The Alabama Legislature convened last Tuesday to start the 2022 Regular Legislative Session. In addition to their usual activities of crafting both the General Fund and Education Trust Fund budgets, lawmakers will also consider a couple of tax-reduction bills introduced by Sen. Arthur Orr (R-Decatur). Gov. Kay Ivey is expected to call a special session possibly as early as today to allow lawmakers to direct their focus to allocating funds from the American Rescue Plan Act.
So far, no banking-related legislation has been introduced. Our governmental relations team continues to monitor all legislation that has been filed. Later this week ABA will host a meeting for our Legal and Governmental Affairs Committee.
American Rescue Plan Act Allocation
Allocating around $580 million in federal American Rescue Plan Act (“ARPA”) funding was the focus of the first week of the 2022 regular session and will likely dominate the next few weeks. The governor is likely to call the legislature into a special session to ensure the issue is addressed in a manner with as few distractions as possible.
The authorized uses of the ARPA funds generally include rural broadband, water and sewer infrastructure, public health, and pandemic relief. While broadband expansion continues to be a priority of many policymakers (the newly formed Digital Expansion Authority met last Monday to approve a statewide plan), water and sewer needs also seem to be a priority for many communities around the state. ARPA also includes a separate $192 million Capital Projects Fund, which will be allocated in the upcoming special session. The state will receive another $1.1 billion installment in the summer of 2022. Those funds will be allocated once they are received.
Notably, the legislature previously allocated about $400 million in ARPA funds for prisons and $80 million for hospitals and nursing homes during last year’s special session.
According to a draft plan obtained by the Alabama Daily News, the legislature will consider the following allocation:
Budgets
After ARPA funding is appropriated, attention will likely turn to the state budgets. Both the General Fund and Education Trust Fund budgets are expected to be in good shape and should see revenue increases, although appropriators are mindful that federal stimulus has created a temporary circumstance. The goal seems to be passing fiscally conservative budgets that remain stable after federal COVID stimulus money runs out. Gov. Kay Ivey’s proposal includes $2.7 billion for the General Fund and $8.3 for the Education Trust Fund. If realized, those figures would represent increases of about $300 million and $627 million, respectively. The governor’s budget includes 4% pay raises for teachers and state employees.
Economic Development and Tax Incentives
SB 57 by Senator Arthur Orr is a bill worth watching. The bill establishes new reporting requirements for tax incentive programs and also terminates or “sunsets” all incentive programs that currently aren’t subject to a sunset provision.
Specifically, the bills say the following:
“Notwithstanding any law to the contrary, any tax incentive, credit, or abatement as described in Title 40 of the Code of Alabama 1975 that does not have a prescribed expiration, conclusion, or repeal date, shall be repealed on Dec. 31, 2023, unless extended by an act of the Legislature during the 2023 Regular Session. The Department of Revenue shall develop a list of tax incentives, credits, or abatements subject to the sunset provisions of this section.”
As currently written, this legislation is very broad, and the impact/consequences are unknown at this time.
NIL
Also of note, HB 76 passed out of the House State Government Committee last Wednesday. It would repeal the name, image, and likeness (“NIL”) law that the Legislature passed last year. Since last year’s passage, the NCAA has adopted blanket guidelines that have proven less restrictive than Alabama’s 2021 law. By continuing under the Alabama law passed last year, athletes in Alabama would be at a disadvantage relative to athletes in states that simply operate according to the new NCAA guidelines, thereby undercutting the original purpose of the law.
A number of committee meetings are planned for today. The House will convene at 2 p.m. and the Senate at 3 p.m.
