Issue: Budgets

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

New revenue for a stronger Alabama

By Carol Gundlach

What makes a state strong? We likely all could agree on a few answers: healthy people, a dependable workforce, a stable government, safe streets and vibrant communities. But without new revenue to address a huge General Fund budget shortfall, Alabama will face devastating cuts to education, health care, public safety and other vital services that make shared prosperity possible.

If the Legislature can’t agree on new revenue to avoid these cuts, Alabamians would see thousands of lost jobs, a sharp decline in our state’s quality of life and a weaker future for years to come. Here’s a snapshot of what Alabama would look like if the cuts in a no-new-revenue General Fund budget become reality.

What went well in 2015 — and the challenges that remain for Alabama

By Kimble Forrister

It’s over! But it’s not over yet. After approving a wholly inadequate General Fund budget that would jeopardize our state’s future, the Alabama Legislature ended the 2015 regular session Thursday. But Gov. Robert Bentley vetoed that budget, and he will call lawmakers back for a special session on the budget later this summer.

Arise members celebrated some big victories this year, but major challenges still remain. Here’s a quick review of how Arise issues fared:

Budgets and taxes: None of Bentley’s revenue bills passed. Without new revenue, vital services like Medicaid and public safety face devastating cuts that would hurt Alabama’s quality of life for years to come. Just a few examples:

  • Thousands of Alabamians would lose community-based mental health care services.
  • Medicaid would end coverage of crucial services like outpatient dialysis and prosthetics.
  • State prisons would be even more overcrowded and at greater risk of federal takeover.

But there was some good news, too. Lawmakers overwhelmingly approved a bill to save money and give Alabamians more choices in Medicaid long-term care services. The state will have a powerful new tool – a “tax expenditure report” – to determine if tax breaks are worth the cost. And a new prison reform law will help save money and reduce overcrowding – but it only takes effect if the state funds it.

Ending Alabama’s lifetime SNAP ban: Alabamians can celebrate a big win for second chances! The prison reform bill includes language ending the state’s lifetime SNAP and TANF eligibility bans for people with a past felony drug conviction. Thousands of people can regain SNAP eligibility on Jan. 30, 2016, if the prison reform law gets the money required for it to take effect.

Alabama Accountability Act: The Legislature approved major changes to the act. The new version allows more money that would have supported public education to go to private schools instead – but it also includes some of Arise’s recommendations for greater accountability and transparency.

Housing Trust Fund: A bill to fund affordable housing in Alabama encountered powerful opposition and did not emerge from committee. Supporters plan to meet with opponents to seek agreement before the 2016 session.

Payday and title lending reform: In a big win for consumers, the Alabama Supreme Court ruled the state Banking Department can create a single statewide database of payday loans. But much work remains in the drive for a 36 percent interest rate cap: No bills to regulate payday or auto title loans passed, but public pressure for reform continues to grow.

The regular session is over, but Arise’s work continues. Stay tuned for updates as we prepare for this summer’s crucial debates over our state’s future. Together, we can build a better Alabama for all!

By Kimble Forrister, executive director. Posted June 4, 2015. Updated June 12, 2015.

Alabama Accountability Act changes receive final legislative approval

By Carol Gundlach

A bill that would expand tax credits under the Alabama Accountability Act (AAA) received final legislative approval Wednesday and went to Gov. Robert Bentley. SB 71, sponsored by Senate President Pro Tem Del Marsh, R-Anniston, is not the total repeal that Arise supported. But the bill would make significant improvements to the existing law (including some that Arise recommended), even as it allows more money that would have supported public education to go to private schools instead. Here are six changes to the AAA under SB 71:

(1) More tax credits would be available. Businesses and individuals can get tax credits for donations to organizations that grant scholarships to help eligible students attend private schools under the AAA. The original law capped the total amount of such credits at $25 million a year, but SB 71 would raise the cap to $30 million. The bill also would raise the current $7,500 annual limit on scholarship tax credits for individuals to $50,000 and let taxpayers claim credits against their 2014 taxes for donations made in 2015.

(2) Scholarship sizes would be limited. SB 71 would limit AAA scholarships to no more than $6,000 a year for elementary school students, $8,000 a year for middle school students and $10,000 a year for high school students.

(3) The income limit for scholarship eligibility would be lower. SB 71 would reduce the income eligibility limit for AAA scholarships from its prior level – 150 percent of the median household income, or nearly $65,000 in Alabama – to 185 percent of the federal poverty level (FPL), or about $44,000 for a family of four. Scholarship-granting organizations (SGOs) would have to re-evaluate students’ eligibility every other year. Students with existing scholarships could continue to receive them as long as their family income is no more than 275 percent FPL, or nearly $67,000 for a family of four.

(4) The definition of “failing school” would change. Another big difference under SB 71 is a change in the AAA’s definition of “failing school.” The bill would deem a public school to be “failing” if it is “listed in the lowest 6 percent of public K-12 schools based on the state standardized assessment in reading and math” or if the state school superintendent designates it as one. Schools that serve students with special needs are excluded from the act’s definition of “failing” schools. Students zoned for “failing” schools would have first priority for AAA scholarships until July 31 of each year, when any remaining scholarship money could go to eligible students living anywhere in Alabama.

(5) Participating schools and groups that grant AAA scholarships would face additional requirements. SB 71 would require SGOs to report quarterly on how many scholarships they give, as well as how many of them go to students who were zoned for “failing” schools or who already attended private schools. Participating schools now would have to give state achievement tests, be accredited within three years and disclose tuition rates online before each semester begins. The bill also would require an independent comparison of the test scores of students participating in the AAA scholarship program and similar students in public schools. A SGO now could be audited by the Alabama Department of Revenue (ADOR), and the ADOR would have the authority to bar a SGO or private school from participating in the tax credit scholarship program. All required annual and quarterly SGO reports would have to be made available to the public on the ADOR’s website.

(6) Unspent scholarship money must be returned to public education. SGOs would have to use any scholarship funds on hand at the start of a calendar year by the end of the following school year. Any such money not spent on AAA scholarships by then would go to the state Department of Education to help support “underperforming” schools.

By Carol Gundlach, policy analyst. Posted June 4, 2015.