Goat Hill Report-Week ending April 19, 2024

The Alabama legislature completed Days 22 and 23 of the 2024 session this week, leaving seven days out of the maximum 30 legislative days. The session is expected to wrap up by early to mid-May, but no later than May 21. Details of this week’s action are provided below.

Workforce Development Package Update
As a follow up to the previous report on the workforce development package introduced by the Governor’s Office and Legislative Leadership to address the workforce participation shortfall, the following is a snapshot of the seven bill package’s progress:

• HB372 by Rep. Randall Shedd (R-Baileytown) /SB252 by Sen. Greg Reed (R-Jasper) would create the Alabama Growth Alliance, a public corporation aimed at supporting economic development. The AGA’s focus includes increasing private investment within the state and creating opportunities for minority-owned businesses. SB252 received final passage on Thursday and is awaiting action by the Governor.
• HB344 by Rep. Danny Garrett (R-Trussville)/ SB247 by Sen. Steve Livingston (R-Scottsboro) renames the Secretary of Labor and the Department of Labor to the Secretary of Workforce and the Department of Workforce and alter the Department’s duties. SB247 also received final passage on Thursday and is awaiting action by the Governor.
• HB373 by Rep. Kelvin Lawrence (R-Hayneville)/ SB253 by Sen. Donnie Chesteen (R-Geneva) would provide different pathways towards earning a high school diploma based on the further workforce or continuing education plans of the student. SB253 received final passage on Thursday and is awaiting action by the Governor.
• HB358 by Rep. Anthony Daniels (D-Huntsville)/SB280 by Rep. Garlan Gudger (R-Cullman), creating the childcare tax credits. HB358passed the House on Thursday and now awaits action in the Senate, where it was referred to the Senate Finance and Taxation Education Committee.
• HB346 by Rep. Cynthia Almond (R-Tuscaloosa)/SB250 by Sen. Chris Elliott (R-Josephine), establishing the Workforce Housing Credit Act. SB346 passed the House on Thursday. It now awaits action in the Senate where it was referred to the Senate Finance and Taxation Education Committee.
• HB349 by Rep. James Lomax (R-Huntsville)/SB242 by Sen. Bobby Singleton (D-Greensboro), allowing counties and municipalities to authorize the incorporation of an innovation district as a public corporation, both received a favorable report from their respective committees in each chamber but still await passage by the full House and Senate. Both bills have been delayed due to questions concerning the vast powers these public corporations would enjoy. The Senate actually had SB242 up for consideration this week, but decided to carry the bill over to allow members to work further on the bill.
• HB368 by Rep. Neil Rafferty (D-Birmingham)/SB243 by Sen. Dan Roberts (R-Mountain Brook) are constitutional amendments which, if ratified, would allow the Legislature to authorize the incorporation of innovation districts as public corporations. Like HB349/SB242, these bills have been delayed due to questions concerning the powers these public corporations would enjoy. Similar to SB242, the Senate brought up SB243 this week for passage, but decided to carry the bill over for further discussion and consideration.

Last Year’s Overtime Tax Exemption Legislation Back in the Spotlight

On Tuesday, the House approved HB407 by Rep. Phillip Pettus (R-Killen) which would make changes to last year’s legislation creating a state income tax exemption for overtime pay. HB407 would link the tax exemption to overtime compensation paid “in accordance with the U.S. Fair Labor Standards Act”, thereby excluding overtime pay not earned under provisions of the FLSA. Pettus’ focus has been on firefighters, asserting that the current exemption has created an administrative nightmare for firefighters’ payroll processes. But the FLSA language has apparently removed other employees from the overtime tax exemption, leading impacted employers and industries to review the bill and its impact on their employees. The House amended HB407 to take effect Jan. 1, 2025, rather than the current calendar year. The bill now awaits action in the Senate, where it has been assigned to the Senate Finance and Taxation Education Committee.
Meanwhile, there has been a broader discussion among legislative leaders and budget writers that last year’s overtime is turning out to have a much larger benefit for individuals – which also means a bigger hit to the education budget – than originally projected. When approved by lawmakers in 2023, exempting workers’ overtime earnings from state taxes for 18 months was expected to reduce income tax revenue to the Education Trust Fund by an estimated minimum of $34 million for fiscal years 2024 and 2025. But now the Department of Revenue is reporting that in 2023 the total amount of overtime wages paid, if exempted, would have potentially provided an average of $56 in tax savings per employee with a total amount of $184 million in tax savings – which means a difference of $150 million from the original fiscal note. The Fiscal Division of the Legislative Services Agency has explained that they did not have the full data now being reported by businesses when drafting that fiscal note of a minimum of $34 million. This off-target fiscal projection has colored consideration of the budgets and related legislation in the current legislative session, as lawmakers consider multiple tax cuts and credits. Not surprisingly, Senate education budget committee chairman Arthur Orr (R-Decatur) struck a cautionary note about the $150 million surprise on the overtime tax exemption fiscal projections: “It will significantly and negatively affect education revenues and members should be mindful of this as they are asked to vote on a slew of tax credit, exemption and reduction legislation that is pending in the legislature for passage during the last days of the session.” Last session, Orr tried to amend the overtime bill to cap its impact at $25 million. Gov. Kay Ivey removed that cap in an executive amendment, and both chambers concurred in her change. However, Ivey’s change also moved up the sunset date for the tax cut from the end of 2026 to mid-2025. With this unexpected fiscal impact and the legislation’s sunset date looming in July 2025, there is growing speculation that next session the legislature will not renew/extend the overtime break.

Senate Names Conference Committee Members for Gambling Legislation

The “on-again/off-again” saga of the high profile gambling legislation was on-again this week. On Tuesday, the Senate finally agreed to send the two-bill gambling package to a conference committee of Senate and House members to try to work out differences between the two chambers’ versions of the bills. The package – a proposed constitutional amendment and enabling legislation – have been in legislative limbo since March 7 when the Senate substantially scaled back the House’s proposal, which passed the lower chamber in February. The more comprehensive legislation passed by the House would establish a lottery and also allow for sports betting and up to 10 casinos with table games in the state. But the Senate balked at the broader scope of the House’s plan, resulting in a Senate-passed version of the bills that include only a lottery, casinos limited to three current tribal facilities, and parimutuel gaming at existing sites in Alabama. The current revenue estimates indicate the House version would generate as much as $500 million more than the Senate’s version. Despite this week’s Senate action finalizing the conference committee, it is evident that the legislation has waning support in the Senate. The Senate vote to send the constitutional amendment to conference committee was only 19-14, which is notable since any constitutional amendment needs 21 votes (three-fifths of the 35-member body) for final passage. The six lawmakers assigned to the conference committee are Sens. Greg Albritton (R-Atmore), Garlan Gudger (R-Cullman), and Bobby Singleton (D-Greensboro), and Reps. Chris Blackshear (R-Phenix City), Andy Whitt (R-Harvest) and Sam Jones (D-Mobile). A timeline for the conference committee’s work has not been established.

Congressional Runoff Results in AL-2

On Tuesday, voters in Congressional District 2 chose both party nominees for the newly-drawn district that stretches across south central Alabama from Georgia to Mississippi and includes Montgomery and northern Mobile. In the Democratic Primary Runoff, former Obama-era US Department of Justice attorney and Mobile native Shomari Figures defeated State Representative/House Minority Leader Anthony Daniels (D-Huntsville) by a 61% to 39% margin. Figures was the clear favorite after the March 5 primary, when he received 43% in an 11-person field. In the Republican Runoff, Montgomery attorney and political newcomer Caroleene Dobson scored a come-from-behind and surprising win over Montgomery-area businessman and former State Senator Dick Brewbaker, with an impressive 58% to 42% tally. Brewbaker led the 7-person GOP primary on March 5 with 40%, while Dobson came in second with 26%, but in the six-week runoff Dobson hit the TV airwaves with an emphasis on her support for Donald Trump and also criticized Brewbaker for his legislative voting record.

Looking ahead to the November election, although AL-2 now features a more favorable district map for Democrats, Republicans have not conceded the seat. Political observers predict a strong Trump wave in November will likely boost GOP turnout in the district. The voter turnout factor was previewed in the March 5 primary when Democratic and Republican turnout was essentially even with 57,000 voters in each of the two competitive AL-2 primaries, however turnout dropped for the April 16 runoff to 36,000 Democratic voters and just 25,000 Republican voters. Historically, November elections in Presidential election years are high water marks for voter turnout, which underscores the impact that turnout will have on this race in the general election.

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