REPAYING $437 MILLION RAINY DAY FUND IS EDUCATION BUDGET CHAIRMAN'S PRIORITY

Sen. Trip Pittman, R-Montrose, said he'd like to see at least $100 million repaid to the ATF rainy day account next year, the amount Governor Robert Bentley recommended in his proposed Education Trust Fund budget for 2013-14.

Bentley also recommended a conditional repayment of $169 million if the money is available at the end of the fiscal year. The budget bill, HB 166, by Rep. Jay Love, R-Montgomery, passed the House with $35 million appropriated to the debt. 

"My priority is we repay the ATF," Pittman said. "I was advocating the highest line item, $150 million. The governor submitted $100 million."

Then-Governor Bob Riley five years ago began withdrawing from the $437 million ATF rainy day account to offset the effect of proration on education spending. The amount must be repaid by the end of the 2015 fiscal year. So far $14 million has been repaid, leaving a balance due of $423 million.

The ATF is a state savings account that receives royalty payments from offshore oil and gas exploration, payments that are invested. It contains rainy day accounts for the Education Trust Fund and the General Fund.

Pittman advocates repaying the ATF education rainy day account as soon as possible.

"There's a tremendous responsibility personally for that amendment plus my fiscal nature as a businessman (is to) make sure we repay the ATF prior to the end of the 2015 budget year," Pittman said.

Pittman said he had hoped to have a budget surplus of $200 million this year to plow back into the Alabama Trust Fund but acknowledges the surplus probably won't materialize.

Turning to the state's economy in general, Pittman said, "The reality is the economic recession is turned into somewhat of a new normal. We're not certain that we feel comfortable (that) the budget will have the overflow we need."

Pittman addressed the need for more revenue for the General Fund budget that is used to operate state government such as Medicaid and state troopers.

He said a tobacco tax proposal, HB 177, bears consideration. It's a constitutional amendment.

A proposed constitutional amendment would increase the state cigarette tax by $1 for a package of 20 cigarettes. Part of the proceeds would repay a separate $437 million that voters approved transferring from the Alabama Trust Fund last year to help the General Fund.

The legislature earlier this year passed a bill, which Bentley signed, to repay the $437 million by 2025. Hubbard's proposed constitutional amendment would repay the amount with interest by 2022.

For the last two years, the BCA has been at the forefront of the TIPAC (Transparency in Private Attorney Contracting) effort to require state agencies to make a written declaration that hiring outside counsel on a contingency fee basis is cost effective and in the public's best interest.  As state attorneys general become more engaged in major consumer protection issues, there has been a willingness on the part of some state attorneys general to hire trial lawyer firms to pursue litigation on behalf of the state.  As payment, these attorneys receive a contingency fee, which is a percentage of whatever amount is recovered on behalf of the taxpayer.  In the past, some private law firms received excessively high fees in relation to the amount of work they did on behalf of the state.  In addition to excessive fees, there is a substantial risk of "pay to play" schemes that may appear when political contributions from plaintiffs firms are traded for contingent fee contracts.

It should be noted that Alabama Attorney General Luther Strange has been a model of transparency and accountability during his time in office and has not engaged in the type of private attorney contracting as stated above.

There is a high likelihood that HB 227 will come up next week for a vote on the House floor. As you may recall from your Feb. 22 Capital Briefing, former U.S. Representative and Florida Attorney General Bill McCollum visited Montgomery on Feb. 20 to testify at a public hearing before a joint House and Senate Judiciary Committee meeting in support of HB 227, explaining that TIPAC legislation has already been introduced in more than a dozen state legislatures and successfully implemented in states like Florida, Indiana, and Mississippi.  You can read more about McCollum's visit to Montgomery on our BCA Blog.  

To learn more about TIPAC, click here. 

BCA supports this legislation.

The Alabama House, on a vote of 84-16, passed its substitute version of an education budget, HB 166, by Rep. Jay Love, R-Montgomery, for Fiscal Year 2014. The budget includes a cost-of-living increase of 2 percent for educators and support personnel, slightly below the governor's recommendation of 2.5 percent. The pay raise, authorized by HB 506, also by Love, differs from past cost-of-living increases in two important ways: 1) The pay increase authorization bill also requires the state to provide liability coverage for all K-12 educators and support personnel and 2) the pay raise only applies to K-12, where traditionally, such raises included the two-year college system (K-14). Love defended the linking of the pay increase to the liability coverage as a benefit the state is overdue in providing to education personnel, as do most employers, while Democratic representatives described the coverage as a move by Republicans to offer liability coverage to discourage membership in the Alabama Education Association (AEA). Currently, most educators receive liability coverage through their membership in the AEA.

Governor Bentley's budget totaled $5.825 billion and included a $100 million appropriation to repay the Education Trust Fund Rainy Day Account, while the House-passed version totaled $5.739 billion and repays $35 million to the Rainy Day account. The House-passed version leaves an estimated unexpended balance of $66 million which Love set aside in anticipation of negative effects on the ETF revenue due to the federal sequester and the tax credits included in the Alabama Accountability Act. Love reported that the spending plan should result in a surplus of approximately $175 million that will also be applied to repay the rainy day Account some $437 million that was transferred to the ETF to shore-up the education budget in recent years of budget proration.

The following table compares some selected appropriations in millions:

The House sponsor of a Medicaid reform bill said he expects his and the Senate version to be on the agendas of the respective House and Senate Health Committees next week. Rep. Jim McClendon, R-Springville, the sponsor of HB 454, said his bill and the Senate version, SB 340 by Sen. Greg Reed, R-Jasper, have been reworked after negotiations with hospital and provider groups. SB 340 was on Wednesday's Senate Health Committee agenda, but the meeting was cancelled because the Senate was in session at the committee's scheduled meeting time. "The substitute has been put out there," McClendon said Friday. The bills as introduced would authorize the Alabama Medicaid Agency to establish medical service organizations in not more than eight geographic regions and provide medical services to Medicaid recipients. McClendon said negotiation subjects included the duration of the provider tax and whether "home grown" groups would be given preference over outside commercial groups in managing regional Medicaid services.  

The Senate sponsor of a bill to consolidate Alabama House and Senate administrative operations said his bill should be on the agenda of a House committee next week. Sen. Jimmy Holley, R-Elba, sponsor of SB 122, said the bill was carried over in Wednesday's House State Government Committee because the House member handling the bill wants to simplify its language. Holley's bill passed the Senate and was assigned to the House committee. The bill creates a 17-member Joint Committee on Legislative Operations that would oversee the general administrative services of legislative agencies, including personnel, accounting, and purchasing functions, the bill's synopsis said. Holley said Rep. Greg Wren, R-Montgomery, wants to avoid re-writing entire statute sections simply to reflect name changes for existing functions.  

This bill, which now goes to Governor Robert Bentley for consideration, would require any agency that proposes a regulation that might adversely affect a business to prepare a business economic impact statement and file it with the Joint Committee on Administrative Regulation Review.

"Several business owners in my district have complained that satisfying bureaucratic red tape requirements eats up man hours, produces numerous compliance costs and takes their attention away from their main objective - keeping the doors open and providing jobs," Weaver said in February. "State government should concentrate on giving business owners the tools they need to remain successful instead of finding ways to suffocate them under the weight of needless government oversight and mounds of paperwork."

The Business Council of Alabama supported this legislation.