One year ago, the “Week One” issue of Capitol Notes for the 2015 Regular Session began as follows: “Alabama’s Legislature began its 2015 Regular Session last Tuesday at noon. By the end of the week, two things were crystal clear: Alabama’s budget problem is serious, but no one is quite sure how to solve it.”
Without question, the same two sentences could also apply to the beginning of the 2016 Regular Session.
Legislators returned to Montgomery last week after what was, by all accounts, a tough 2015. Representatives and senators held one organizational, one regular, and two special sessions last year, and were forced to tackle a host of tough issues during the first year of the four-year quadrennium. No issue was more pressing in 2015 than the State General Fund (SGF) budget, which funds all non-education public services. Unfortunately, it appears that the SGF budget will hold the title of “most pressing issue” for two years in a row.
Even after raising an additional $160 million in revenue for the FY 2016 SGF, state agencies have already indicated that more money will be needed to maintain level services in FY 2017, which begins Oct. 1. The largest consumer of SGF dollars, the state’s Medicaid Agency, has asked for an additional $157 million for next year on top of the $685 million that they are scheduled to receive in the current fiscal year. Even smaller agencies such as the Department of Human Resources and the Department of Mental Health are requesting increases of $20 million and $7 million, respectively. In fact, when combined together, public agencies are requesting nearly $250 million in additional revenue from the SGF for FY 2017, over and above what they were appropriated in FY 2016.
While the SGF may again be the most pressing issue during this year’s session, one major difference between 2015 and 2016 is the Legislature’s apparent lack of an appetite to consider tax increases again this year. Legislators are also indicating an unwillingness to transfer money from the Education Trust Fund budget to the SGF to plug the funding hole, which is what Governor Bentley suggested they do again in FY 2017. If those two major options are truly off the table in 2016, it’s anyone’s guess how the SGF will look at the end of its legislative journey.
For an incredibly detailed presentation on the state’s budget outlook for FY 2017, see the Legislative Fiscal Office’s presentation (click here) on Alabama’s financial condition, which was given to legislators just before the beginning of session.
As always, the Alabama Bankers Association will be at the State House every single legislative day, and on many non-legislative days, serving as the eyes and ears for Alabama’s banking community during the 2016 Regular Session. We continue to appreciate the willingness of so many of our members who engage in our political advocacy work, and look forward to reporting on yet another successful legislative session going forward.
At the end of the second legislative day, 125 bills have been introduced in the House of Representatives and 144 bills have been introduced in the Senate. Some of the measures that could impact Alabama banks include the following:
Senate Bill 67, sponsored by Sen. Cam Ward (R-Alabaster): This bill, the “Alabama Consumer Lawsuit Lending Act,” would regulate the process of consumer lawsuit lending in the state. The bill includes provisions related to consumer lawsuit lending agreements as well as interest rates applicable to such agreements (currently capped at 10 percent APR).
Senate Bill 144, sponsored by Sen. Cam Ward (R-Alabaster) and House Bill 113, sponsored by Rep. Matt Fridy (R-Montevallo): This bill makes a declaratory finding that the term “transfer” in the Alabama Fraudulent Transfer Act includes transfers made pursuant to a divorce settlement or domestic settlement. While the bill merely seeks to clarify, rather than amend existing law, this bill is written as a response to a recent ruling of the Alabama Court of Civil Appeals that could potentially have a negative impact on banks.
House Bill 36, sponsored by Rep. Kyle South (R-Fayette): This bill, the “Alabama Small Business Jobs Act,” would give businesses, including banks, an income/FIET tax credit under certain conditions. Specifically, a bank headquartered in Alabama with 75 or fewer employees would receive a one-time tax credit valued at $1,500 for each employee hiring that results in a “net employee growth” from one tax year to the next.
House Bill 62, sponsored by Rep. Victor Gaston (R-Mobile): This bill would authorize a seven-year extension of the tax credit against the tax liability of certain taxpayers, including banks with an FIET liability, for the substantial rehabilitation of qualified structures. Currently, up to $20,000,000 in tax credits are available each year for rehabilitation projects involving certified historic structures (credit equals 25 percent of the qualified rehabilitation expenditures, up to $5,000,000 per project) or qualified pre-1936 non-historic structures (credit equals 10 percent of qualified rehabilitation expenditures, up to $5,000,000 per project). The tax credit program, which expired at the end of 2015, would under this legislation be renewed until Dec. 31, 2022.
The Legislature has met for two legislative days as of this writing. A Regular Legislative Session can contain no more than 30 legislative days, and all legislative days must take place on or before May 16, which is 105 days after the beginning of the session. The House of Representatives and Senate will convene today for the third legislative day. The House will begin at 1 p.m. and the Senate will begin at 2 p.m.
Questions or comments? Contact Jason Isbell, vice president of governmental and legal affairs.
