2014 Alabama Legislative Session Preview

The 2014 Regular Session of the Alabama Legislature begins on Tuesday, January 14, in Montgomery. The Alabama Constitution permits the Legislature to meet just 30 days over a 105-day period. By law, the 2014 session, the fourth in this quadrennium, begins several weeks earlier than the three previous sessions. If the legislative leadership is successful, it will end more quickly.

Prior to 2010, the Legislature typically met in formal session two days a week, generally Tuesday and Thursday, reserving Wednesdays for committee meetings and work sessions. In November of 2013, both Speaker of the House Mike Hubbard (R-Auburn) and Senate Pro Tem Del Marsh (R-Anniston) sent out proposed legislative schedules to the members of their respective bodies. Those schedules included a significant number of three legislative-day weeks, and would result in the Legislature concluding its session on April 7, three weeks before the 105-day period ends. Although leadership has indicated that they will be flexible with this schedule, election year sessions tend to focus on non-controversial legislation, and this year does not appear to be an exception.

“As noted by Senator Marsh recently, “[t]he budgets will be the primary issue of the session.” As was the case in 2013, it will be the General Fund budget that the Legislature will have to struggle with the most. Estimates going into the session are that the General Fund could be $80 to $100 million short of what is needed. That shortfall results from the loss of $50 million in one-time funding that was sent to the General Fund from a tobacco settlement fund in 2013, and from additional funds needed to ensure the State’s Medicaid system remains solvent. As a result, Senate General Fund Chairman Arthur Orr (R-Decatur) predicted that “[i]t’s going to be another tight, tight year as far as the General Fund is concerned. No one expects the Legislature or the Governor to seek new revenue, so the question will be where they can save, and what can be cut.”

One major item of continuing concern is the State’s Medicaid program, which is one of the largest budget items for the State General Fund. In 2013, the Legislature revamped the program, switching from a state-wide fee-for-service model to a capitated (per person) payment model in which the state is divided into five regions. The transformation of Medicaid is underway, but projected savings from this switch will not be realized in time to make an impact on the 2014-15 budget. It is possible, however, that changes in the Medicaid prescription drug program could be made this year. A Commission established by Governor Bentley and chaired by State Health Officer Don Williamson has been studying the prescription drug program for the past six months and released its report (though not a recommendation) on December 30. The Commission heard projected savings that could result from: 1) modifying the existing payments, 2) switching to a Pharmacy Benefit Manager, or 3) moving to a preferred vendor for all Medicaid pharmaceutical sales. Changes in the way the State pays for or manages this program may be one way the Legislature looks to make up some of the General Fund shortfall.

Despite the dire budget projections, the State Employees Association has indicated that it intends to pursue a cost of living adjustment for state workers in the coming budget. An across-the-board pay raise for those paid from the General Fund seems unlikely, however, because Governor Bentley lifted a freeze on merit raises that had been in place since 2009. Employees may begin receiving merit pay increases starting in January 2014.

The Education Trust Fund budget appears to be in better shape going into the session than the General Fund. In 2013, the Legislature approved a two percent across-the-board increase for education employees – the first such increase since 2007. Available revenue in the ETF for the coming fiscal year is expected to grow by about $135 million, but that likely will not mean a substantial pay increase for education employees. It is anticipated that most of any additional revenue in the ETF will be needed to cover increased health insurance costs and to repay the money that was taken out of the State’s Rainy Day Fund in prior years (repayment in a time certain is a requirement under the law establishing the fund). That said, there may be a fight over pay raises for educators, as Governor Bentley has indicated that he would like to see an increase for ETF-funded employees, although he has not committed to a number. The Alabama Education Association is seeking a six percent COLA.

There are two additional education-related matters that will attract attention and headlines, but not significant floor debate in either chamber. The first is the Alabama Accountability Act. In 2013, the Legislature passed legislation that allows a student in a failing school to transfer to another school, including a private school. Included in the legislation was a method to fund scholarship granting organizations (SGO’s) through the provision a tax credit to individuals and businesses for contributions. The legislation capped the total amount of tax credits available at $25 million. The Accountability Act remains somewhat controversial, and the AEA and Democrats have called for its repeal. On the other side, school choice advocates likely would welcome an expansion of the available tax credits. Repeal or substantial revision seems unlikely in an election year session, though.

The second education matter likely to be discussed in the halls of the Statehouse, but not the chambers is Common Core. Common Core is a set of standards developed through an initiative of the National Governors Association and adopted by 45 states including Alabama. It sets general standards and is designed in part to bring subject-matter consistency to what is taught at various grade levels around the country. Although the standards are generally supported by business advocacy groups and chambers of commerce, there is a strong anti-Common Core sentiment within many conservative groups, particularly those aligned with the Tea Party. In November, President Pro Tem Marsh indicated that he did not intend to bring a debate over Common Core and its possible repeal to the Senate floor this session, and that he felt the only way to deal with the issue was through a Special Session. Speaker Hubbard has similarly indicated that he did not intend to include Common Core legislation in his planning for the Session.

The Speaker and the House Republican Caucus have put forth a nine-bill package that it plans to pass this session, however. The package is called the “Commonsense Conservative” agenda, and includes 9 bills: 7 new proposals, and 2 measures from prior sessions. Caucus bills likely will receive immediate attention in the House, and some could reach the Senate by the end of the first week. The bills included in the Caucus agenda are:

• Taxpayers’ Bill of Rights, Rep. Paul DeMarco, R-Homewood, HB105 (referred to Judiciary). The Taxpayer Bill of Rights has been debated for many years, and even passed both houses and was delivered to the Governor in 2012 before an administrative foul-up required it to be vetoed. One of the primary provisions of the bill would create an independent administrative hearing process for tax appeals, which are currently heard before hearing officers appointed by the Revenue Commissioner. Most business advocacy groups strongly support this legislation, with Alabama’s NFIB constituting the lone known opposition. While the TBOR has passed the House multiple times, it failed to pass the Senate in 2013.

• The Small Business Tax Relief Act, Rep. Barry Moore, R-Enterprise, HB151 (referred to Ways and Means Education). Businesses today must pay sales taxes in advance if there average monthly estimated sales tax payment exceeds $1,000. This bill would raise the threshold to $2,500, thus requiring fewer businesses to make advanced payments. The bill would not alter the ultimate amount of the tax required to be remitted.

• Business Tax Streamlining Act, Rep. Greg Wren, R-Montgomery, HB108 (referred to Commerce and Small Business). This bill would create a new online filing system to provide a “one-stop shop” for filing business personal property taxes, and would allow businesses claiming $10,000 or less in business personal property tax to file a short form that would not require itemization of their property.

• Tax Elimination Act, Rep. Jim Patterson, R-Meridianville, HB97 (referred to State Government). This bill would give the Alabama Department of Revenue the authority to suspend taxes and fees when the cost of collecting the tax exceeds the amount of revenue the tax brings in.

• Alabama Taxpayer Audit Protection Act, Rep. Wayne Johnson, R-Ryland, HB42 (referred to State Government). This bill, prompted by media reports that the IRS was targeting conservative nonprofit groups that were trying to gain tax-exempt status, would prohibit the State Department of Revenue from targeting organizations for audits based on their political leanings.

• The Healthcare Rights of Conscience Act, Rep. Becky Nordgren, R –Gadsden, HB31 (referred to Health). This bill would allow health care workers to refuse to perform or participate in a health care service that violates their conscience, limited to abortion, human cloning, human embryonic stem cell research and sterilization.

• Adoption Tax Credit Act, Rep. Paul Lee, R-Dothan, HB48 (referred to Ways and Means Education). This bill would give residents who adopt an Alabama child through private adoption or the state foster care system a one-time, $1,000 tax credit, which would apply for the year the adoption was finalized.

• Statutory Immunity for Teachers and State Employees, Rep. Mike Jones, R-Andalusia, HB64 (referred to Judiciary). This bill would provide statutory immunity to teachers and states employees from being sued while acting in their official capacity. Existing Constitutional provisions and case law provide immunity in most instances, and this bill would place that protection in the Alabama Code.

• Revolving Door Act, Rep. Ken Johnson, R-Moulton, not yet introduced. Under the current Ethics Act and interpretations of that Act, members of the Alabama House and Senate can leave their Legislative office and begin lobbying the other body (the House for resigning Senators and the Senate for resigning House members) immediately. This bill would prohibit former legislators from lobbying either house of the Legislature within two years of leaving the Legislature.

Though not part of the Republican Caucus’ official package, it is a near certainty that significant economic development legislation will be introduced this session. Governor Bentley and the legislative leadership have made it clear from the beginning of the quadrennium that job creation is their number one priority. Further, officials noted in their recent attempts to woo the Boeing Company to North Alabama that the State was in need of additional economic incentives both to recruit new companies to the state, and to retain those already here.

On January 3, Secretary of State Jim Bennett required both the Republican and Democratic Parties to end their qualifying period for candidates on February 7, two months sooner than originally planned. Three weeks into the 2014 Session, lawmakers and Constitutional officers will know whether they have credible opposition in their primary or general elections. The number of candidates facing a re-election fight, as well as who those candidates are, could alter the tone and direction of the session.

-Ted Hosp
guest contributor