facilities. The Legislature also passed a bill – SB 208, sponsored by Orr – to require annual reports on whether tax incentives are producing their intended economic effects.

“Ban the box” legislation

SB 327, sponsored by Sen. Quinton Ross, D-Montgomery, won Senate committee approval on April 7 but never reached the Senate floor. The bill would have removed the criminal history checkbox from state job and license applications, removing a potential barrier to employment for thousands of Alabamians looking to rebuild their lives and provide for their families after serving their time for a criminal offense.

Housing Trust Fund (HTF)

A bill to increase the state mortgage recording fee and distribute some of the revenue to the state HTF died in a House committee. HB 341, sponsored by Rep. Patricia Todd, D-Birmingham, would have created a dedicated state funding source for the HTF, which could create thousands of jobs while addressing Alabama’s need for more than 90,000 affordable homes for residents with extremely low incomes.

Quick overviews of Arise’s 2016 issue priorities

By Alabama Arise

Your time is important, and your voice for a better Alabama is essential. That’s why we’ve prepared these quick overviews to keep you up-to-date on what’s happening at the Alabama Legislature on Arise’s 2016 issue priorities. We’ll update this post as needed.

“Ban the box” legislation: ‘Ban the box’ law would help rebuild lives in Alabama — The “criminal history checkbox” on many standardized job application forms often keeps otherwise qualified employees from making it to the next stage of the hiring process, where they could explain their past face-to-face. This creates discouraging barriers to employment for people who are looking to rebuild their lives after serving their time and paying their debt to society. A growing national “ban the box” movement to remove those checkboxes from job applications is helping former inmates become productive members of society and provide for their families. It could do the same for thousands in Alabama. (The Senate Judiciary Committee on April 7 approved SB 327, which would “ban the box” on state job and license applications, but the Senate never voted on it.)

Death penalty reform: Death is different: Reforming Alabama’s capital punishment system — People accused of capital crimes deserve every possible safeguard to ensure the integrity of a conviction. This overview examines several bills that could lower the risks of errors and injustice and could bring Alabama law into compliance with U.S. Supreme Court rulings.

Health care: Medicaid RCOs: Better care, better health, lower costs — Medicaid’s promising new regional care organization (RCO) reforms are designed to keep patients healthier while cutting health care costs. Investing in preventive care now should pay off in fewer costly emergency room visits later. (The Legislature on April 5 overrode the governor’s veto to pass a General Fund budget that would force deep Medicaid cuts. Lawmakers may return later this year for a special session to address Medicaid’s funding shortfall.)

Housing: Home at last: The Alabama Housing Trust Fund — Alabama has a shortage of almost 90,000 affordable and available homes for residents with extremely low incomes. State funding for the Alabama Housing Trust Fund (HTF), created in 2012, could reduce this shortfall and make dreams of home a reality for tens of thousands of families, seniors, veterans, and people with disabilities.

Payday lending reform: SB 91: A step in the right direction for Alabama borrowers — Payday loans in Alabama carry astonishingly high interest rates: up to 456 percent a year. A Senate proposal would give payday borrowers a less expensive path out of debt by reducing the maximum interest rate and allowing borrowers to pay off their loan in installments over time. (The Senate passed the bill 28-1 on April 5. A House committee approved a different version of SB 91 on April 27, but the regular session ended without a House vote on either version.)

State budgets: Alabama’s education budget begins to rebuild, but General Fund struggles put Medicaid at risk — The usual contrast between Alabama’s starving General Fund budget and its slightly healthier but still inadequate Education Trust Fund budget is exceptionally stark this year. As education finally climbs back toward its 2008 funding level after years of enormous cuts, the latest General Fund shortfall threatens devastating Medicaid cuts with effects that could ripple through the state’s entire health care system. (The Legislature on April 5 overrode the governor’s veto to pass a General Fund budget that would force deep Medicaid cuts. Lawmakers may return later this year for a special session to address Medicaid’s funding shortfall.)

Tax reform: Cigarette tax for Medicaid: A win-win to improve health and fill Alabama’s revenue gap — The future of Alabama Medicaid is on the line as lawmakers confront yet another threadbare General Fund budget. Without significant new long-term revenue, Medicaid will continue to be at risk of cuts to vital services and doctor payments that could place the entire program — and Alabama’s entire health care system — at risk. A cigarette tax of 75 cents per pack could provide long-term revenue needed to avoid those cuts, while also reducing health care costs and saving lives in Alabama.

Voting rights: A menu of options to improve voting rights in Alabama — Our entire democratic system depends on how elections are structured and who can participate. When barriers exclude people from voting, they often lose faith in a system that doesn’t seem to value their voice in our society’s decision-making process. This overview examines several bills that would protect and expand voting rights, including proposals related to early voting, streamlined voter registration and voting rights restoration. (SB 186, which would expedite the state’s voting rights restoration process, has gone to Gov. Robert Bentley after passing the Senate on April 19 and the House on May 4. Different versions of HB 268, a bill to clarify which crimes are “crimes of moral turpitude” that permanently disqualify offenders from voting in Alabama, passed the House on April 19 and the Senate on May 3, but the plan died May 4 when the regular session ended before the House could vote on a proposed conference committee version.)

Posted March 7, 2016. Last updated May 5, 2016.

Alabama’s education budget begins to rebuild, but General Fund struggles put Medicaid at risk

By Carol Gundlach

The usual contrast between Alabama’s starving General Fund (GF) budget and its slightly healthier but still inadequate Education Trust Fund (ETF) budget is exceptionally stark this year. Nearly halfway through the Legislature’s 2016 regular session, both major state budgets have begun to move – in one case toward a predictable conclusion, and in the other with no settled end in sight.

State education support just now approaching return to 2008 level

The path forward looks easier for the ETF, which finally is beginning to recover from deep cuts during and after the Great Recession. The House ETF budget committee Wednesday approved an education budget that would bring K-12 funding nearly back to its 2008 peak. The committee’s budget includes a 4 percent teacher pay raise, a 3 percent increase for transportation, a 2.5 percent increase for universities, and a nearly 5 percent increase for two-year colleges.

Alabama’s K-12 cuts have been the nation’s second worst since 2008, and its higher education cuts have been the fourth worst. Even a return to 2008 funding levels would not be enough to account for the many needs that were still unmet then, especially in low-income rural schools.

The ETF has two primary sources of state revenue: income taxes (earmarked for teacher salaries) and sales taxes. Both are considered “growth taxes” because their revenues tend to increase during good economic times. As Alabama climbs slowly out of the recession, taxes that support the ETF are inching up. The Legislative Fiscal Office (LFO) projects the ETF will have $187 million more in available revenue in 2017 than in 2016.

Proposed Medicaid cuts would be disastrous for Alabama’s health care system

The picture is much bleaker and more uncertain for Alabama’s non-education services like health care, child care and public safety. All of the “big four” state agencies – Medicaid, the Department of Human Resources (DHR), mental health and corrections – would receive essentially the same amount of GF money next year as this year under the budget that the Senate passed last week. But “level funding” at the 2016 level would follow years of steady declines and failure to keep up with ordinary cost growth. Mental health and DHR, in particular, would find it difficult to serve the children, seniors, and people with disabilities who depend on their services.

For Medicaid, level funding would be a disaster. It would end the regional care organization (RCO) reforms designed to keep patients healthier by emphasizing preventive care and reducing the number of costly emergency room visits. Failure to implement the RCOs could cost Alabama more than $700 million in new federal money set aside for the changes. Without significant new revenue, Medicaid will be unable to launch the RCOs or maintain many vital services for the most vulnerable patients.

Level funding for Medicaid also would eliminate coverage of outpatient dialysis, hospice, and adult eyeglass services, and would reduce payments to physicians, Medicaid commissioner Stephanie Azar said. Advocates fear that lower Medicaid physician payments would lead many doctors, especially pediatricians, to leave the program – or possibly to leave Alabama entirely.

With no new money available and no new revenue measures on the move, Senate GF budget committee chairman Sen. Trip Pittman, R-Montrose, concentrated all GF reductions in one agency: Medicaid. Almost all other GF services would be level-funded under the plan. Public health, facing a tuberculosis outbreak and other potential infectious disease crises, is one of the rare services that, after years of cuts, would see an increase ($10 million, or 45 percent).

The GF has more than a dozen revenue sources, mostly small taxes that don’t grow with the economy. Nearly 8 percent of 2015 GF revenue was one-time money borrowed from the Alabama Trust Fund, which receives state revenues from oil and gas drilling. That money dried up for the 2016 budget year, fueling a funding crisis that took three legislative sessions to resolve.

The GF will have $95 million less available next year than it did in 2016, the LFO projects. Lost revenue includes the end of the borrowed money, lower oil and gas lease income, and lower interest on state deposits. Last year’s cigarette tax increase was not large enough to offset those revenue declines.

What lies ahead for Alabama’s 2017 budgets

Inadequate though they are, both budgets are moving forward in the Legislature. The GF budget passed the Senate last week. During the debate, Pittman said he would withdraw the budget if it returned to the Senate in the same form it passed. He predicted that “all-star” lobbyists representing health care providers would succeed in urging the House to find the revenue necessary to save Medicaid services while funding other vital functions like child protection, mental health and courts.

House action on both budgets is expected soon. The House could vote on the ETF budget as early as Tuesday. And House GF budget committee chairman Rep. Steve Clouse, R-Ozark, plans to unveil a substitute GF budget for the committee’s consideration this Wednesday.

By Carol Gundlach, policy analyst. Posted March 4, 2016.

Same old song: Alabama faces another shortfall for vital services, but lawmakers aren’t eager to raise revenue to prevent cuts

By Carol Gundlach

Groundhog Day, the first day of the Alabama Legislature’s 2016 regular session, left advocates for human services feeling a powerful sense of déjà vu. A mere five months ago, the Legislature managed, with small tax increases and large transfers from the Education Trust Fund (ETF) budget, to pass a 2016 General Fund (GF) budget that barely maintained Medicaid, mental health care, corrections and other essential services.

It took lawmakers three tries to pass this year’s GF budget, and many advocates hoped the grueling experience would lead legislators to sober consideration of Alabama’s very real need for sustainable new revenue for the perenially cash-strapped GF. Unfortunately, that doesn’t seem to be the case for many of them.

The Legislature began consideration of the 2017 budgets this week with no indication that it will seriously consider significant new revenue measures like closing income tax loopholes or raising the cigarette tax. Instead, key legislators told the media that they saw “no appetite” for tax increases, and said any further ETF transfers were “off the table.”

Those stances are in sharp contrast to the shortfalls and unmet needs for health care, public safety and other vital services in Alabama. In pre-session budget hearings, agency leaders asked the GF budget committees for an additional $235 million just to maintain current services. The GF has a structural deficit, with normal cost growth regularly outpacing the sluggish growth of its revenue sources.

Medicaid alone needs an additional $157 million to avoid cuts and complete the shift to a new regional care organization (RCO) model designed to save money and keep patients healthier, Commissioner Stephanie Azar told lawmakers last month. Medicaid provides health coverage for one in five Alabamians – mostly low-income children, seniors, and people with disabilities.

Bentley’s plan: Move money from education to General Fund

Gov. Robert Bentley sent his proposed budgets to the Legislature on Feb. 3, as required by the state constitution. But unlike last year, he offered no recommendations for new revenue. Instead, Bentley proposed to move $181 million of use tax revenue from the education budget to the GF and to replace that money with a one-time transfer of money from the ETF Budget Stabilization Fund and the ETF Advancement and Technology Fund.

Senate President Pro Tem Del Marsh, R-Anniston, told AL.com this week that he would be “very surprised” to see lawmakers move ETF money to the GF again this year.

The Budget Stabilization Fund originally was created as a savings account to help the ETF avoid proration in years when revenues were low. The Advancement and Technology Fund was created just last year so schools would have money available for one-time expenses like buildings, buses and textbooks. Without a transfer, about $195 million will be available in these two accounts at the end of 2016, according to Legislative Fiscal Office estimates.

While use taxes would continue to bolster the GF in future years, the ETF revenue loss would only be replaced in 2017 if lawmakers pass a bill sponsored by Sen. Paul Sanford, R-Huntsville. SB 129 would spend 90 percent of the money in these two accounts in one year and leave the ETF without a source to replace lost revenues from the use tax (essentially a sales tax on out-of-state purchases) in future years.

Medicaid, public health would come up short in governor’s budget

Bentley’s budget is a starting point for the GF debate, but if history is any guide, it will not be the final product. With the help of the ETF transfer, Bentley’s proposed budget includes:

  • A $100 million GF increase for Medicaid, which is well short of the $157 million that the agency says it needs to prevent cuts and fully fund the RCO reforms.
  • A 12.6 percent, or $4.5 million, cut to the Department of Public Health in a year when the agency also will run out of the surplus federal matching money that allowed it to balance its budget this year.
  • A $5 million GF increase for the Department of Human Resources. Meanwhile, DHR could face a loss of as much as $150 million of dedicated funds under SB 15, an un-earmarking bill sponsored by Sen. Cam Ward, R-Alabaster. The bill does not specify that the money would be reallocated to DHR through the GF.
  • A $900,000 (less than 1 percent) budget increase for courts, which have suffered for years with staff shortages and lengthy trial delays.
  • Level funding for the Department of Mental Health, which has yet to recover from years of cuts and also could face a significant loss of earmarked dollars under SB 15.
  • A 5 percent, or $300,000, GF decrease for the Department of Youth Services, an agency that almost has been eliminated from the GF in prior years.
  • A 4.6 percent, or $18.2 million, increase for Alabama’s overcrowded prison system, which operates at nearly twice its designed capacity. In his State of the State address Tuesday, Bentley proposed issuing bonds to fund the construction of four new prisons over the next three years. Those new buildings would replace dilapidated facilities like the Julia Tutwiler Prison for Women.

Bentley’s total proposed GF budget is only 5 percent larger than last year’s, even with the transfer from the ETF. This anemic growth would do little to make up for a 15 percent cut to the GF since 2008, and a nearly 20 percent ETF cut in that time. Alabama’s state K-12 cuts have been the nation’s second worst since the Great Recession, while its higher education cuts have been the fourth worst.

By Carol Gundlach, policy analyst. Posted Feb. 4, 2016.

A budget at last: What got cut, what didn’t, and what’s next for Alabama

By Carol Gundlach

Three times proved to be the charm Wednesday night as the Alabama Legislature finally passed a General Fund (GF) budget and accompanying revenue bills. Gov. Robert Bentley signed the budget Thursday morning, a mere two weeks before the start of the 2016 budget year.

Tax bills: What passed and what didn’t

Alabama faced a GF budget shortfall of nearly $260 million that was partially filled by a 25-cent-per-pack increase in the cigarette tax. Alabama Arise and health advocates had hoped for a much larger increase that would have raised more revenue and ensured a reduction in smoking, particularly among teens. Unfortunately, the tax approved was inadequate to meet either need.

The Legislature also passed two small provider taxes (each worth about $8 million) on pharmacies and nursing homes. These taxes were dedicated to the Medicaid program and helped save both promising new Medicaid reforms and Medicaid itself.

Facing opposition from ALFA, the Legislature failed to pass business privilege tax changes that would have raised $28 million by increasing taxes on the wealthiest corporations while cutting taxes for tens of thousands of small businesses. Separately, lawmakers also failed to eliminate the state income tax deduction for FICA (e.g., Social Security and Medicare) taxes, which would have raised nearly $200 million for education and other essential state programs.

Through a complicated linkage of bills, the Legislature transferred $80 million in use tax revenues (essentially a sales tax on out-of-state purchases) from education to the GF while also increasing the amount of education money available to public schools. Changes to the Rolling Reserve Act, which sets an artificial cap on annual education spending, replaced the lost use tax revenues by increasing the money available to schools for one-time infrastructure needs like books, building repairs, buses and technology. Alabama’s education funding still hasn’t returned its pre-recession 2008 level.

Altogether, the use tax transfer and the new taxes raised around $164 million. That was enough to prevent devastating cuts to crucial state services, but inadequate to truly fill the budget gap. The changes also were not nearly enough to solve the GF’s chronic shortfall.

Medicaid, DHR, mental health aren’t cut, but other important services are

Because new revenues were inadequate, not all state agencies received the money needed to maintain current service levels. The Department of Public Health was cut by nearly $10 million, of which $2.4 million came from AIDS medication assistance. The Alabama Department of Environmental Management was nearly zeroed out of the budget, endangering the state’s environmental protection and risking federal intervention.

The Department of Youth Services was cut by nearly 20 percent, which almost certainly will result in fewer community services for at-risk children and teens. Senior services also suffered a small cut, though it should not affect the Medicaid waivers that allow hundreds of seniors to live independently outside of nursing homes.

Other essential services survived without the devastating cuts feared earlier this year. The “Big Five” – Medicaid, mental health, corrections, trial courts and the Department of Human Resources – all were funded at or above 2015 GF levels.

Important reforms to Medicaid and the corrections system also will be able to continue. Lawmakers cobbled together additional money to support Medicaid’s transition to a regional care organization model designed to cut costs and keep patients healthier. The GF budget also funds new parole officers and community correctional services as alternatives to lengthy prison sentences.

The prison reform funding was good news on another front: It means Alabama will end its lifetime SNAP and TANF eligibility bans for people with a past felony drug conviction. Language ending the state’s bans on assistance under the Supplemental Nutrition Assistance Program and the Temporary Assistance for Needy Families program is included in the prison reform law that the Legislature passed earlier this year. With funding in place to allow the law to take effect, the SNAP and TANF bans will end Jan. 30, 2016.

Hope for the future

As the last late night of the session wrapped up Wednesday, there were some encouraging signs for the future. For the first time, the conservative supermajority in the Legislature was willing to consider raising taxes, and majorities in both the House and Senate actually voted to do so. Legislative floor debate included real, serious discussion of Alabama’s structural deficit and the need for comprehensive tax reform.

Most importantly, the organized voices of citizens and advocates for low-income Alabamians, seniors, children, and people with disabilities were loud – and effective – in their demand for new taxes instead of devastating cuts to life-saving state services. Constituent emails, telephone calls, postcards and face-to-face meetings with legislators helped to prevent those cuts. They also helped convince the Legislature, though reluctantly and inadequately, to raise tax revenue to support vital services that make Alabama a better place to live and work.

By Carol Gundlach, policy analyst. Posted Sept. 18, 2015.

Mental health, DHR, courts would face cuts under Alabama House’s General Fund budget

By Chris Sanders

Mental health care, trial courts and the Department of Human Resources (DHR) would be among the vital services suffering cuts next year under the General Fund (GF) budget that the Alabama House passed 59-37 Friday. A Senate committee is set to consider the GF budget Monday.

The House’s budget would fund new reforms of Medicaid and corrections and would prevent the closure of National Guard armories across Alabama. But mental health, public health, DHR and courts – which were funded at their 2015 GF levels under the plan that cleared a House committee Wednesday – would face 2.5 percent cuts under the House’s budget. Many other services would lose 10 percent or more of their support next year.

No business privilege tax bill means deeper service cuts

Cuts to mental health care, DHR and other services emerged Friday when lawmakers retooled the committee’s budget to account for the House’s failure to pass business privilege tax changes Thursday. The measure would have raised an additional $22.5 million a year by cutting taxes for tens of thousands of small businesses while increasing the tax for the largest corporations. The Alabama Farmers Federation opposed the bill, the Montgomery Advertiserreported Thursday.

Narrow majorities in the House voted Thursday for several other revenue measures, including a 25-cent-per-pack increase in the cigarette tax, two provider taxes dedicated to Medicaid, and tax increases on automobile titles and rentals. Together, these taxes would bring in an additional $107 million for GF services next year. But the package falls short of the amount needed to address the GF shortfall without cuts. It’s also well short of the $300 million in new GF revenue that Alabama Arise and more than 200 other organizations have urged.

The provider tax bills won approval from the Senate’s GF budget committee Friday. So did the cigarette tax bill, along with an amendment to dedicate the revenue to Medicaid. But committee members did not vote on the auto title and car rental tax proposals, and those bills’ future is unclear.

Bills would move revenue, expenses from education budget to General Fund

Senate committee members Friday also approved bills to revise the Rolling Reserve Act, which caps annual education spending, and transfer use tax revenues from the Education Trust Fund (ETF) to the GF. But Sen. Arthur Orr, R-Decatur, who chairs the committee, said he expects the bills will be “heavily amended” before a Senate vote.

The use tax measure would shift use tax revenue from the ETF to the GF starting in 2017, accompanied by a transfer of education budget obligations for traditional GF agencies. The use tax is equivalent to a sales tax on goods bought outside the state for use within Alabama. It is commonly discussed in the context of Internet sales and equipment purchases.

Many lawmakers strongly oppose moving money from education to GF services. Alabama’s education funding is still well below its 2008 level, before the Great Recession, and its K-12 cuts and higher education cuts since then are among the nation’s worst.

The GF supports vital services like health care, child care, corrections and public safety in Alabama. The budget relies on a hodgepodge of revenues, most of which grow slowly even in good economic times. That leaves the GF with a structural deficit, meaning revenue growth is not strong enough to keep pace with ordinary cost growth. Without significant new revenue, Alabama will not have enough money to continue investing in vital services that make the state a better place to live and work.

By Chris Sanders, communications director. Posted Sept. 11, 2015.

Committee breakthrough: Alabama House panel OKs General Fund budget, tax increases

By Carol Gundlach

An Alabama House budget committee Wednesday approved a set of tax increases worth approximately $130 million – and a General Fund (GF) budget that would cut $55 million from many core state services. The full House is set to consider the budget and many revenue measures Thursday.

The total revenue package falls far short of the amount needed to address the GF shortfall without cuts. Tax measures that cleared the House’s GF budget committee include:

  • a cigarette tax increase of 25 cents per pack;
  • an increase in the business privilege tax for large corporations, accompanied by a tax cut for small businesses; and
  • tax increases on automobile rentals and titles.

The House’s education budget committee Wednesday approved a one-time transfer of about $50 million from the Education Trust Fund (ETF) to the GF. The transfer would have to be repaid by 2018 and would come from revenues above next year’s ETF spending cap under the Rolling Reserve Act. The committee also OK’d a plan to shift some use tax revenues from the ETF to the GF starting in 2017.

Winners and losers under proposed GF budget

There were clear winners and losers in the GF committee’s budget. Major reforms of Medicaid and criminal justice system would receive the funds needed to move forward. Other major services – including courts, mental health and the Department of Human Resources (DHR) – would be funded at their 2015 GF levels.

Many other state services would fare far worse under the committee’s GF budget. The Department of Senior Services would be cut by $2.4 million, with most of that money coming from home-based services for seniors who otherwise might have to enter nursing homes. The Department of Youth Services would be cut by nearly 75 percent, and the Department of Archives and History by almost a fourth.

Before the second special session began this week, Alabama Arise requested public hearings on all revenue and budget bills. Representatives of Arise, Voices for Alabama’s Children, the Children First Foundation and several state agencies testified before the House committee Wednesday in favor of new GF revenue.

Arise state coordinator Kimble Forrister told lawmakers that more than 200 advocacy groups, churches, hospitals and other organizations had signed an open letter to the Legislaturecalling for $300 million in new tax revenue to prevent drastic cuts to health care, child care, public safety and other vital services. “Our most vulnerable people depend on General Fund agencies to help them take care of their families,” Forrister said.

Forrister testified in favor of the business privilege tax changes. He also told lawmakers that failing to increase the price of a pack of cigarettes by at least 10 percent may not result in reduced smoking and improved health benefits for Alabama.

Senate committee doesn’t approve combined reporting bill

Not all tax proposals made it out of committee Wednesday. The Senate’s ETF budget committee did not approve a bill to required “combined reporting” on state corporate income tax returns.

The bill’s sponsor – Sen. Linda Coleman, D-Birmingham – urged her fellow committee members to consider the consequences of “nickeling and diming” the average Alabamian while enabling many large corporations and businesses to do business in Alabama while paying few or no taxes here. Closing corporate tax loopholes could bring an additional $30 million to the ETF each year, Coleman estimated.

Sens. Jim McClendon, R-Springville, and Jabo Waggoner, R-Vestavia Hills, were among committee members who said they were concerned about combined reporting’s potential impact on businesses and industrial recruitment.

Combined reporting would treat corporations and their subsidiaries as one entity for tax purposes. Most states have adopted such laws, and “combined reporting states are well-represented among the most economically successful states in the country,” the Center on Budget and Policy Priorities found.

By Carol Gundlach and M.J. Ellington, policy analysts. Posted Sept. 9, 2015.

Alabama Senate committee eases Medicaid cuts, approves budget that Bentley already vetoed

By Chris Sanders

Update: The Alabama Senate passed a no-new-revenue General Fund budget 19-15 Monday, but the House swiftly rejected it 92-2. The first special session ended without a budget, meaning Gov. Robert Bentley will have to call the Legislature back for a second special session.

Get ready for another special session. That seems to be the takeaway from Friday’s action at the State House, where an Alabama Senate committee rejected the House’s Medicaid cuts and voted 9-4 for a General Fund (GF) budget identical to the one that Gov. Robert Bentley already vetoed in June.

The budget, which includes no new revenue, would slash child care and mental health care. It also would end promising new reforms of Medicaid and corrections before they could get started. The full Senate likely will consider the budget Monday. Sen. Arthur Orr, R-Decatur, who chairs the Senate’s GF budget committee, urged lawmakers to amend the plan on the floor to prioritize funding for prison reform. (Read more about the Senate budget’s effects here.)

Lawmakers appear no closer to an answer on the GF than they were two months ago. With just two meeting days left before the current special session ends Tuesday, Bentley could reject any budget without giving the Legislature a chance to override his veto. Another special session would be needed to approve a GF budget before Alabama’s 2016 budget year begins Oct. 1, 2015.

‘Replacing a sorry budget with a crappy budget’

Senators gave a cold shoulder to the House’s budget, which would have gutted Medicaid with a 23 percent cut. A cut that deep could force Alabama to end its Medicaid program, State Health Officer Don Williamson said this week.

One in five Alabamians – mostly children, seniors, and people with disabilities – would lose health coverage if the state ended Medicaid. The effects also would be devastating for hospitals, nursing homes, pharmacies and the state’s entire economy. (Learn more about what the end of Medicaid would mean for Alabama here.)

Several committee members spoke passionately in favor of protecting Medicaid. Sen. Billy Beasley, D-Clayton, said Alabama must fund the program fully to protect the state’s entire health care infrastructure. “Without Medicaid, Children’s Hospital may have to close,” Beasley said. “Without Medicaid, doctors’ offices may have to close.”

Sen. Priscilla Dunn, D-Bessemer, asked lawmakers to ease the fears of Medicaid patients who are “scared to death” of losing coverage. “We need to put more of our hearts into Medicaid,” Dunn said.

Perhaps the bluntest assessment came from Sen. Cam Ward, R-Alabaster, who sponsored the prison reform law that needs funding before it can take effect. “We’re replacing a sorry budget with a crappy budget,” Ward said.

Revenue measures still face an uphill battle

The budget deadlock intensified when key parts of Bentley’s plan to raise new revenue to prevent massive GF cuts went nowhere in the House’s GF budget committee. The panel voted 8-7 Tuesday to reject a plan to increase the state cigarette tax by 25 cents per pack (from 42.5 cents to 67.5 cents). A bill to increase the business privilege tax on large corporations was on the agenda Tuesday but did not come up for a vote.

House and Senate committees have approved bills to transfer use tax revenues from the Education Trust Fund to the GF, but the measures face stiff opposition from many legislators. The use tax is equivalent to a sales tax on goods bought outside the state for use within Alabama. It is commonly discussed in the context of equipment purchases and Internet sales.

Many lawmakers strongly oppose shifting money from education to GF services. Alabama’s education funding is still well below its 2008 level, before the Great Recession, and its K-12 cuts and higher education cuts since then are among the nation’s worst.

The GF supports vital services like health care, child care, corrections and public safety in Alabama. The budget relies on a hodgepodge of revenues, most of which grow slowly even in good economic times. That leaves the GF with a structural deficit, meaning revenue growth is not strong enough to keep pace with ordinary cost growth. Without significant new revenue, Alabama will not have enough money to continue investing in vital services that make the state a better place to live and work.

By Chris Sanders, communications director. Posted Aug. 7, 2015. Updated Aug. 11, 2015.

Alabama House passes budget that could end Medicaid in state

By Carol Gundlach

Medicaid could end in Alabama under a General Fund (GF) budget that the Alabama House passed Wednesday. Medicaid would lose 23 percent of its state funding, or $156 million, next year under the plan. Lost federal matching money would increase those cuts significantly. Cuts that large could end the Medicaid program in Alabama, State Health Officer Don Williamson said Tuesday.

The House initially voted 46-45 to reject a budget amendment cutting Medicaid. But then, on a second vote, it approved the amendment 46-44. The House then passed the GF budget 53-40, sending it to the Senate. Several key senators have said they strongly oppose deep Medicaid cuts, but their solution to the GF shortfall remains unclear.

Medicaid is ‘health care infrastructure in this state’

If the Medicaid cut remains, about one in five Alabamians would lose their health coverage, including nearly half of Alabama’s children and about 60 percent of the state’s seniors in nursing homes. Those cuts likely would lead to the closure of Children’s Hospital in Birmingham, as well as dozens of other hospitals and nursing homes across the state. The results would be devastating for Alabama’s economy and quality of life.

During four hours of debate on the budget, House members decried the impact that the Medicaid cuts would have on their constituents and communities. Rep. April Weaver, R-Brierfield, said it was “shocking” to see lawmakers considering such cuts to Medicaid. “If anyone thinks that Medicaid is an entitlement, come see me,” Weaver said. “It’s the health care infrastructure in this state.”

Rep. Mike Jones, R-Andalusia, also spoke of the huge toll that a Medicaid shutdown could take on communities. Jones said the end of Medicaid could mean 600 job losses in his district and put two hospitals and several local nursing homes at risk of closing.

Without new revenue, the path forward is uncertain

The budget passed after key parts of Gov. Robert Bentley’s plan to raise new revenue to prevent massive GF cuts went nowhere in the House’s GF budget committee. The panel voted 8-7 Tuesday to reject a plan to increase the state cigarette tax by 25 cents per pack (from 42.5 cents to 67.5 cents). A bill to increase the business privilege tax on large corporations was on the agenda Tuesday but did not come up for a vote.

House and Senate committees have approved bills to transfer use tax revenues from the Education Trust Fund to the GF, but the measures face stiff opposition from many legislators. The use tax is equivalent to a sales tax on goods bought outside the state for use within Alabama. It is commonly discussed in the context of Internet or mail-order purchases.

Many lawmakers strongly oppose shifting money from education to GF services. Alabama’s education funding is still well below its 2008 level, before the Great Recession, and its K-12 cuts and higher education cuts since then are among the nation’s worst.

The GF supports vital services like health care, child care, corrections and public safety in Alabama. The budget relies on a hodgepodge of revenues, most of which grow slowly even in good economic times. That leaves the GF with a structural deficit, meaning revenue growth is not strong enough to keep pace with ordinary cost growth.

If lawmakers do not approve a substantial source of new GF revenue in the coming days, it will be impossible for them to pass a budget that avoids devastating cuts to Medicaid or other vital services during this special session. Alabama’s 2016 budget year begins Oct. 1, 2015, and the prospect of another special session before then looms ever larger by the day.

By Carol Gundlach, policy analyst, and Chris Sanders, communications director. Posted Aug. 5, 2015.

Medicaid could end under Alabama House committee’s budget

By Carol Gundlach

Medicaid could end in Alabama under devastating cuts in a proposed General Fund (GF) budget that the Alabama House’s GF budget committee approved Tuesday, State Health Officer Don Williamson said. About one in five Alabamians would lose their health coverage, including nearly half of Alabama’s children and about 60 percent of the state’s seniors in nursing homes.

Medicaid would lose 23 percent of its state funding, or $156 million, next year under the budget that the committee approved Tuesday. Lost federal matching money would increase the loss significantly.

Those cuts likely would lead to the closure of Children’s Hospital in Birmingham, as well as dozens of other hospitals and nursing homes across the state. “If Alabama chooses not to have a Medicaid program, you will see an impact on the health care system that you can only begin to imagine,” Williamson said Tuesday.

Cigarette tax increase, other revenue bills fail to gain traction

The vote came after key parts of Gov. Robert Bentley’s plan to raise new revenue to prevent massive GF cuts went nowhere during a tense day in the House’s GF budget committee. The panel voted 8-7 Tuesday to reject a plan to increase the state cigarette tax by 25 cents per pack (from 42.5 cents to 67.5 cents). A bill to increase the business privilege tax on large corporations was on the agenda but did not come up for a vote.

The committee recessed for several hours after the cigarette tax vote. When it returned late Tuesday afternoon, a frustrated Rep. Steve Clouse, R-Ozark, who chairs the committee, offered an amendment to concentrate GF budget cuts in the Medicaid program. Committee members approved the change 10-4 and then OK’d the budget on a voice vote. The GF budget now awaits action in the full House.

Democratic committee members strongly condemned the proposed Medicaid cuts. “To take and use Medicaid as a pawn, I think is totally unfair,” said Rep. John Knight, D-Montgomery. “Other agencies should be on the chopping block.”

Knight urged legislators to be honest with the public about the need for new GF revenue to support vital services like health care, child care and public safety. The Legislative Black Caucus will not vote for tax increases without adequate long-term GF revenues, Knight told the Montgomery Advertiser.

Clouse criticized several Democratic lawmakers’ votes against the cigarette tax bill, telling the Advertiser that Democrats had supported a tobacco tax increase during the regular session. “I came with a fair budget that level-funded Medicaid,” he said. Clouse said he does not support deep Medicaid cuts but said Alabama needs to have a debate about the program’s future.

Lawmakers OK transfer of education revenues to shore up General Fund

Both the House and Senate’s GF budget committees approved bills Tuesday to transfer use tax revenues from the Education Trust Fund (ETF) to the GF. The use tax is equivalent to a sales tax on goods bought outside the state for use within Alabama. It is commonly discussed in the context of Internet or mail-order purchases.

The House committee voted to transfer both use tax revenues and some funding obligations to the GF, resulting in a net loss of $50 million to education and a net GF gain of the same amount. The Senate bill would transfer use tax revenues but not the accompanying obligations. That would reduce education revenue (and increase GF revenue) by more than $200 million.

Alabama’s education funding is still well below pre-recession levels. The state’s per-pupil K-12 spending in 2015 was 18 percent lower than in 2008, the second worst decline in the nation, according to the Center on Budget and Policy Priorities (CBPP). Alabama’s per-student higher education cuts from 2008 to 2016 are also the nation’s second worst, the CBPP found.

Bentley has proposed to “backfill” the ETF’s revenue loss by ending the state income tax deduction for FICA taxes paid to support Social Security and Medicare. But this bill has not yet been set for a committee vote, and many press reports suggest it is unlikely to pass.

Bill to ‘un-earmark’ mental health, DHR money advances in House committee

The House’s GF budget committee also approved a bill Tuesday to “un-earmark” revenues dedicated to five state agencies and shift the revenues into the GF. Nearly 90 percent of the transfers under HB 46, sponsored by Rep. Allen Farley, R-McCalla, would come from mental health and the Department of Human Resources (DHR). Other services affected would be public health, veterans’ affairs and forestry.

Bentley’s budget plan would provide additional GF money to help the agencies cover the un-earmarked amounts. But neither the current Legislature nor future ones would be obligated to do so under HB 46. Advocates for children and for people with mental illness are deeply concerned about this idea.

By Carol Gundlach, policy analyst, and Chris Sanders, communications director. Posted Aug. 4, 2015.04