LEGISLATURE, GOVERNOR AGREE ON GENERAL FUND BUDGET
 
Governor Robert Bentley on Thursday signed the 2015-16 General Fund budget that was passed in the second special legislative session that he had called to put together a general government operating budget for the fiscal year that begins Oct. 1.

The Senate on Wednesday passed a substitute General Fund bill 23-9 and the House concurred voting 70-21 and it was sent to Governor Bentley.

HB 1 sponsored by Rep. Steve Clouse, R-Ozark, is the $1.76 billion, 2015-16 General Fund budget.

It contains $166 million in new revenue - $70 million from a 25-cent-per pack cigarette tax increase (HB 3 by Rep. Connie Rowe, R-Jasper),  an $80 million use tax transfer from the Education Trust Fund to the General Fund (HB 30 by Rep. Bill Poole, R-Northport), a net $8 million from a 15-cent per tax on medical prescriptions for Medicaid (HB 8 by Rep. Elaine Beech, D-Chatom),
and a new bed tax on nursing homes (HB 12 by Clouse),  netting $8 million for Medicaid.

Poole's HB 30, the permanent use tax transfer, is an important reform because it provides a growing revenue source for the often stagnant General Fund.

The Legislature also approved changes to the education budget Rolling Reserve Act, HB 29 sponsored by Poole, that is expected to free up more money for classrooms from dollars that would have otherwise been deposited into a "rainy day" fund.

It's important to note that the use tax transfer was contingent upon this legislation passing.  The Rolling Reserve Act was a part of budget reform passed in 2011 to free up more money for education spending each year.

The new appropriations and some agency budget cuts averaging 5.5 percent are expected to cover the expected $200 million budget shortfall. The budget level-funds medicaid, corrections, the courts, mental health, and human resources. An additional $11 million was earmarked for prison reform, a measure BCA supported in the 2015 regular legislative session. 

One notable exception is the Alabama Department of Environmental Management (ADEM), which was cut by 83 percent. The agency's appropriation was cut by almost $1 million - from $1.2 million in FY 2015 to $280,000 in FY 2016. Additionally, language was added to the budget in the final hours of the session that precludes ADEM from using money from the Underground and Aboveground Storage Tank Fund to shore up its budget. House and Senate leadership have agreed to work with ADEM and the regulated community to address this problem during the next regular session. Prior to the special session, BCA's Chair of the Environment and Energy Committee Tim McCartney sent a letter to members of the House and Senate General Fund Committees explaining the importance of properly funding ADEM to Alabama's business community.
SUMMARY OF REVENUE BILLS THAT PASSED
 
House Bill 30 - Use Tax Transfer:  Effective Oct. 1, 2015, this legislation transfers an additional $80 million (or 53 percent) of use-tax receipts to the General Fund from the Education Trust Fund.  Because it provides much-needed growth revenue to the state's General Fund, this bill was considered by many to be the most important part of the budget package.

House Bill 29 - Rolling Reserve Modifications: This legislation makes adjustments to the Education Trust Fund Rolling Reserve Act to allow for increased spending capacity in the education budget. The Rolling Reserve Act was passed in 2011 to stabilize education spending and prevent proration in the Education Trust Fund budget. The bill also creates the Education Trust Fund Advancement and Technology Fund, which will allow the Legislature to make one-time appropriations for technology in schools during good economic years.

House Bill 3 - Cigarette Tax Increase:  This legislation, which is effective Oct. 1, 2015, increases the tax on cigarettes by 25 cents per pack and provides for its distribution to the General Fund for the purpose of funding Medicaid. The bill also decreases the tobacco tax stamp discount currently enjoyed by wholesalers or jobbers, and changes the distribution of tax on consumable vapor products. Finally, this legislation requires wholesalers of tobacco products to stamp cigarettes and collect tobacco tax when those tobacco products are sold to an Indian reservation tobacco vendor; however, it also provides for a refund of tobacco taxes paid by tribal members on purchases of cigarettes and other tobacco products purchases within the boundaries of a federally recognized Indian reservation. This legislation is estimated to generate $70 million in new revenue for the General Fund in FY 2016.

House Bill 8 - Prescription Tax Increase: Effective Sept. 1, 2015, this legislation provides for a supplemental privilege tax of 15 cents for each prescription filled or refilled for a citizen of Alabama to be collected during fiscal years 2016 and 2017. The bill also provides that the Centers for Medicare & Medicaid Services must approve a pharmacy dispensing fee increase in order for this temporary tax increase to go into effect. This legislation is projected to generate $8 million in new revenue for the General Fund in FY 2016.

House Bill 12 - Nursing Home Bed Tax Increase: This legislation provides for a secondary supplemental privilege assessment of $401.28 per month for each bed of every nursing facility in the state. The supplemental assessment is effective Oct. 1, 2015, and will terminate on Aug. 31, 2017. The secondary supplemental privilege assessment will be contingent upon a minimum appropriation of $685 million to Medicaid, and is in addition to all other taxes and assessments currently imposed on nursing homes. This legislation is estimated to generate $8 million in new revenue for the General Fund in FY 2016.

(Summary of Revenue Bills Provided by Bradley Arant Boult Cummings LLP)
MANDATORY UNITARY COMBINED REPORTING CARRIED OVER IN COMMITTEE
 
The Mandatory Unitary Combined Reporting Tax increase, SB 12 sponsored by Sen. Linda Coleman, D-Birmingham, did not advance.

During the first special session, the bill was approved by a Senate committee. But after reappearing in the second special session, the Senate Finance and Taxation Education Committee carried the bill over.

Because the bill is likely to reappear in the 2016 regular legislative session, business vigilance and action are necessary. "It remains critical that legislators, especially senators, continue to hear directly from business leaders in their districts as to why this issue is a job-killer for Alabama business," Business Council of Alabama President and CEO William J. Canary said.

The BCA's State Legislative Agenda includes a long-standing opposition to MUCR and the Alabama business community's opposition to this measure was made explicitly clear in all three legislative sessions this year.

BUSINESS PRIVILEGE TAX CLEARS COMMITTEE BUT WAS NOT CONSIDERED ON HOUSE FLOOR
 
The House Ways and Means General Fund Committee favorably reported the Business Privilege Tax, HB 21 by Rep. Mike Hill, R-Columbiana, as part of a package of bills intended to prop up the General Fund budget. It did not advance after committee approval. HB 21 would have produced about $22 million for the General Fund budget.

Currently, all entities registered to do business in Alabama must pay an annual Business Privilege Tax that is calculated by multiplying the business's taxable net worth apportioned to Alabama by a rate that is determined by the business's federal taxable income apportioned to Alabama.

Existing law sets the minimum at $100 and the maximum at $15,000 for all companies except financial institutions and insurance companies, which have a $3 million cap. 

HB 21 would have kept the tax rate based on federal taxable income, allowed an exemption for an estimated 100,000 entities with less than $10,000 in taxable net worth from having to pay the minimum BPT, increased BPT rates in each range of federal taxable income by 25 percent, and increased the current cap from $15,000 to $30,000 for all companies except financial institutions and insurance companies.

HB 21 did not garner enough support among House members to be considered on the floor, and Hill moved to carry the bill over, effectively killing it.
TRANSPORTATION INFRASTRUCTURE INVESTMENT
 
A bill to increase transportation infrastructure investment was discussed during the special session and likely will reappear in the 2016 regular legislative session.

HB 28 by Rep. Mac McCutcheon, R-Huntsville, would have increased the tax on gasoline and diesel fuel by an initial 5 cents per gallon the first year and an additional 3 cents in year two and year three as long as the average price stays below the average price over the last 10 years.

During negotiations, McCutcheon agreed to cap the increase at a total of 11 cents. The bill followed the normal distribution formula between the state, counties, and cities. If enacted, HB 28 would have provided more than $100 million annually to invest in Alabama roads and bridges.

Alabama's gasoline tax has remained at 16 cents per gallon since it was last increased in 1992.

Over those 23 years, motor vehicles have been getting significantly better gas mileage, which reduces the amount of tax that would have been collected. As a result, revenues for Alabama's Public Road and Bridge Fund are declining while natural inflation is driving the cost of road construction higher and higher.

In addition to creating jobs and generating tax revenues throughout the economy during the construction cycle, infrastructure improvements also foster and facilitate continuing economic growth for many years beyond the initial investment.

Alabama currently has over 20 two-lane roads with more than 15,000 cars traveling on them daily, which is considered "grossly overcrowded," and 13 counties do not have four-lane access to an interstate highway, which leaves them at a sizable competitive disadvantage in economic development.

States like Georgia, Tennessee, and Florida, all of which have Republican-led legislatures like Alabama, have already pursued this change because of its importance to their future economic growth. 

Due to the immediacy of the special session and the crisis in the General Fund budget, McCutcheon carried over HB 28 and indicated that the 2016 regular session would be the appropriate time to advance this important economic development bill.  

The BCA has long supported increased investment in Alabama's transportation infrastructure and is a member of the Partnership for Alabama's Vision for Economic Development.

PAVED is a coalition of economic developers, business groups, local chambers of commerce, counties, cities, industry leaders, and others who are committed to improving Alabama's roads and expanding efforts to recruit and grow industry.

For more information, visit PAVED on the web.
MINIMUM WAGE PREEMPTION LEGISLATION TO RETURN IN THE 2016 REGULAR SESSION
 
HB 27 by Rep. David Faulkner, R-Mountain Brook, would have prohibited municipalities from setting a minimum wage higher than the federal minimum.

The House Ways and Means General Fund Committee favorably reported the bill and it made it to the House floor twice. After much debate it was carried over both times. HB 27 would have prohibited any county or city from passing any ordinance, rule, or policy requiring a business to pay minimum wage that is not required by state or federal law. However, the bill would not prohibit a city or county from setting a certain wage level for employees.

The bill is certain to reappear in the 2016 regular legislative session.
OTHER BILLS THAT PASSED
 
HB 20 by Rep. Ken Johnson, R-Moulton, clarifies that the automobile sales tax paid by out-of-state residents who purchase a vehicle in Alabama cannot be higher than the automobile sales tax of their resident state. The bill went to Governor Bentley for consideration.

SB 13 by Pittman, was sent to Governor Bentley for consideration. Introduced as the Motor Vehicle Ad Valorem Tax Fairness Act, SB 13 will increase the ad valorem receipts to the State General Fund and to local governments by removing the tax deferral on new motor vehicles registered for the first time beginning on Jan. 1.

SB 20 by Sen. Tim Melson, R-Florence, the Alabama Tax Delinquency Amnesty Act of 2016 creates a tax amnesty period to be held for a two-month period prior to Aug. 31, 2016, and applies to all taxes, except motor fuels, administered by the Department of Revenue that were either due prior to Jan. 1, 2015 or for taxable periods that began before the same date. The bill went to Governor Bentley. If it becomes law, the Department of Revenue Commissioner can waive one-half of the interest and all penalties due.
OTHER BILLS WHICH DID NOT PASS
 
HB 9 by Rep. Paul Beckman, R-Prattville, would have limited the federal income tax deduction for Social Security and self-employment taxes (FICA) allowed for state income taxes.

HB 17 by Rep. Jack "J.D." Williams, R-Vestavia Hills, would have taxed sexually explicit materials.

HB 24 by Rep. Randall Shedd, R-Cullman, was a soft-drink tax.

SB 1 by Sen. Paul Sanford, R-Huntsville, would have created the Alabama Shared Revenue Fund, a combined fund to be distributed to the Education Trust Fund and General Fund based on a set percentage.

SB 4 by Pittman, would have changed the distribution of the General Use Tax and Use Tax on automobiles currently collected and deposited into the Education Trust Fund and the State General Fund. The change would have shifted $50 million from the Education Trust Fund to the General Fund.

SB 7 by Sanford, is a constitutional amendment that would have asked voters to allow Alabama to participate in Powerball and Mega-Millions lottery games.

SB 10 by Figures, is a constitutional amendment that would have asked voters to increase the state's property tax from 6.5 mills to 11.5 mills, a 77-percent increase, and earmark the proceeds to Medicaid.

SB 35 by Pittman, would repeal the insurance facilities office credit and the real property investment credit for insurance companies. The bill was favorably reported out of the Senate Finance Taxation Education Committee but was not given additional consideration.
YOUR BCA ADVOCACY TEAM
Dana Beyerle
Director of Communications
334.240.8768
William J. Canary
President and Chief Executive Officer
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Chief of Staff
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334.240.8775
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334.240.8727
Nancy Wall Hewston
Vice President of Communications, Strategic Information and Federal Affairs
334.240.8725
Nathan Lindsay
Vice President for Political Affairs, Regional Operations and Executive Director of ProgressPAC
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Trevor Parrish
Legislative Policy Coordinator
334.240.8773
Joshua Vaughn
Director of Visual Communications and Strategic Information
334.240.8740
Pam Ware
Manager, Government Affairs and Advocacy
334.240.8719

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