Wednesday, Sept. 17, 2015
Six Months in the Making:
Alabama Has a General Fund Budget
After a regular session, two special sessions and with only 14 days left before the state’s budget year begins, the Alabama Legislature on Wednesday adopted a $1.76 billion general operating budget for our state. The governor has indicated he will sign the budget and avert a partial state government shut down.
The adopted budget (HB1) for the fiscal year beginning Oct. 1 is more than $80 million less than the current spending plan. It level funds some agencies such as Medicaid, Corrections, Mental Health and Human Resources, while cutting others by 5.5 percent or more.
In the second special session of the year, lawmakers added $166 million in new revenue for the General Fund:
- an $80 million transfer of use taxes (HB30) from the education budget to the General Fund coupled with freeing money from the education budget’s Rolling Reserve Act for classroom use (HB29).
- $70 million through the combination of a 25-cent-per-pack increase in cigarette taxes benefitting Medicaid and a shift of nicotine vapor products sales taxes from the education to the general fund.
- $16 million from provider taxes, also for Medicaid.
The Legislature rejected or put aside several taxes including unitary combined reporting (SB12), a $22.5 million annual increase in business privilege taxes (HB21), a $19.5 million annual increase in vehicle title fees (HB14) and a $6.1 million annual increase in vehicle rental and lease taxes (HB15).
Avoiding discussion altogether was the elimination of the income tax deduction for the Federal Insurance Contribution Act, or FICA, which was part of the governor’s call for the special session.
Many of those taxes could reappear when the Legislature returns in February for the 2016 regular session.
Cigarette Tax, Shift of Nicotine Vapor
Product Sales Taxes with Governor
On the 7th and final day of the special session, Alabama lawmakers sent the governor a 25-cent-per-pack cigarette tax increase and a shift in where sales taxes for nicotine-containing vapor products go. If the governor signs HB3 by Rep. Connie Rowe, R-Jasper, into law as expected, it takes effect Oct. 1.
The bill raises the per-pack cigarette tax from 42.5 cents to 67.5 cents and also decreases the tobacco tax stamp discount for wholesalers from 7 percent to 4.75 percent. The 25-cent-per-pack tax increase, an estimated $66.5 million, which tobacco wholesalers pay through the purchase of tax stamps, is earmarked for the state’s Medicaid agency. The increase does not impact e-cigarettes, cigars and other tobacco products.
An amendment by Sen. Arthur Orr, R-Decatur, does direct sales tax revenue from nicotine vapor products, an estimated annual $3 million to $5 million, to the General Fund budget, increasing the total annual General Fund gain to $70 million. Sales taxes retailers collect at the cash register for cigarettes will continue to go to the Education Trust Fund.
Orr’s amendment also imposes a new floor-stock tax, which again is levied on the wholesaler, not the retailer. It captures the difference between the tax that was paid prior to Oct.1 at the lower rate, and the higher tax that takes effect Oct. 1.
By a six-vote margin, the Alabama Senate gave final approval Tuesday to adding 15 cents to the provider tax on every prescription filled in Alabama for two years. HB8 by Rep. Elaine Beech, D-Chatom, awaits the governor’s signature to become law.
Alabama’s pharmacists would send 25 cents, rather than the current 10 cents, to the state every time they fill the more than 92.3 million prescriptions filled each year, under the bill. The per-prescription tax, which is paid by pharmacists, not consumers, would be retroactive to Sept.1, with the September tax due to be paid by Oct. 20. Should the Centers for Medicare and Medicaid Services determine that the provider tax is not eligible for a federal match, the 15-cent increase will cease, the bill states. Also, according to the bill, by Oct. 30, Medicaid will ask CMS for an “appropriate increase in the pharmacy dispensing fee.” Beech told lawmakers the intent is to increase the dispensing fee from $10.64 to $13.90. Medicaid would see a net gain of $8 million, according to the bill’s fiscal note. Lawmakers also voted to increase taxes on nursing homes by $400 per bed, generating another $8 million annually for Medicaid.
Ban on Local Minimum Wages
in Alabama Fails to Get a Floor Vote
Legislation that would have prohibited cities and counties from setting minimum wages for private employers made it to the House floor during the special session, but the body never voted on it. HB27 by Rep. David Faulkner, R-Mountain Brook, would have negated a recent vote by the Birmingham City Council to set a minimum wage that applies only to that city. In August, the Council voted to have a Birmingham-only minimum wage of $8.50 beginning in July of 2016, increasing to $10.10 in July 2017. Faulkner argued a patchwork of city wage laws causes a hardship on businesses and would cost jobs. Alabama has no state minimum wage and follows the federal minimum wage.
Senate Fails to Vote on Resolution
Calling for an End to Predatory ADA Lawsuits
The Alabama Senate twice brought up a House-passed joint resolution calling on Congress to reform the Americans with Disabilities Act to reduce predatory lawsuits, but never took a vote on the measure during the special session. “For those violations that truly are technical and do not deny an individual with a disability the opportunity to gain access to a business, there should be a right for the business to cure the violation before being sued,” stated HJR17 by Rep. Chris Pringle, R-Mobile.
ADA lawsuits have been on the rise since 2014. “Retailers and restaurateurs have been hit particularly hard by these lawsuits, in which disabled individuals claim to have been denied similar access and enjoyment in places of public accommodation due to conditions that did not meet federal regulations for accessibility. The costs of repairs are generally minor, but getting rid of the lawsuit will generally require thousands of dollars in settlement costs and attorneys’ fees,” employment lawyer Whitney Brown said in an article written earlier this year for the Alabama Retail Association’s newsletter on this growing problem.
NEXT LEGISLATIVE DAY
The Alabama Senate and House will convene at noon Tuesday, Feb. 2, 2016, for the Legislature’s 2016 regular session.