LIGHT AT THE END OF THE TUNNEL FOR TBOR II

 

The Senate on Thursday passed a business tax fairness bill that has long been sought by the Business Council of Alabama - the Taxpayer's Bill of Rights II.

The Senate on a vote of 26-0 passed a substituted HB105 by Rep. Paul DeMarco, R-Homewood. The substitute version offered by Sen. Paul Sanford, R-Huntsville, would create an independent Alabama Tax Tribunal separate from the Department of Revenue and give the governor the authority to appoint the tax tribunal judge for six-year terms. Because the bill was substituted and amended, it must be returned to the House for review.  Concurrence on the bill by the House is expected, as is Governor Bentley's signature.

BCA President and CEO William J. Canary lauded the Senate for passing the Taxpayers' Bill of Rights II.

TBOR II has been a BCA priority for several years, as a majority of states have adopted some form of the independent tax appeals model, with Alabama being among the last.

Others in the Alabama business community have joined forces with the BCA in support of the legislation under the banner of the Business Associations' Tax Coalition (BATC), which includes 27-member business and trade associations. Attempts to pass this legislation and update the 1992 original law stretch back to the late 1990s.

Over the years, the legislation has not been enacted for various reasons, including anti-business leanings of previous legislatures, misunderstandings, erroneous conclusions, apathy concerning the bill, and even simple bad luck.

Sen. Roger Bedford, D-Russellville, remarked about the bill prior to its passage.

The Department of Revenue tax appeals process presently involves an Administrative Law Judge within the department. DeMarco's bill creates an independent tax judge.

Sen. Quinton Ross, D-Montgomery, amended the bill to prohibit the tax tribunal judge from acting on cases in which his or her outside duties would conflict with action on the bench.

Under current law, the Administrative Law Judge is an employee of the Department of Revenue and while no one is saying that the current judge has been unfair, the DOR association creates a perception of a lack of independence when adjudicating tax matters.

The bill's stated purpose is to increase public confidence in the fairness of the state tax system by substantially adopting the American Bar Association Model State Administrative Tax Tribunal Act. The Alabama Tax Tribunal will hear appeals of tax and other matters administered by the DOR as well as certain self-administered counties and municipalities that choose to participate under the auspices of the Alabama Tax Tribunal.

Taxpayers will have full opportunity to settle tax matters with the DOR or any self-administered city or county prior to sending any dispute to the tribunal. The independent Alabama Tax Tribunal will be part of the executive branch.

Special thanks for the tireless work of the Alabama Retail Association, the Alabama Society of CPAs, all of the members of the Business Associations Tax Coalition (BATC members) and the Birmingham Business Alliance.

BCA offers its thanks and appreciation to key members of the Legislature who were instrumental in putting this bill on the cusp of becoming law, including Speaker of the House Mike Hubbard, bill sponsor Paul DeMarco, Senate President Pro Tem Del Marsh, along with Senators Bryan Taylor, Paul Sanford, Roger Bedford and Phil Williams, R-Rainbow City.

The Senate-passed version sponsored by Sen. Trip Pittman, R-Montrose, retained the $10 million increase to the Office of School Readiness for Alabama's 1st Class Pre-K Program. The Pre-K Task Force, of which BCA is a member, requested an increase of $12.8 million, but the $10 million increase will allow for the expansion of Pre-K and add an estimated 100 additional classrooms to serve an additional 1,950 children.

Governor Bentley had also recommended a 2 percent pay raise at a cost of $75 million but the Senate Finance and Taxation Education Committee changed it to a 1 percent bonus for K-14 education personnel at a cost of $34 million.  The replacement of a 2 percent COLA with the 1 percent bonus drew the most criticism from the Democratic senators during debate.

The Senate version held the line on appropriations to stay within the spending cap required under the Responsible Budgeting Act, also known as the Rolling Reserve Act.  Clearly, the top priority for the upcoming education budget is to ensure that it gives the Legislature its best opportunity to fully repay the balance of $162 million that is owed and must be repaid to the ETF Rainy Day Account by Sept. 30, 2015. The Senate education budget includes an appropriation of $62 million to reduce the Rainy Day Account debt.

For the K-12 Foundation Program, the budget adds funding in several areas. The Senate budget added $10 million to other current expense which funds the costs of support workers and school overhead.  Some $10 million was added to reduce the teacher: pupil ratio in the middle grades, which will fund 50 to 60 additional middle school teachers.

The following table compares ETF funding for selected educational agencies and programs (in millions $):

The bill says that seniority of service cannot be the "most significant" factor in the adoption of a school district's reduction-in-force policy. The new factor in the RIF policy will be operational by the 2015-2016 academic year and will be part of evaluation results for student growth in the 2016-2017 academic year.

Evaluations must state that "An employee's demonstrated experience in providing quality instruction to students shall be a significant factor" in considering whether to eliminate a position.

"Seniority is not itself a substitute for or indicator of experience in providing quality instruction," the bill states.

Former State School Superintendent Dr. Joseph Morton, Chairman and President of the Business Education Alliance of Alabama, spoke Wednesday during the public hearing.

"In education, students are taught that if they do their best and excel in their work they will be rewarded in life," Morton said. "A seniority-based policy or law in which teachers are retained or released in a reduction-in-force is exactly opposite of what students are taught. The best teachers should be retained with the results of a high quality evaluation system being the majority factor, not the number of years a teacher has been on the job."

SB79 sponsored by Sen. Dick Brewbaker, R-Pike Road, that passed the Senate 28-0, mandates the use of the "Preferred Vendor" provisions for resident bidders regarding the purchase of certain goods and nonprofessional services over $15,000 and under $100,000 by public agencies. Currently, the use of the "Preferred Vendor" provision is discretionary, and according to the Department of Finance purchasing division, the current provision has not been used for at least the past four years.

This bill, which was favorably reported by the House State Government Committee and is on the House calendar, adds another provision to the "Preferred Vendor" preference for vendors who have not defaulted nor failed to fulfill the bid requirements of any previously awarded bids. The Purchasing Department will determine the standing of the lowest responsible vendor under the new provisions.

Using Fiscal Year 2013 data, this bill could increase the expenses of state agencies and higher education institutions by an estimated $10.8 million annually, assuming: 1) at least one preferred vendor bids within 5 percent of the lowest bid for every purchase; and, 2) the amount of purchasing by state agencies and higher education institutions remain at FY 2013 levels.

NEW EDUCATION MONEY COMMITTEE CHAIRMAN ADDRESSES BCA GROUP

The chairman of the House Ways and Means Education Budget Committee told the Business Council of Alabama's Governmental Affairs Committee on Tuesday that the 2014-15 budgets will dominate the second half of the 2014 regular legislative session that is now just past its halfway point.

State Rep. Bill Poole, R-Northport, was speaking about the Education Trust Fund budget that pays for public education, and the General Fund budget, which sets spending for non-education functions such as state troopers, Medicaid, and prisons.

"We'll take up the General Fund in the House this week and I expect the education budget to be taken up by the Senate and hope it to be passed out this week," said Poole, who succeeded Rep. Jay Love, R-Montgomery, as chairman of the House education money committee. (The Senate passed the ETF budget and sent it to the House Thursday. The House passed a $1.83 billion General Fund budget on Wednesday, sending it to the Senate.)

Poole said repayment of the education rainy day fund is the paramount issue for the ETF because, constitutionally, the remaining $128 million balance has to be repaid by the end of the 2015 fiscal year.

Poole said this year's ETF contains a $65 million appropriation for debt reduction but it's conditioned on whether the economy can produce the amount. "You could see us increase that additional appropriation this year, so if additional dollars come in we'll pay as much as possible," he said.

Poole said the ETF still suffers from the 2008 recession, the year when the state appropriation to education was $6.75 billion. The appropriation this fiscal year is $5.75 billion, an indicator that the economic recovery hasn't been sufficient.

HB195, the neutrality-in-contract bill by Rep. Mack Butler, R-Rainbow City, has passed both the House and Senate and was sent to Governor Robert Bentley's in-basket on Wednesday. The House passed the bill 74-18 and the Senate approved it 20-2 on Tuesday.

Butler's Fair and Open Competition in Governmental Construction Act would prohibit public agencies from specifying union or non-union labor in public works contracts while allowing some exemptions such as imminent threats to health and safety. Butler said project labor agreements can increase contract costs by 20 percent.

The stated purpose of the legislation is to "Promote the economical, nondiscriminatory, and efficient administration and completion of state and state-funded or state-assisted construction projects."

A PLA could force contractors to recognize unions and use union halls to hire workers for projects. Butler said, if mandated in Alabama, PLA requirements would make it nearly impossible for 90 percent of Alabama's construction employers that choose not to join a labor union to compete for projects paid for with their own tax dollars. The legislation would ensure that Alabama is protected against the PLA initiative on public construction projects and ensure a level playing field.

The BCA supports the legislation.

The Alabama House voting 96-0 on Wednesday passed HB24, which was sponsored by Rep. Bill Roberts, R-Jasper. The bill would set time limits for reviewing contracts in excess of $50,000 and paying invoices once they're received by the contracting public agency. SB386 by Senate President Pro Tem Del Marsh, R-Anniston, is the Senate version. It was favorably approved by the Fiscal Responsibility and Accountability Committee and was placed on the Senate calendar on Thursday.

On Wednesday, the House Ways and Means Education Committee favorably reported SB46, sponsored by Sen. Bryan Taylor, R-Prattville. The bill, deemed the Small Business Tax Relief Act, previously passed the Senate by a vote of 34-0. If it becomes law, the bill would increase the average monthly tax liability threshold, from $1,000 to $2,500, for businesses that make advance estimated sales tax payments. By increasing the threshold, an estimated 3,900 businesses would be relieved from making estimated payments, allowing them to redirect those resources to other areas of their businesses.

SB46 was amended in order to delay its implementation until Oct. 1, 2015, because lawmakers were concerned that the deferment of the estimated $4.5 million in sales tax receipts would place a strain the FY 2015 Education Trust Fund budget. However, after further discussion and review, lawmakers concluded that the FY 2015 ETF budget would remain unaffected by the delayed revenue. With that in consideration, the House committee passed an amendment to change the bill's implementation back to its original date of Aug. 1, 2014.

BCA strongly supports SB46.

The House version of the bill, HB151 by Rep. Barry Moore, R-Enterprise, passed the House chamber earlier in the session by a vote of 96-2 and is waiting to be placed on the Senate calendar. Supporters applaud the financial and administrative relief the legislation offers small businesses in Alabama.

This week, the General Fund budget, HB235 sponsored by Rep. Steve Clouse, R-Ozark, passed the House 80-20 in substituted and amended form and was assigned to the Senate Finance and Taxation General Fund Committee. The budget contains two areas of particular interest for the Environmental and Energy Committee - funding for the Alabama Department of Environmental Management and the potential statewide water assessment program. The House budget slightly increased ADEM's funding compared with the budget suggested by Governor Robert Bentley. In the area of water resources, the Business Council of Alabama supports agencies collecting the appropriate data needed to assist the state in making informed decisions regarding water policy in Alabama. The budget includes a $1 million appropriation to the Geological Survey of Alabama to be spent in coordination with the Office of Water Resources. These funds are to be used to support the state water assessment program.

The House Health Committee on Tuesday approved a bill to expand the Birmingham Water Works Board and limit members to two full terms. The committee approved HB482 by Rep. Jim McClendon, R-Springville, which went to the full House for consideration.

The bill would expand the board from five members to nine, with one member each from Shelby, Blount, St. Clair and Walker counties. When the next vacancy occurs on the current board, that member would be replaced by a Jefferson County resident who lives outside Birmingham. That means Birmingham would have just four of the nine members and would no longer control the board.

Several other bills pending in the Legislature would also expand the board, including one by Sen. Jabo Waggoner, R-Vestavia Hills, that would impose term limits and limit board members' pay. 

The bills drew opposition, including from Sen. Rodger Smitherman, D-Birmingham, who has said he wants Birmingham members to retain control of the board.

McClendon said the main purpose of his bill is to allow St. Clair County and the city of Moody to have board representation. The Birmingham board bought the Moody water and sewer systems in 1993 and sold the sewer system back to Moody in 2008.

McClendon said that Moody is interested in buying the water system back, if feasible. Mac Underwood, general manager of the Birmingham Water Works Board, spoke at the committee meeting in opposition to McClendon's bill. Underwood said that it would be a mistake to shift board power from outside the city and Jefferson County. He said more than 90 percent of the customers are in Jefferson County.

Underwood said the board is willing to discuss selling the Moody system back to the city of Moody but the board has invested a lot in the Moody system and it is providing good service. McClendon said Moody has requested information about the number of customers in Moody, cash flow and volume of water used, and has so far not been able to get it from the board. He said that information would help determine whether it would be feasible for Moody to buy the system back.

The recycling labeling bill, SB284 would prohibit the sale of any plastic container unless it contains certain markings applicable to recycling. The stated intent is to prevent contamination of recyclable plastic containers. This week, SB284 sponsored by Sen. Jimmy Holley, R-Elba, passed the House 98-0 and was sent to Governor Robert Bentley for consideration. The bill passed the Senate by a vote of 23-2.