The 2016 Legislative Session Produced Strong Business and Education Results
The 2016 regular legislative session that began Feb. 2 and concluded May 4 produced legislation that was a priority for the Alabama business community and saw successful blocking of legislation harmful to Alabama business.
The Business Council of Alabama’s active 2016 State Legislative Agenda included important legal reform initiatives, improvement for our education system, responsible investment in Alabama’s transportation infrastructure, and fending off unneeded regulations and taxes that singled out business.
The legislative agenda included education/workforce development, environment and energy, health, judicial and legal reform, labor and employment, small business, and tax and fiscal policy issues.
“Our agenda is the pilot we use to navigate the shoals of each session based on the course our members chart every year,” BCA President and CEO William J. Canary said. “These legislative agendas conform to our guiding principles first envisioned when the BCA was created 31 years ago and updated throughout the succeeding decades.”
If not at the top of the list, certainly near the top of BCA-backed bills was successful passage of a constitutional amendment to enshrine Alabama’s status as a right-to-work state. Voters will go to the polls to approve the amendment this November. “The BCA strongly supports Alabama’s right-to-work status for its benefits to economic growth, industrial recruitment, and job creation,” Canary said.
The BCA was part of the conversation in favor of passage of the General Fund and Education Trust Fund budgets as they relate to business, economic development, and workforce development. This session also saw defeat of this year’s attempt to eliminate the Alabama College and Career Ready Standards, which serve Alabama’s 740,000 school children well.
A small business tax credit and port use tax credit laws were among several other pro-business tax credits that will be available to businesses.
The BCA’s Advocacy Team and volunteer leaders were actively engaged in every committee meeting where BCA-supported or opposed legislation appeared and skillfully followed each and every bill and issue until the session’s end.
“In addition to developing policy papers, working committee meetings, and bills on the floor, our Advocacy Team continued to build bridges to promote BCA’s pro-business agenda among all of the legislative caucuses and political parties,” said Mark Colson, BCA’s senior vice president for governmental affairs and chief of staff. “There were 1,005 bills filed this session, and our team was on duty 24/7 on behalf of Alabama’s business community.”
The BCA collaborated with the Alabama Hospital Association to provide a briefing for legislators and business leaders to explain the importance of the Alabama Medicaid program to hospitals, patients, and the state’s economy.
The BCA’s Tuesday Briefings hosted members of the Legislature including House and Senate leadership and Alabama’s senior member of Congress, U.S. Rep. Robert Aderholt, R-Haleyville. We also hosted legislators and other state leaders early in the session at our annual reception in Montgomery honoring leaders of state government.
2016-17 Education Trust Fund Budget Includes Education Employee Raises
The 2016-17 ETF of $6.3 billion for the fiscal year that begins Oct. 1 includes increases for business-backed initiatives compared with this year: $16 million for Pre-K will add more than 150 classrooms and enroll an additional 2,700 4-year-olds. Fully funding voluntary Pre-K is a BCA and Business Education Alliance of Alabama priority.
The bill adds $4 million for student assessment, $3 million for teacher mentoring, $2.3 million for at-risk students, $2 million to recruit career tech instructors from the private sector, $1 million for Advanced Placement, $1 million for distance learning, $400,000 for career coaches, and $200,000 for workforce development.
K-12 school employees will get raises of either 2 percent or 4 percent based on their salaries. The raise will be the first actual increase since 2008.
College and Career Ready Standards Upheld
Since their adoption in 2010, a coalition of education, business, military, parents, and community groups successfully have advocated keeping the high standards of the Alabama College and Career Ready Standards. The BCA led the charge to defeat this year’s attempt to eliminate the standards and usurp the State Board of Education’s authority to set academic standards.
Canary spoke during a public hearing on SB 60 at a Senate Education and Youth Affairs Committee. “Here we are again, asking you to not repeal something that our children need, our teachers want, the military demands, and Alabama business leaders require,” Canary said. The bill did not advance.
Alabama Schools Will Be Most Wired In Nation
The Governor signed HB 41, the Alabama Ahead Act by Rep. Donnie Chesteen, R-Geneva, which updates the WIRED Act and allows high-quality Wi-Fi broadband access in all Alabama public schools. The BCA supported this legislation.
Rep. Poole’s HB 123 appropriates money to completely provide wireless networks in all public schools, provide matching funds to local school systems that apply for federal funds to pay for providing wireless networks, or provide funds to implement a local school system’s state-approved technology that already has a wireless network.
HB 125 by Rep. Terri Collins, R-Decatur, would have created a student performance and workforce link called the Alabama Longitudinal Data System. The House passed it, but it was carried over after Senate floor debate. However, the money earmarked for the LDS program was moved to two other programs this fiscal year: $800,000 for the Governor’s Local School and School System and Financial Improvement (At-Risk) Program and $800,000 for the Governor’s High Hopes for Alabama Students Program.
ENVIRONMENT AND ENERGY
ADEM Funding, While Sparse, Still Better than Last Year in General Fund Budget
The General Fund Budget mostly maintains the FY 2015-16 appropriation reduction to ADEM: However, unlike last year, the budget does not divert nearly $1 million in permit fees collected by ADEM, which is a positive for Alabama’s regulated community. The $1.85 billion budget for FY 2016-17 also appropriates $400,000 to the Alabama Department of Environmental Management’s Concentrated Animal Feed Operations.
The BCA has been a consistent supporter of adequate state funding for ADEM in order to eliminate the need for continued fee increases imposed on the backs of Alabama’s regulated industries. All Alabamians benefit from environmental action, not just the industries that need fees to operate, fees which often cannot be passed on.
The BCA Shares Concerns Over Proposed Water Policy Bill
Sen. Arthur Orr, R-Decatur, sponsored SB 367 that would have defined four Alabama water basins for planning and managing inter-basin water transfers. The BCA’s Environment and Energy Committee expressed concerns to Sen. Orr and committee members in a letter stating that our longstanding policy concerning changes to Alabama’s water laws and policies should be based on demonstrated scientific need substantiated by verifiable data.
Currently, there is an ongoing statewide assessment of water resources including active focus panel meetings that should be completed prior to formulating or enacting any water-related legislation. The BCA supports these assessments, but the basin definition in this legislation is not necessary as the federal government has already established the hydrologic unit code system for defining basins. Any proposals should originate or at least be closely coordinated with the Alabama Water Resources Commission.
Medicaid Funding Continues to be a Major Challenge
SB 125 sponsored by Sen. Trip Pittman, R-Montrose, is the General Fund budget that was approved over the Governor’s veto. The $1.8 billion budget for FY 2016-17 would level fund most state agencies, with minor increases for the court system and National Guard.
The $700 million appropriated to Medicaid is about $85 million less than Medicaid said it needs to maintain current service levels and implement the RCO reforms that were recently approved by the federal government. Adequate Medicaid funding is still unresolved.
Medicaid could have received some short-term relief from a proposal to utilize monies from the BP Deepwater Horizon oil spill settlement to pay off state debts freeing up money for Medicaid, but this proposal, which went through several iterations, died on the last day of the session due to a lack of support in the Alabama Senate.
Alabama Medicaid Deadlines Extended
Early in the legislative session, the BCA and the Alabama Hospital Association conducted a seminar for legislators to learn more about the vital Medicaid program. The information was timely due to several looming Medicaid deadlines.
Oct. 1 was the operational deadline for the new Medicaid Regional Care Organization delivery system of managed care. But the deadline was unrealistic due to the lack of money to initiate the RCOs, the new system of delivering and managing Medicaid services for nearly 1 million Alabamians.
The RCOs got breathing room with an extension of the Oct. 1 deadline from HB 530 by Rep. April Weaver, R-Brierfield.
HB 191 by Rep. Steve Clouse, R-Ozark, extended the 5.5 percent assessment on net patient revenue currently levied on all private hospitals as a cost of doing business in Alabama for one fiscal year. The assessment was to expire Sept. 30. HB 191 updates the base year for calculating the assessment from FY 2011 to FY 2014.
During the session, the Centers for Medicaid and Medicare granted Alabama a long-awaited waiver to implement Alabama’s Medicaid reform plan that will deliver Medicaid via RCOs and focus on patient outcomes. The information was good news for Medicaid because the state could receive up to $748 million from the federal government over the next five years to implement the program.
JUDICIAL AND LEGAL REFORM
Deceptive Trade Practices Law Clarified; Protects Businesses From Class Actions
For years, businesses fought to ensure we get a fair shake instead of a shakedown from the legal system. This session saw improvements in the legal climate.
The BCA commends the Legislature for protecting businesses with passage of SB 270, the deceptive trade practices bill by Sen. Phil Williams, R-Rainbow City. SB 270 will curb proliferation of deceptive trade class-action lawsuits that might slip into court due to a 2015 ruling by a federal appellate court.
The bill was an important part of the BCA’s 2016 State Legislative Agenda. “The House and Senate deserve a heartfelt thank you from the business community for their decisive clarification to a law that unfixed could have had a dangerous effect on business,” Canary said.
Sen. Williams and Reps. David Faulkner, R-Birmingham, and Matt Fridy, R-Montevallo, deserve credit for their expert handling of the bill in committees and on their respective floors.
A recent opinion by the 11th U.S. Circuit Court of Appeals threatened to expose Alabama businesses to class-action lawsuits brought by private parties under the Alabama Deceptive Trade Practices Act. The ruling that created this problem interpreted this aspect of the statute to be “procedural” rather than “substantive,” which created a serious threat of increased litigation for business.
SB 270 reestablishes legislative intent of the ADTPA that the limitation barring private parties from bringing class-actions is a “substantive” one. The ADTPA expressly prohibits private plaintiffs from bringing an ADTPA class action. Instead, it reserves this powerful enforcement tool for the discretion of the Alabama attorney general or district attorneys.
Legislature Unable to Agree On Prison Construction Bill
Governor Bentley’s plan to borrow $800 million to build four new state prisons (three for male inmates and one for female inmates) was amended throughout the session and ultimately died on the last day. The plan relied on costs savings from anticipated efficiencies in the new facilities to pay for a 30-year bond.
SB 287 by Sen. Trip Pittman, R-Montrose, passed the Senate and House in different versions, requiring a conference report on the last day of the session. The conference report scaled down the original bill and cut the cost to $550 million that called for two men’s and one women’s prison.
The Senate concurred in the conference report after delaying the vote throughout the last day of the session. But due to the Senate’s delay in voting, the House did not have ample time to consider the conference committee report and the bill died.
House Speaker Mike Hubbard, R-Auburn, said the legislation did not have the votes to break a possible filibuster from membership and changes in a bill of such complexity were too much to take in the few hours the House had to consider them, the Montgomery Advertiser reported. The push to build new prisons is the result of extensive overcrowding and poor conditions of Alabama’s 14 state prisons and the realistic threat of the federal government mandating that Alabama construct new prisons due to these conditions.
LABOR AND EMPLOYMENT
Business Secures Employee Protections with Right-to-Work Amendment
The first item in the BCA’s 2016 Legislative Agenda’s Labor and Employment section was support for a right-to-work constitutional amendment.
Alabama’s economic development and manufacturing landscape received a major boost with passage of HB 37, the right-to-work constitutional amendment by Rep. Arnold Mooney, R-Birmingham.
Rep. Mooney and Sen. Dial, who sponsored the Senate version, expertly handled this vital measure that will ensure Alabama remains a business-friendly state and further encourages job creators to locate in Alabama and to remain and grow the jobs. “The House and Senate are to be commended for their forward thinking in order to further protect the thousands of manufacturing and tech jobs that have moved into Alabama from other states,” Canary said.
Current law already prohibits labor organizations from forcing employees to join unions and prohibits employers from denying union membership to workers who wish to join, but a constitutional amendment preserving these rights signals business that Alabama will remain a right-to-work state.
HB 37 was part of the BCA’s 2016 Legislative Agenda and was part of the House Republican Caucus’s 2016 “Right for Alabama” legislative agenda. Voters will get to approve the amendment in November and constitutionally protect Alabama as a right-to-work state.
‘Ban the Box’ Bill Needs More Work
SB 327 by Sen. Quinton Ross, D-Montgomery, would have “banned the box” on applications for state employment and for licensing authorities by restricting when and how an applicant’s criminal history could be investigated.
“Ban the box” refers to the process of eliminating the box on an application asking whether the applicant has ever been arrested, charged with, or convicted of a crime. The bill also would have required all contractors doing business with the state to meet these same restrictions, which BCA has objected to.
The BCA did not support this bill in its current form but actively worked to address numerous concerns raised by BCA members. Sen. Ross did address some of the concerns in earlier versions of the bill that had a much broader reach and more complicated compliance requirements.
The concept of “banning the box” seeks to eliminate a barrier to help ex-offenders find permanent employment. The BCA has been supportive of similar efforts, such as the 2015 prison reform package. There are solutions that have been utilized in other states that have unified stakeholders, a goal the business community shares.
However, this complicated issue, much like prison reform, deserves attention and careful study to find common ground that does not impose undue regulations or liability on the business community. The BCA has been and will continue to be engaged in an ongoing effort to educate members of the business community on this topic and related topics of ex-offenders reentering the workforce.
Legislature Protects Jobs with Uniform Minimum Wage Act
HB 174 by Rep. Faulkner prohibits local governments from setting private employer minimum wage scales.
The BCA, the Alabama Retail Association, the NFIB, and the Alabama Restaurant Association and other business groups supported Faulkner’s Alabama Uniform Minimum Wage and Right to Work Act and worked diligently and rallied support.
The BCA’s Canary, testified at a public hearing in support of Faulkner’s bill.
“Instead of raising small businesses’ labor costs and creating more barriers to entry-level employment, government should focus on policies that actually help create jobs,” Canary said. “Alabama businesses are already subject to and are complying with numerous government regulations at the federal, state and local level. This bill will prevent even more onerous regulations from being imposed on Alabama businesses.
“Governor Bentley and the legislative leadership including Sen. (Del) Marsh and Speaker (Mike) Hubbard as well as bill sponsors Rep. David Faulkner and Sen. Jabo Waggoner showed real leadership in passing this legislation in such a short time frame,” Canary said. “People’s jobs were at stake and they delivered.”
Health Savings Account State Tax Deduction Created
The BCA-supported Health Savings Account Tax Deduction bill, HB 109 by Rep. Becky Nordgren, R-Gadsden, mirrors federal law and creates a state income tax deduction for contributions to health savings accounts. Under HB 109, a new state income tax deduction will be available for contributions starting in the 2018 tax year. The BCA’s Small Business Agenda included support for Health Savings Account tax deductions for Alabama small businesses.
Small Business Hiring Tax Credit Becomes Law
The BCA applauded the Legislature for passage of HB 36, which became Act No. 2016-188. The Alabama Small Business and Agribusiness Jobs Act by Rep. Kyle South, R-Fayette, authorizes a tax credit for qualified businesses of 75 or fewer employees that hire full time workers at salaries of at least $40,000 a year.
HB 36 was part of the BCA’s 2016 Legislative Agenda and also was a priority of the House Republican Caucus. “The Business Council of Alabama recognizes that small businesses provide the majority of jobs for Alabamians, and we applaud the Legislature for recognizing the need to provide small businesses looking to add jobs with the necessary incentives they need,” Canary said.
TAX AND FISCAL POLICY
Transportation Investment Glass is Half-Full
Investing in transportation infrastructure improvement is a significant issue for Alabama’s economic well-being. The Legislature made inroads to support surface infrastructure improvement with passage of one bill in a two-bill transportation improvement package but work remains to be done on the second in a future legislative session.
The BCA and others sponsored six public hearings on Alabama’s transportation needs in order to urge legislators to enhance the investment in our roads and bridges. Local chambers of commerce and the Alliance for Alabama’s Infrastructure (AAI) partnered with the Alabama Legislature’s Joint Transportation Committee to discuss the needs of roads and bridges.
Backing by the grassroots AAI, the BCA and members of the Alabama business community, chambers of commerce, industry associations, community groups, and concerned citizens resulted in passage of SB 180 by Sen. Gerald Dial, R-Lineville.
SB 180 creates the Alabama Transportation Safety Fund that will receive designated revenues for maintenance, improvement, replacement, and construction of state, county, and municipal roads and bridges in the state.
The second part of the transportation package, HB 394 by Rep. Mac McCutcheon, R-Huntsville, would adjust Alabama motor fuel revenues to match the average of the user fees of bordering states and invest nearly $200 million in Alabama roads and bridges. The last time the Legislature increased the investment in Alabama’s highways and bridges was in 1992.
Throughout the debate on infrastructure, not a single legislator disputed the fact that Alabama desperately needs to invest in Alabama’s infrastructure. The BCA, the AAI and their members will continue to promote the importance of investing in infrastructure and work with all parties to support responsible solutions.
Learn more at www.alabamaroads.org.
Port Use Tax Credit Becomes Law Early
One of the first bills signed into law was the Alabama Renewal Act, HB 34 sponsored by Rep. McCutcheon. It authorizes qualifying Alabama businesses that use Alabama’s port facilities to get a tax credit beginning Oct. 1, 2016.
The BCA supported this legislation.
HB 34 creates a number of new programs to enhance Alabama as a place to do business, including a tax credit for increased use of the state’s port facilities that addresses economic development and creates the Renewal of Alabama Commission that will consider credit applications.
Port credits issued for economic development project agreements may have allocations made by the governor and approved by the commission if a company commits to invest at least $20 million and create 75 jobs. The nine-member commission will oversee and approve the administration of the credits and would annually report to the Legislature.
Taxpayers’ Bill of Rights Law Gets Tweak
The Senate and House updated the Alabama Taxpayers’ Bill of Rights and Uniform Revenue Procedures law with passage of SB 335 by Sen. Paul Sanford, R-Huntsville and in the House by Rep. Paul Lee, R-Dothan. The new law will restrict aggressive third-party auditing and collecting firms from mistreating businesses when collecting local sales and use taxes and protect businesses from becoming overburdened by the audit process. The bill adds specific requirements and disclosures that would have to be made by third-party auditing and collecting firms when they are contracted by a municipality or county.
Apprenticeship Tax Credit, Income Tax Reporting Alignment, and Tax Increment Bills Approved
The Legislature also passed SB 90, the Apprenticeship Tax Credit Act of 2016 by Sen. Orr. Beginning with the tax year starting Jan. 1, 2017, SB 90 authorizes a tax credit of $1,000 per employee hired as an apprentice, up to five employees per year. The tax credit will be allowed up to four years for an apprentice employee who is on the job at least seven full months a year. Businesses that hire apprentices will benefit from the tax credit while an apprentice will benefit by being employed.
The BCA supported SB 90.
SB 263 by Sen. Quinton Ross, D-Montgomery, aligns state income tax reporting dates with the federal deadlines. This change will make it easier for state income tax filers by saving time and duplication. This bill was a priority for the Alabama Society of CPA’s and is a part of BCA’s Tax and Fiscal Policy agenda.
Rep. Anthony Daniels, D-Huntsville, successfully sponsored HB 311, a state tax increment constitutional amendment for local governments. HB 311 will allow counties and municipalities that use tax increment districts within a Major 21st Century Manufacturing Zone to redevelop property to determine, in their discretion, the sale price of the property. It goes to voters for approval.
Mandatory Unitary Combined Reporting Bill and a Non-Tangible Tax Bill Are Defeated
The business community continued to have issues with SB 202, a mandatory unitary combined reporting bill by Sen. Linda Coleman-Madison, D-Birmingham.
The BCA has consistently expressed opposition to the arbitrary tax increase on business. The Department of Revenue commissioner has voiced support of SB 202 and deems it as “closing corporate loopholes.” SB 202 did not advance beyond committee introduction.
SB 242 by Sen. Pittman is a new effort by the ADOR to collect tax on non-tangible goods. Last year the ADOR proposed and withdrew a rule to subject digital transmissions such as movies, television programs, and music to Alabama’s rental tax. The ADOR has taken other administrative action by rescinding prior rulings in an attempt to unilaterally tax digital goods.
Roller Coaster BP Settlement Proposal Dies
Throughout the session, the Legislature debated proposals that would allow the state to collect a lump-sum payment on its share of BP’s settlement with Gulf Coast states over the 2010 oil spill rather than receiving roughly $1 billion spread out over 20 years as currently expected.
Sen. Bill Hightower, R-Mobile, carried one of the versions, which was a constitutional amendment that if passed would have repaid the $161.5 million to the General Fund Rainy Day Account and then invested around $500 million in on-time infrastructure money. Half of it would have gone to Mobile and Baldwin counties. While his version passed the Senate, it did not have enough support to be considered in the House.
Instead, HB 569 by Rep. Steve Clouse, R-Ozark, moved late in the session. It would have created the Alabama Economic Settlement Authority and authorized a bond issue backed by the state’s share of the BP oil spill money in order to fully repay $161.5 million to the General Fund Rainy Day Account, $287 million of the outstanding $422.4 million debt to the Alabama Trust Fund, and for unspecified road projects in southwest Alabama totaling nearly $200 million. By paying back the trust fund, the bill would have freed up $70 million for Medicaid.
The bill passed the House and went to the Senate Finance and Taxation General Fund Committee on the next to last day of the session. The bill died in the committee due to differences between senators mainly from north Alabama who wanted to see less money going to Baldwin and Mobile counties and more money used to pay off debt and spread around the state for infrastructure projects.
BCA supported both the Hightower version and the compromise Clouse version of the BP settlement. BCA President and CEO William Canary testified in support of the Hightower version at the public hearing of the House Ways and Means General Fund Committee.
The BCA maintains that if either version of the BP settlement bill would have passed along with HB 394 by Rep. McCutcheon, an additional $200 million would have been invested annually in Alabama’s infrastructure, resulting in the Legislature positioning itself as responsibly paying off the state’s debt, fixing Alabama’s roads and bridges, and providing the necessary funds for Medicaid. Unfortunately, neither bill passed.
Historic Tax Credit Bill Dies Despite Overwhelming Support
Even with 32 of 35 Senators signed on as co-sponsors, HB 62 by Rep. Victor Gaston, R-Mobile, the Historic Tax Credit bill, died without debate in the Senate. HB 62 as amended would have extended tax credits for rehabilitating qualified structures for seven years, until 2022. The existing tax credit will expire this month.
Despite widespread support for the bill from business, community and economic development groups and the evidence that it has spawned downtown revitalization and job creation, the Senate killed the legislation by not taking the House bill out of the basket.
Senate President Pro Tem Del Marsh, R-Anniston, stated in an article on AL.com, “I am not convinced the credits are advantageous to the state,” Marsh said. “I want to make sure we are creating a program that (doesn’t just benefit) large corporations and big developers.”
The BCA is a member of a coalition advocating for this important legislation. Learn more about how extending this tax credit benefits Alabama at advancealabama.org.
The House was fully complemented this session with the installment of House District 80 Rep. Chris Blackshear, R-Smiths Station, and House District 5 Rep. Danny Crawford, R-Athens. Blackshear was elected in a special election to fill the unexpired term of the late Rep. Lesley Vance, R-Phenix City, and Rep. Crawford was elected in a special election to fill the unexpired term of the late Rep. Dan Williams, R-Athens.
Office of Minority Affairs Established
HB 534 by Rep. John Knight, D-Montgomery, makes the Governor’s Office on Minority Affairs a cabinet-level position. Governor Bentley created the office in March and named Mobile native Nichelle Williams Nix, an attorney formerly with Maynard Cooper & Gale, as director.
Governor Appoints the BCA’s Leah Garner to Health Literacy Partnership of Alabama
Governor Bentley appointed BCA Director of Governmental Affairs and Advocacy Leah Garner to the Health Literacy Partnership of Alabama, which he created by executive order on April 20. Ms. Garner and other members of the Partnership are charged with recommending to the Governor “ways to improve the health literacy of Alabamians.”
State School Board Appoints Interim Superintendent
The Alabama State School Board this session named Dr. Philip Cleveland as Interim School Superintendent to succeed retired Superintendent Dr. Tommy Bice. Dr. Cleveland has been serving as Alabama Director of Career and Technical Education and Workforce Development for the Alabama Department of Education.