Special Session Ends: Budget Passed and Signed by the Governor

When the gavels fell around 10 p.m. on Wednesday, the Alabama Legislature closed its second special session of 2015 ending a months-long debate over whether the Legislature would pass a State General Fund budget before Oct. 1, the beginning of next fiscal year. In one of the most contentious special sessions in memory, representatives and senators were finally able to cobble together enough new revenue to fund the state’s non-education expenses at a time when many elected officials were less than a year removed from running for office on a “No New Taxes” pledge.

The budget itself – HB1 by Rep. Steve Clouse (R-Ozark) – appropriates $1.76 billion from the State General Fund for FY2016, a reduction of about $83 million, or 4.5 percent, from this year. Certain state agencies – the Medicaid Agency; the Mental Health, Human Resources, and Corrections Departments; and the Unified Judicial System – were level-funded, but most state agencies received funding cuts of at least 5.5 percent. The bill passed the House 70-21 and the Senate 23-9.

In the end, the Legislature sent the following five bills to Gov. Bentley that made it possible for the State General Fund to have $166 million in new revenue:

  • HB3 by Connie Rowe (R-Jasper) increased cigarette taxes by 25 cents per pack, generating an additional $70 million for the State General Fund. This bill passed the House 52-42 and the Senate 21-13.
  • HB8 by Elaine Beech (D-Chatom) increased by 15 cents the supplemental privilege tax on each prescription filled or refilled during fiscal years 2016 and 2017, generating an additional $8 million for the State General Fund for those years (these funds were earmarked for Medicaid). This bill passed the House 53-38 and the Senate 19-13.
  • HB12 by Steve Clouse (R-Ozark) increased by $401.28 the supplemental bed tax on each bed in a nursing home facility in the state in fiscal years 2016 and 2017, generating an additional $8.4 million for the State General Fund for those years (these funds were earmarked for Medicaid). This bill passed the House 54-36 and the Senate 20-11.
  • HB29 by Bill Poole (R-Tuscaloosa) modifies provisions of the state’s Rolling Reserve Act to make additional revenue available to the Education Trust Fund, which lost revenue due to HB30. This bill passed the House 83-16 and the Senate 25-9.
  • HB30 by Bill Poole (R-Tuscaloosa) changes the distribution of state use taxes currently collected and deposited into the Education Trust Fund and the State General Fund, providing an additional $80 million to the State General Fund. This bill passed the House 72-25 and the Senate 21-11.

As expected, Gov. Bentley signed the budget into law the day after it was passed.

On the banking front, there were two bills – HB13 by Rep. Lynn Greer (R-Rogersville) and HB21 by Rep. Mike Hill (R-Columbiana) – that would have increased the business privilege tax paid by every business organized or operating in Alabama, including banks. The association worked feverishly prior to the session to make sure that the impact of these bills on the banking industry was in proportion to their impact on other business sectors. Neither of these bills passed the House of Representatives.

Additionally, in the waning hours of the session, one budget proposal circulated around the State House would have transferred $500,000 from the State Banking Department’s Bank Assessment Fund to the State General Fund. The association acted quickly arguing that transferring these funds was nothing more than a back-door tax on Alabama banks. Moreover, we argued that while the Legislature may have statutory authority to take funds from certain agencies, they lacked the authority to take these funds from the State Banking Department. Our argument worked, and an amendment was added on the Senate floor that eliminated the transfer of funds from the State Banking Department. Sen. Slade Blackwell (R-Montevallo), chairman of the Senate Banking and Insurance Committee, sponsored the amendment, which passed on a voice vote. Special thanks goes to Sen. Steve Livingston (R-Scottsboro) and Sen. Jabo Waggoner (R-Vestavia Hills) for their vocal support of the amendment.

Barring any other special legislative sessions, the Legislature will next convene for its regular session on Feb. 2, 2016.


Questions or comments? Contact Jason Isbell, ABA’s Vice President of Legal and Governmental Affairs, at jisbell@alabamabankers.com.