Alabama Legislature Passes Budgets for Fiscal Year 2026
State General Fund
Last week the Alabama Legislature fulfilled its primary constitutional duty by approving budgets to fund state government and education for the fiscal year beginning Oct.1. These budget bills have now been sent to Gov. Kay Ivey for her consideration.
The $3.7 billion General Fund budget, spearheaded by Budget Chairmen Rep. Rex Reynolds and Sen. Greg Albritton, received unanimous approval in the Senate. However, passage was delayed by about four-and-a-half hours after Sen. Rodger Smitherman requested the reading of the entire 125-page bill. Key allocations within the General Fund include:
- $826 million for the Department of Corrections
- $159 million for the Department of Public Health
- $143 million for the Alabama Law Enforcement Agency, with $3 million specifically for the Alabama Metro Crime Suppression Unit
- $1.179 billion for the Alabama Medicaid Agency
- $184 million for the Alabama Unified Judicial System
- $90.6 million for the Alabama Board of Pardons and Paroles, a decrease of approximately 4% due to legislative concerns regarding the board’s responsiveness on parole matters.
The General Fund also includes a $40 million conditional appropriation for the Department of Corrections’ capital improvement fund, contingent on higher-than-expected revenue. Additionally, it sets the employer rate for state employee health insurance at $1,025 per month per employee.
House Bill 185, providing supplemental General Fund appropriations for the current fiscal year, also passed.
Highlights of this bill include:
- $12.6 million for the Alabama Unified Judicial System
- $50 million for the Department of Finance, sourced from federal COVID-related funds, to support the Alabama Innovation Corporation and Small Business Credit Initiative Fund
- Authorization for the Department of Transportation to increase bond repayments to $126.2 million, up from $113.2 million
- $2 million for the Department of Environmental Management
Education Trust Fund
The Education Trust Fund (ETF) budget, the result of the work of Budget Chairmen Rep. Danny Garrett and Sen. Arthur Orr, also received legislative approval and are with the governor. The main ETF bill allocates $9.09 billion, with the majority (67.99%) directed toward K-12 education, 25.8% for higher education, and 6.2% for other programs and agencies.
Key allocations within the main ETF budget include:
- $5.535 billion for local boards of education and the Foundation Program, which funds teachers and local public schools
- $213 million for the Department of Early Childhood Education and pre-K programming
- $622 million for the Alabama Community College System
- $16.8 million for the Department of Workforce for education-related training programs
- $1.776 billion for Alabama colleges and universities
While the ETF does not include a pay raise for educators, it does allocate approximately $100 million in increased funding for the Public Education Employees’ Health Insurance Plan (PEEHIP).
Two supplemental appropriations bills related to the ETF, SB111 and SB113, also passed.
These include:
- $55.8 million for the Alabama Community College System
- $28 million for textbooks for local K-12 schools
- $15 million for school safety training, services, and supplies
- $10.3 million for charter school grants
- $30 million for summer and after school programming
- $5 million to the Department of Workforce for a state veterans transition public/private partnership
- $375 million to the Renewing Alabama’s Investment in Student Excellence (RAISE) Fund, aimed at providing additional funding for student groups with higher educational costs
- $80 million in additional funding for the CHOOSE Act, Alabama’s education savings account program (supplementing the $100 million in the main ETF bill).
With the budget bills now in the governor’s hands, the “Budget Isolation Resolution” (BIR) has been lifted for pending legislation. The BIR, which requires an extra vote before floor consideration, is intended to encourage earlier budget passage. Its removal is expected to expedite the legislative process as the session concludes.
Senate Moves Forward on Tax Cut Package
The Senate advanced four tax cut bills sponsored by Rep. Danny Garrett out of Senate Committee that have been pending since their passage in the House in mid-March. The bills are now pending approval by the full Senate.
The proposed tax cuts include:
- HB386: Sales Tax Reduction on Food
This bill aims to lower the state sales tax on food from 3% to 2%, projected to save Alabamians around $122 million annually. It eliminates the previous requirement linking this tax reduction to a specific growth level in the Education Trust Fund budget. Furthermore, it would enable local cities and counties to independently reduce their sales tax on food if they choose.
- HB387: Manufacturing Machinery Tax Cut
While the original House bill focused on allowing municipalities to lower grocery sales taxes, the Senate has substituted that provision. The amended bill now proposes reducing the state sales tax on manufacturing machinery from 1.5% to 1.25%. This change is estimated to save businesses approximately $11 million per year. Sen. Orr indicated that this amendment aims to provide tax relief to businesses, complementing the individual savings addressed in other bills.
- HB388: Increased Retirement Income Exemption
This bill seeks to double the state’s income tax exemption for Alabamians aged 65 or older who withdraw funds from 401(k) or similar retirement plans, raising it from $6,000 to $12,000. The Senate has modified the implementation, proposing a phased increase of $2,000 per year over three years until the $12,000 cap is reached. Once fully in effect, this measure is projected to save taxpayers approximately $45 million annually.
- HB389: Expansion of Standard and Dependent Deductions
This bill intends to increase the number of taxpayers eligible for the maximum standard deduction. It also broadens the range of the deductible amount and increases dependent exemptions. The estimated annual taxpayer savings of this bill once fully implemented is $25.1 million.
The overall package of these tax cuts is reported to be near revenue neutral due to the Alabama Legislature’s decision to allow the state income tax exemption for all overtime earnings to expire later this summer.
House Passes Birmingham Water Works Board Reform Bill, Heads to Governor’s Desk
Following its approval in the Senate last week, Sen. Dan Roberts’ bill aimed at restructuring the Birmingham Water Works Board (SB330) has now swiftly passed the House. The bill received approval from the House Commerce and Small Business Committee on Tuesday.
On Thursday, the House prioritized the bill by placing it at the top of its special order calendar. Rep. Jim Carns carried the bill, which was approved by a vote of 66-27 after several hours of debate. Concerns were primarily raised by Democrats who characterized the bill as a “power-grab” by other municipalities and counties. Rep. Carns responded by presenting statistics alleging mismanagement and fiscal irresponsibility by the utility, one of the largest in the state.
If signed into law by Gov. Ivey, the bill will implement the following changes to the Birmingham Water Works Board:
- Board Size Reduction: The board will be reduced from nine members to seven.
- Appointment Authority Shift: The number of appointees by the Birmingham City Council will decrease from six to one, with the Governor and other state officials gaining new appointment authority.
- Expertise Requirement: New board members will be required to possess expertise in engineering and business.
ALFA Insurance Health Plan Proposal Clears Legislature
A contentious bill this legislative session, proposed by the Alabama Farmers Federation (ALFA) to allow the sale of health care plans to its members, has now received final approval from the Legislature. ALFA introduced the bill to address the challenges faced by some Alabama farmers who lack employer-provided insurance and whose income exceeds the threshold for significant subsidies under the Affordable Care Act.
ALFA has argued that the high cost of traditional insurance is deterring young individuals from pursuing farming and causing financial strain on current farmers. They contend that their proposed health care plans would offer a more affordable and flexible alternative.
An amendment proposed by Sen. Bobby Singleton, which would have required ALFA to cover individuals with pre-existing health conditions, was unsuccessful. Following the failure of this amendment, the Senate passed the bill by a vote of 30-2, with two abstentions. The legislation now moves to Gov. Ivey for her signature.
“Phone Filter” Bill Heads to Governor After Final Approval
A bill sponsored by Sen. Clyde Chambliss, SB186, which mandates automatic content filters on tablets and smartphones activated by minors during the initial device setup, has received final legislative approval and is now headed to Gov. Ivey. Under the provisions of this bill, manufacturers selling smartphones or tablets without this automatic filter feature could face potential liability pursued by the attorney general.
A bill requiring app store providers and developers to implement age verification and parental consent for new app downloads, purchases, and in-app transactions is still under consideration in the House State Government Committee.
House Approves Amended Wire Transfer Reporting Bill
The House has passed a significantly altered version of Rep. Jennifer Fidler’s HB297, a bill initially proposed to impose a fee on wire transfers by undocumented immigrants to other countries. The amended bill was sent to the Senate on Tuesday.
The original bill sought to levy a 4% fee on international money transfers originating from Alabama and offer a corresponding income tax credit to Alabama taxpayers who paid such fees. However, during committee review, House members substantially modified the bill. The revised legislation now focuses on enhanced reporting requirements for wire transfer companies, including:
- Record Keeping: Mandating wire transfer companies to retain records for five years on any single transaction exceeding $1,000.
- Large Cash Transaction Reporting: Requiring the reporting of all cash transactions totaling $10,000 or more from the same customer within a single business day to the Alabama Securities Commission (ASC).
- Suspicious Cash Transaction Reporting (Single): Obligating the reporting of any individual cash transaction deemed suspicious to the ASC within 15 days.
- Suspicious Cash Transaction Reporting (Aggregate): Requiring the reporting of the total amount of suspicious cash transactions reaching $2,000 or more within a 30-day period to the ASC.
The amended bill passed the House with an 83-2 vote, with 15 abstentions. With only three legislative days remaining in the session, the bill must now be swiftly considered and passed by a Senate committee and the full Senate.
“Lulu’s Law” Establishing Shark Alert System for Alabama Beaches Passes
A bill sponsored by Rep. David Faulkner, HB437, has received final unanimous approval in the Senate on Thursday. Nicknamed “Lulu’s Law” in honor of Lulu Gribbin, a Mountain Brook teenager injured by a shark bite in Florida last year, the bill will establish a statewide alert system for confirmed shark attacks near Alabama beaches. Similar in function to an Amber Alert, the system will send notifications to individuals’ phones and will be managed and overseen by the Department of Conservation and Natural Resources. The bill now moves to Gov. Ivey for her signature.
The Alabama Legislature concluded its 27th legislative day last week, leaving just three days remaining in the 30-day maximum for the 2025 session. Lawmakers are scheduled to reconvene tomorrow for their 28th legislative day. The final two legislative days are anticipated to be May 7 and May 14.
Our governmental relations team is tracking the following bills:
| Bill | Sponsors | Title | Last Action | Latest Version |
| AL 2025rs HB 297 |
Fidler | Cash transactions; report certain cash transactions to Alabama Securities Commission required (Banking and Insurance (Senate)) | Senate, May 1, 2025: Pending Committee Action in Second House (Banking and Insurance) | Engrossed |
| AL 2025rs HB 610 |
Harrison | Constitutional Amendment; authorizing Legislature to establish a state bank; create a commission to operate bank or designate a state agency to oversee its operations (Financial Services (House)) | House, Apr 24, 2025: Pending Committee Action in House of Origin (Financial Services) | Introduced |
| AL 2025rs SB 282 |
Barfoot | Virtual currency, declares preemption of virtual currency or cryptocurrency regulation by the Legislature and exempts virtual currency from ad valorem tax
Senate Calendar: Regular Calendar (May 06, 2025) Position: 151 |
Senate, Apr 17, 2025: Read for the Second Time and placed on the Calendar (Finance and Taxation General Fund) | Introduced |
| AL 2025rs HB 587 |
Shaw | Information Technology Auditors, qualifications for being hired to perform audits on state chartered financial institutions specified (Financial Services (House)) | House, Apr 17, 2025: Pending Committee Action in House of Origin (Financial Services) | Introduced |
| AL 2025rs HB 483 |
Shaw | Virtual currency, declares preemption of virtual currency or cryptocurrency regulation by the Legislature and exempts virtual currency from ad valorem tax
House Calendar: Regular Calendar (May 06, 2025) Position: 71 |
House, Apr 17, 2025: Read for the Second Time and placed on the Calendar (Ways and Means General Fund) | Introduced |
| AL 2025rs HB 396 |
Paschal | Taxation and Revenue; Homestead ad valorum taxes of certain veterans prohibited from inclusion in debt-to-income ratio
Senate Calendar: Regular Calendar (May 06, 2025) Position: 154 |
Senate, Apr 17, 2025: Read for the Second Time and placed on the Calendar (Finance and Taxation General Fund) | Introduced |
| AL 2025rs SB 130 |
Melson | Financial Institutions and Businesses; authorizes gold and silver bullion and coins as legal tender | Senate, Apr 14, 2025: Enacted | Act Number 2025-123 |
| AL 2025rs HB 484 |
Shaw | Public Blockchain, creation of; inclusion of certain state expenditures. (Ways and Means General Fund (House)) | House, Apr 8, 2025: Re-referred to Committee in House of Origin (Ways and Means General Fund) | Introduced |
| AL 2025rs SB 281 |
Shelnutt | Consumer Protection; platforms providing services allowing employees to access earned income prior to paycheck not considered a lender or debt collector; standards on platforms imposed
Senate Calendar: Regular Calendar (May 06, 2025) Position: 96 |
Senate, Apr 3, 2025: Read for the Second Time and placed on the Calendar (Banking and Insurance) | Introduced |
| AL 2025rs SB 284 |
Barfoot | Public Blockchain, creation of; inclusion of certain state expenditures. (Banking and Insurance (Senate)) | Senate, Apr 1, 2025: Pending Committee Action in House of Origin (Banking and Insurance) | Introduced |
| AL 2025rs SB 283 |
Barfoot | State Treasurer, investment of funds in digital assets (Banking and Insurance (Senate)) | Senate, Apr 1, 2025: Pending Committee Action in House of Origin (Banking and Insurance) | Introduced |
| AL 2025rs HB 482 |
Shaw | State Treasurer, investment of funds in digital assets (Ways and Means General Fund (House)) | House, Apr 1, 2025: Pending Committee Action in House of Origin (Ways and Means General Fund) | Introduced |
| AL 2025rs HB 418 |
Kiel | Financial Institutions and Insurers; using social credit score to discriminate prohibited; violations of insurers an unfair trade practice; fines, penalties and remedies authorized (Financial Services (House))
Companion Bills: SB 228 |
House, Mar 6, 2025: Pending Committee Action in House of Origin (Financial Services) | Introduced |
| AL 2025rs SB 228 |
Jones (A) | Financial Institutions and Insurers; using social credit score to discriminate prohibited; violations of insurers an unfair trade practice; fines, penalties and remedies authorized (Banking and Insurance (Senate))
Companion Bills: HB 418 |
Senate, Mar 5, 2025: Pending Committee Action in House of Origin (Banking and Insurance) | Introduced |
| AL 2025rs SB 77 |
Weaver | International wire transfers; fee on wire transfers imposed; income tax credit for wire transfer fees paid, authorized; Securities Commission and Revenue Department to administer
Senate Calendar: Regular Calendar (May 06, 2025) Position: 3 |
Senate, Feb 13, 2025: Carried Over to the Call of the Chair | Introduced |
| AL 2025rs SB 141 |
Butler (T) | Financial Institutions; prohibit fee for periodic paper billing statements (State Governmental Affairs (Senate)) | Senate, Feb 11, 2025: Pending Committee Action in House of Origin (State Governmental Affairs) | Introduced |
| AL 2025rs SB 29 |
Elliott | Government issued licenses, permits, and certifications; time frame imposed for issuing licenses etc.; exceptions provided
Senate Calendar: Regular Calendar (May 06, 2025) Position: 5 |
Senate, Feb 11, 2025: Read for the Second Time and placed on the Calendar (County and Municipal Government) | Introduced |
| AL 2025rs HB 192 |
Shirey | International wire transfers; fee on wire transfers imposed with proceeds for ELL instructors; income tax credit for wire transfer fees paid, authorized; Securities Commission and Revenue Department to administer (Ways and Means Education (House)) | House, Feb 5, 2025: Pending Committee Action in House of Origin (Ways and Means Education) | Introduced |
| AL 2025rs SB 17 |
Coleman (M) | Digital assets, prohibits the state from certain actions related to digital assets and exempts certain actions from classification as a security or money transfer (Banking and Insurance (Senate)) | Senate, Feb 4, 2025: Pending Committee Action in House of Origin (Banking and Insurance) | Introduced |
