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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.
New payday lending rules would be a good first step, but rate cap still needed to help consumers
ACPP executive director Kimble Forrister issued the following statement Thursday, March 26, 2015, in response to President Obama’s speech in Birmingham on proposed new federal payday lending regulations:
“It’s past time to rein in high-cost payday lending. The proposed new federal regulations that President Obama talked about in Birmingham today would be a big step toward keeping consumers out of debt traps in Alabama and across the country.
“The safeguards that the Consumer Financial Protection Bureau is considering would make life better for thousands of families in Alabama. A mandatory cooling-off period after repeated loans would protect borrowers and encourage responsible lending. It’s also heartening to see a proposal aimed at taking into account borrowers’ ability to repay loans.
“As promising as these proposals are, work remains to be done. The CFPB should work to require all payday and title lenders to evaluate borrowers’ repayment ability. And the most important step – reining in the triple-digit annual interest rates on these loans – requires action from our state leaders. By capping these rates at 36 percent, Alabama lawmakers can strengthen our communities and protect families from the high costs of high-cost lending.”
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