2015 legislative update: Alabama crossroads: We need new revenue
We all want to live in a healthy, secure and prosperous state. Alabama is taking important steps toward that goal now, but deep General Fund budget cuts could undo that progress.
Medicaid’s new regional care organizations will keep patients healthier while cutting costs. Prison system improvements will protect Alabamians while lowering costs and helping former inmates transition back into their communities. Investing in these changes now will save money later.
We’re at a crossroads in Alabama. Cutting vital services is the wrong path.
The devastating cuts in the no-new-revenue General Fund budget proposal would force us to abandon our Medicaid and corrections improvements. And without new revenue, Alabama faces deep service cuts that could make the state a worse place to live for years to come.
Cuts to Medicaid, which covers one in five Alabamians, would top $300 million. That would force the program to end coverage of vital services like adult eyeglasses, prosthetics, hospice care and outpatient dialysis. It also likely would lead to even fewer doctors serving Medicaid patients, most of whom are children, seniors, and people with disabilities.
The costs for Alabama’s children would be real. Cuts to the Department of Human Resources (DHR) would make Alabama the first state to end its Temporary Assistance for Needy Families (TANF) program. That would eliminate cash assistance for more than 30,000 children living in deep poverty, as well as uniforms, car repairs and other job readiness assistance for their parents.
DHR cuts also would end child care benefits for 15,000 children. That could hurt our state’s economy by forcing thousands of working parents to quit their jobs. More than $340 million in child support payments would be risk if DHR ends collection services, and hundreds of seniors would lose adult day care services that allow them to live independently.
Mental health funding cuts would harm more than 25,000 Alabamians by reducing or eliminating community-based mental illness and intellectual disability services. That would reduce independence for thousands of Alabamians. The cuts also could cost hundreds of people their jobs by forcing them to stay home to care for family members who lose crucial support services. In addition, severe mental health cuts could land Alabama back in federal court.
Deep General Fund cuts would have serious public safety implications as well. Nearly a fourth of Alabama’s state troopers would be laid off. The prison system, which already operates at nearly twice its designed capacity, would close two facilities. That would mean even more overcrowding and an even greater chance of a federal takeover of the state’s prison system.
More than 1,100 state workers would lose their jobs, including more than 600 court employees. That likely would force courts to close at least two days a week, meaning longer wait times for criminal trials or restitution cases.
This is no way to invest in our state’s future. Alabama needs new revenue to end the chronic budget shortfalls that are holding us back. The General Fund needs a sustainable revenue stream to support Medicaid, corrections, mental health care and other vital services. Raising the cigarette tax and raising the state sales tax on automobiles to 4 percent – the same as we pay on groceries – would be two good places to start.
If we want a better Alabama tomorrow, we need to start building it today.
By Kimble Forrister, executive director. Posted April 23, 2015.
Bills to reform payday lending, change Accountability Act clear Alabama legislative committees
Alabama borrowers would have much longer to repay payday loans under a bill that emerged from a state Senate committee Wednesday. SB 335, sponsored by Sen. Slade Blackwell, R-Mountain Brook, now awaits action by the full Senate.
Blackwell’s bill would bring substantial reform to the payday loan industry in Alabama. It would extend the length of time that borrowers have to repay their loans to six months. Alabama law allows payday lenders to set loan terms between 10 and 31 days, but nearly every transaction is a two-week loan term.
The bill received a favorable report from the Senate Banking and Insurance Committee, which Blackwell chairs, by a vote of 11-1. Only Sen. Tom Whatley, R-Auburn, dissented.
Accountability Act changes clear House committee with two amendments
A bill that would expand tax credits and limit the size of scholarships under the Alabama Accountability Act (AAA) won House committee approval Wednesday. SB 71, sponsored by Senate President Pro Tem Del Marsh, R-Anniston, passed the Senate last month and awaits action by the full House.
The House’s education budget committee made two changes to the bill. Students already receiving AAA scholarships would remain eligible for that assistance as long as their family’s income does not exceed 275 percent of the federal poverty level – about $66,000 for a family of four – under an amendment offered by Rep. Phil Williams, R-Huntsville.
Another amendment by Rep. Terri Collins, R-Decatur, would require an independent comparison of the test scores of students participating in the AAA scholarship program to those of similar students in public schools. Collins’ amendment also would exclude schools that serve students with special needs from the act’s definition of “failing schools.”
The AAA, passed in 2011, allows Alabama businesses and individuals to get tax credits for donations to organizations that grant scholarships to help eligible students attend private schools. Click here to learn more about the act and how SB 71 would change it.
By Stephen Stetson, policy analyst, and Rebecca Jackson, communications and development associate. Posted April 15, 2015.
Prison reform bill would end Alabama's food assistance ban for former drug offenders
The sweeping prison reform bill that the Alabama Senate passed Thursday was amended to include one of Arise’s legislative priorities: ending the state’s SNAP and TANF eligibility bans for people with a past felony drug conviction.
Senators voted 31-2 for SB 67, sponsored by Sen. Cam Ward, R-Alabaster. The measure now goes to the House, where leaders have declared it a priority. Check out these stories from the Montgomery Advertiser and AL.com for more on the prison reform bill.
Sen. Linda Coleman, D-Birmingham, amended SB 67 on Thursday to seek to allow people convicted of a felony drug offense to regain eligibility for food assistance under the Supplemental Nutrition Assistance Program (SNAP) or cash benefits under the Temporary Assistance for Needy Families (TANF) program. Coleman’s amendment would restore eligibility for offenders who have completed their sentences or who are complying with the terms of their probation or parole.
The Senate voted 26-2 for Coleman’s amendment. Senators last year passed a bill to end the state’s SNAP and TANF bans, but the measure died in the House after losing a procedural vote.
Alabama is one of only a handful of states to ban people convicted of a drug-related felony from ever receiving SNAP or TANF assistance. The state’s prohibition punishes only one class of criminal offense and makes it harder for people to rebuild their lives after serving prison time. The ban also is particularly harsh for offenders who are mothers and must support children upon release from prison.
By Carol Gundlach, policy analyst. Posted April 2, 2015.
HIV medication redistribution bill wins Alabama House committee approval
Pharmacies that distribute HIV medications for or in HIV clinics could redistribute certain unopened drugs under a bill approved Thursday by the House Health Committee. HB 247, sponsored by Rep. Patricia Todd, D-Birmingham, awaits action in the full House. An identical bill passed the House 99-0 last year but died when the Senate adjourned without voting on it.
Under current law, HIV clinics must destroy unopened medications if patients do not show up for treatment. Todd’s bill would allow pharmacies to redistribute those drugs to other patients and would set controls on handling and oversight of the drugs. Arise recommended this policy change in 2013 to the governor’s Medicaid Pharmacy Study Commission, which sought ways to reduce costs in the state’s Medicaid drug assistance programs.
By Jim Carnes, policy director. Posted April 2, 2015.
Plan to write ETF spending limit into state constitution wins Alabama Senate panel's approval
The Rolling Reserve Act’s education spending limit would be written into the Alabama Constitution under a measure that the state Senate’s education budget committee approved 8-4 Wednesday. SB 248, sponsored by Sen. Trip Pittman, R-Montrose, now awaits action by the full Senate.
Pittman, who chairs the Senate’s education budget committee, defended his proposal from criticism of the decision to seek to enshrine the Rolling Reserve Act as a constitutional amendment. Pittman said he wants a hard spending cap that the Legislature has to follow. The act, which is already a statute, limits education funding even though Alabama has yet to restore state support for K-12 schools and higher education to the pre-recession levels of 2008.
The current Rolling Reserve Act caps spending growth in the Education Trust Fund (ETF) using a formula based on the average ETF revenue growth in the previous 15 years. SB 248 would modify the cap to disregard the year with the lowest revenue growth during those years. The bill would need to pass the House and Senate and be approved in a statewide referendum to become law.
House committee weighs other Rolling Reserve changes
The House’s education budget committee Wednesday held a public hearing on a bill that would change how ETF revenues exceeding the Rolling Reserve cap are used. HB 322, sponsored by Rep. Bill Poole, R-Tuscaloosa, would direct more of that money to capital expenses like bus purchases and school building repairs. The bill would not change the cap formula.
Current law requires ETF revenues above the spending cap to be used first to repay the ETF’s rainy day account and then to boost the Budget Stabilization Fund until it reaches 20 percent of the size of current-year ETF spending. HB 322 would change that arrangement. After ETF funding is set and the rainy day account is repaid, Poole’s bill would use remaining revenues to send an amount equal to 1 percent of the previous year’s spending to the Budget Stabilization Fund. Any money left after that would go toward buses, school maintenance and other capital expenses.
Gov. Robert Bentley supports another proposal for amending the Rolling Reserve Act. That plan is found in both HB 330, sponsored by Rep. Alan Boothe, R-Troy, and SB 281, sponsored by Sen. Jimmy Holley, R-Elba. Bentley’s plan would put more money into the classroom by moving it back into the ETF for operating expenses, acting Finance Director Bill Newton said.
Poole and Newton agreed to talk further and seek common ground. Poole, who chairs the House’s education budget committee, said he plans to bring his bill for a committee vote next Wednesday.
By Kimble Forrister, executive director. Posted April 1, 2015.
Bill to require report on tax breaks in Alabama moves closer to becoming law
Alabamians could learn far more about the cost and effectiveness of state tax breaks under legislation that won unanimous support from the House’s education budget committee Wednesday. SB 119, sponsored by Sen. Bill Hightower, R-Mobile, passed the Senate 30-0 last month and now awaits action by the full House.
By shedding light on billions of dollars in tax breaks, Hightower said, Alabama can improve its national rankings in budget transparency. SB 119 would require the Legislative Fiscal Office to produce an annual tax expenditure report to help lawmakers and the public assess the cost and effectiveness of state tax breaks for businesses and individuals. Alabama was one of only seven states with no such report as of 2011, according to the Center on Budget and Policy Priorities.
Rep. Patricia Todd, D-Birmingham, praised her colleagues for supporting a proposal she had introduced for several years. Todd noted that the idea won Republican support when the American Legislative Exchange Council (ALEC) provided a model bill on the issue. ALEC is a nationwide group of legislators and businesses that is funded almost entirely by corporations, trade groups and corporate foundations.
By Kimble Forrister, executive director. Posted April 1, 2015.
Payday lending reform bill clears Alabama Senate committee
Interest rates on payday loans in Alabama would fall by more than half under a compromise payday loan reform bill that won approval in an Alabama Senate committee Wednesday. SB 110, sponsored by Sen. Arthur Orr, R-Decatur, now awaits action by the full Senate.
Only one committee member – Sen. Cam Ward, R-Alabaster – voted against the bill. Sen. Trip Pittman, R-Montrose, abstained from voting.
Orr’s bill would change Alabama’s payday loan law to be similar to the one in Colorado, where the payday loan industry continues to exist but charges lower prices. “Colorado-style” reform caused substantial industry consolidation and made loans somewhat more affordable for borrowers. Orr’s bill would model Colorado’s law by extending the length of time that borrowers would have to repay their loans. Payday loans in Alabama are usually due in two weeks, and carry annual interest rates of up to 456 percent.
SB 110 is more complicated than the 36 percent annual interest rate cap that payday loan reformers have sought for years, and the allowable rates would be much higher than that. The cost of payday loans under Orr’s plan would vary, depending on the length of the loan and the amount (up to $500) borrowed. Though the finance charge would be capped at a 45 percent annual rate, additional fees would push the maximum allowable interest rate into triple digits. Using a similar framework, Colorado’s payday loan interest rates decreased from 339 percent a year to 188 percent a year.
Orr told the committee that his approach was an effort to bring some regulations to the industry by bringing down borrowers’ costs without putting the industry out of business. Orr’s message was one of seeking a regulatory “middle ground” between the status quo and a proposed 36 percent rate cap.
Arise continues to support capping interest rates on payday and auto title loans at 36 percent a year, but it will work to oppose any industry amendments that would weaken Orr’s compromise bill, ACPP executive director Kimble Forrister said. Legislation to cap interest rates on payday and title loans at 36 percent has not been filed yet, but advocates expect such bills to be introduced later this month.
Read the Montgomery Advertiser’s coverage for more on Orr’s bill and the committee’s debate.
By Stephen Stetson, policy analyst. Posted April 1, 2015.
Six things to know about the Accountability Act changes that the Alabama Senate passed
A bill that would expand tax credits under the Alabama Accountability Act (AAA) passed 20-14 in the state Senate on Tuesday night. SB 71, sponsored by Senate President Pro Tem Del Marsh, R-Anniston, now goes to the House. Below are six major aspects of the AAA that would change 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. Current law caps the total amount of such credits at $25 million a year, but SB 71 would raise the cap to $30 million. (Marsh originally sought to lift the cap to $35 million, but he accepted an amendment by Sen. Greg Reed, R-Jasper, to reduce that amount.) The bill also would erase the current $7,500 annual limit on scholarship tax credits for individuals and let taxpayers claim credits against their 2014 taxes for donations made this year.
(2) Scholarship sizes would be limited. AAA scholarships could be 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 under SB 71. Arise’s Kimble Forrister suggested during Senate committee testimony on March 11 that lawmakers limit the size of AAA scholarships “to ensure that private schools keep tuition costs in line with other schools in the market, not boost tuition to get these dollars.”
(3) The income limit for scholarship eligibility would drop. SB 71 would reduce the income eligibility limit for AAA scholarships from its current 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. Forrister on March 11 recommended a limit of 185 percent FPL, which is the threshold for eligibility for reduced-price school meals, as a way “to more precisely target educational scholarships to low-income children.” (Marsh’s original bill would have set the limit at 200 percent FPL.) Scholarship-granting organizations (SGOs) would have to re-evaluate students’ eligibility every other year.
(4) “Failing school” would have a different meaning. Another big difference under SB 71 would be 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. 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 would have to give state achievement tests, be accredited within three years and disclose tuition rates online before each semester begins.
(6) Unspent scholarship money would be returned to public education. SGOs would have to use any scholarship funds on hand at the start of a calendar year by no later than June 30 of the following year. Under Marsh’s bill, any such money not spent on AAA scholarships by then would go to the state Department of Education to help support “underperforming” schools.
By Chris Sanders, communications director. Posted March 31, 2015.
2015 legislative update: Testimony from Arise's Kimble Forrister on proposed Accountability Act changes
Arise’s Kimble Forrister testified before a state Senate committee Wednesday, March 11, 2015, about SB 71. The bill would make numerous changes to the Alabama Accountability Act, which provides state tax breaks for donations to certain groups that give scholarships to pay for private school tuition. Here's the full text of Forrister’s prepared remarks:
“Alabama Arise is a coalition of 150 congregations and organizations that advocate on poverty issues. Our members vote every September to choose our legislative priorities. For 2015, one of the biggest vote-getters was a proposal to do something about the Alabama Accountability Act.
“Many of our members want the Legislature to simply repeal the Accountability Act. SB 71 takes a different approach: not to repeal it, but to improve it. We appreciate Sen. Del Marsh's attempt to make the act more transparent, targeted and accountable. Specifically, we support the effort to more precisely target educational scholarships to low-income children. We recommend setting the income cap at 185 percent of poverty instead of 200 percent, because 185 percent is the income level for reduced-price meals. It’s the accepted poverty benchmark in K-12 school data.
“When it comes to accountability and transparency, we support several revisions in SB 71. If a private school is going to receive taxpayer dollars, certainly it should be accredited by a reputable accrediting agency. Reports filed by scholarship-granting organizations with the Department of Revenue should be public documents with only the names of individual children and parents redacted. Academic credits given at private schools with public money should reflect the same number of subject hours required of public schools. And of course schools that fail to comply with the law should be prohibited from receiving tax dollars.
“Given the condition of state budgets, however, this is not the right time to increase the cap on tax-deductible donations to SGOs, nor to allow retroactive tax deductions. We do not believe the expanded definition of ‘failing school’ is in the best interest of our schools or our children when Alabama is still funding K-12 at $5.9 billion, nearly a billion dollars below 2008. The Rolling Reserve is good in theory, but it should be recalibrated so its baseline is not in the trough of the recession. Just like your professor who removes your lowest test grade, we could remove the worst year from the calculation and provide books, buses and teachers our schools desperately need.
“But back to SB 71: We recommend additional reforms to the Accountability Act. We encourage the committee to consider limiting the size of scholarships to ensure that private schools keep tuition costs in line with other schools in the market, not boost tuition to get these dollars. The law should require regular independent CPA audits of all entities receiving tax-funded contributions, both SGOs and participating schools. If a private school is to be supported by public funds, its standardized tests should be the same tests administered in public schools and approved by the Department of Education—so parents can compare apples-to-apples when choosing a school. Finally, we suggest lowering the drain on the ETF by reducing the tax credit for SGO contributions to 25 percent of tax liability. Thank you for your time.”Top of Form
2015 legislative update: Four things to know about Alabama's 2016 funding challenges
It’s the latest verse of a decades-old song: Alabama faces yet another funding shortfall next year for vital services like Medicaid, mental health care and corrections. Here are four things to know about the budget challenges facing the Legislature during the 2015 regular session that began Tuesday.
(1) Alabama’s revenues for the budgets that fund education, health care and other services still haven’t returned to pre-recession levels.
Alabama has two major state budgets: the Education Trust Fund (ETF), which pays for K-12 and higher education, and the General Fund (GF), which provides a major chunk of the support for vital non-education services, including Medicaid, mental health care, corrections and public safety. The picture that revenue officials painted for each on Tuesday was bleak.
Economic struggles during and after the Great Recession hammered both budgets, and neither has seen revenues return to pre-recession levels. GF receipts last year were down 15.5 percent since 2008, according to the Legislative Fiscal Office (LFO), and ETF appropriations this year are down 12.2 percent from their 2008 level. Alabama’s K-12 cuts since 2008 are the nation’s second worst, while our higher education cuts are the nation’s fifth worst. Alabama’s unemployment rate is improving, but revenues still aren’t growing nearly enough to undo the damage wrought by the Great Recession.
(2) The General Fund shortfall is persistent, and it’s not going away on its own.
The picture is especially bleak for the GF. Alabama’s education budget draws most of its money from state sales taxes and individual income taxes, which grow as the economy improves. But the GF relies on a hodgepodge of other revenue sources, most of which are slow to grow even during boom times.
That leaves the GF with a structural deficit, meaning revenue growth is not strong enough to keep pace with ordinary cost growth for vital services like Medicaid, mental health care and corrections. Without new GF revenue, these services continually will remain at risk of massive cuts.
(3) Alabama needs new revenue to avoid devastating cuts to vital services like Medicaid, mental health care and corrections.
How bad could the cuts for Medicaid, mental health care and other GF services get without new revenue? Perhaps most dramatically, failure to address the GF shortfall could spell disaster for Medicaid, which provides health coverage for one in five Alabamians and already has been cut to the bone of federally required coverage provisions. Even small further cuts could endanger lives.
GF cuts could mean even shorter staffing for the state’s overcrowded prison system, which operates at nearly twice its designed capacity. It also could mean fewer state troopers on the highways, more trial delays, longer lines to renew a driver’s license, or long waiting periods for many families seeking ALL Kids health coverage for their children.
Next year’s GF shortfall will be $264 million, according to Executive Budget Office (EBO) estimates. That would be a 14 percent drop in a perennially underfunded budget that already struggles to fund barebones service levels.
But the funding challenges don’t end there. EBO’s Bill Newton said Tuesday that Alabama also needs an additional:
Add it all up and it comes to $541 million in new GF revenue needs. That’s the amount that Gov. Robert Bentley proposes to raise with a mix of tax increases and loophole closures. “We must break the cycle of budget shortfalls year after year after year,” Bentley said Tuesday night during his State of the State address. “We must have adequate means.”
(4) Taxing low-income Alabama families deeper into poverty is not the way to cure our funding woes.
Alabama’s tax system is upside down. Low- and middle-income families pay twice as much of their income in state and local taxes as the top 1 percent of earners do. It’s an imbalanced structure that makes it harder for low-income families to escape poverty and leaves them with less money for the consumer spending that fuels economic growth. The main driver of this upside-down tax system? High sales taxes, especially on groceries and other necessities that account for a big share of low-income families’ household budgets.
Significantly, Bentley’s plan would not increase taxes on food, clothing or over-the-counter drugs. Instead, the governor proposes to raise more than $400 million by increasing the state’s cigarette tax and sales tax on automobiles. Bentley’s proposal would boost the cigarette tax from 42.5 cents per pack to $1.25 per pack and would increase the state sales tax rate on automobiles (now 2 percent) to match the 4 percent rate that applies to other consumer goods.
The rest of the new revenue would come from a mix of business tax increases and loophole closures. (One proposal is for Alabama to adopt combined reporting, which would treat corporations and their subsidiaries as one corporation for tax purposes. You can learn more about combined reporting here.)
Strong investments in services like education, Medicaid and public safety promote economic growth and improve our state’s quality of life. By funding those investments without raising taxes on necessities like food and clothing, Alabama can give everyone a better opportunity to get ahead in life.
By Chris Sanders, communications director. Posted March 4, 2015.