Goat Hill Report- Week ending May 3, 2024

This week, the Alabama legislature completed Days 26 and 27 of the 2024 session, leaving just three days remaining out of the maximum 30 legislative days. Although it has been previously speculated that the session would end in mid-May, legislative leaders stated this week that they intend to hold session days on Tuesday, Wednesday and Thursday next week, which means they will adjourn Sine Die on Thursday (May 9). Details of this week’s action are provided below.

State Budgets Advance

On Thursday morning, the state’s two budgets – the Education Trust Fund (ETF) and the General Fund (GF) – were considered on the floor of the Senate and House, respectively. The chairman of the Finance & Taxation Education (F&TE) committee, Sen. Arthur Orr (R-Decatur), introduced another state-record budget totaling $9.3 billion for Fiscal Year 2025. As it stands, the proposed FY25 ETF budget is approximately $550 million larger than the current FY24 budget. Several highlights of the current ETF proposal include:

• $40.6 million to the Community College System for Dual Enrollment programs
• $89.5 million to Local Boards of Education for the School Nurses program
• $26.8 million to the State Department of Education for Specialized Treatment Centers (Gifted & Talented program)
• $68 million to the State Department of Education for implementation of the Alabama Numeracy Act
• $142.8 million to the State Department of Education for implementation of the Alabama Literacy Act
• $30.8 million to the State Department of Education for implementation of the Alabama Principal Leadership & Mentoring Act
• $10 million to the Department of Human Resources for the Summer EBT/School Nutrition program
• A 2% pay raise for education employees

The ETF budget will go to a conference committee on Tuesday, May 7th to resolve minor differences between the House and Senate and is expected to be signed by Governor Ivey next week.

On the General Fund side, the chairman of the Ways & Means General Fund (W&MGF) committee, Rep. Rex Reynolds (R-Huntsville), introduced his chamber’s version of the budget totaling $3.36 billion for Fiscal Year 2025. The proposed FY25 budget represents a slight increase of the Senate passed version and a $360 million increase over the current FY24 budget. Several highlights of the current GF proposal include:

• $10 million to the Department of Commerce for projects at the Port of Mobile and Mobile Airport Authority
• $40.5 million overall increase to Department of Corrections
• $4 million to the Department of Economic & Community Affairs for the Electric Vehicle Grant program
• $4.7 million to the Law Enforcement Agency to address State Trooper overtime pay
• $91.3 million overall increase to the Medicaid Agency
• $24 million overall increase to the Department of Mental Health
• $13.5 million overall increase to the Department of Public Health
• A 2% pay raise for State employees

The full Senate will have a vote to concur or non-concur in the House’s changes to the General Fund next week. Much like the ETF budget, any differences between the two chambers are expected to be minimal.

Workforce Development Bills Advance

Continuing our update each week on the comprehensive legislative package introduced by the Governor’s Office and Legislative Leadership to address the workforce participation shortfall, the bills that would provide tax credits for childcare and workforce housing are the focus now as the other bills in the package have either made their way to the Governor’s desk or have, as in the case of SB243/HB368, been scuttled:

• HB358, the childcare tax credit bill sponsored by Rep. Anthony Daniels (D-Huntsville) and Sen. Garlan Gudger (R-Cullman), was scaled back some in the House to reduce its fiscal impact and the incentives for employers. Large employers could qualify for up to $600,000 per year in credits if they build in-house childcare or help pay for off-site care. The original bill was up to $1 million per employer. In the Senate Finance & Taxation Education Committee this week, committee chairman Sen. Arthur Orr (R-Decatur), tried to substitute the bill to lessen the amount of tax dollars they would divert from the Education Trust Fund, but the committee resisted and voted to keep them as they passed the House. As passed by the House and Senate committee, the fiscal impact of the bill when fully implemented would be $82.5 million over the next three years – less than what Daniels and Gudger originally proposed and more than what Orr wanted to pass. Orr’s substitute would have cut that to $60 million.
• HB346 by Rep. Cynthia Almond (R-Tuscaloosa), establishing the workforce housing credits, also received a favorable report from the Senate Finance and Taxation Education Committee on Wednesday. Much like the childcare tax credit, Chairman Orr raised concerns about the impact tax credits have on education funding and attempted to amend the bill to reduce the amount of the credits. Released on Wednesday, the latest state revenue report shows ETF revenues grew by 2.4% in April, but are still down about 2.8%, or $163.7 million, in the fiscal year that began in October. Most of that loss has been in income and sales tax collections. Orr shared with the committee a spreadsheet of passed and proposed legislation that pulls money from the education budget. In 2023, lawmakers enacted bills that by fiscal 2026 are expected to reduce funds in the ETF by nearly $560 million. This session, proposed bills reducing funds in the ETF would have a total impact of $414.7 million by fiscal 2026. Despite Chairman Orr’s resistance, the committee members voted down the Orr amendment – just as they did on HB358. With the committee’s favorable vote on both bills, HB358 and HB346 are poised for action next week on the Senate floor; with a favorable report these bills could be on the Governor’s desk as early as Tuesday.

“Wild Day” for Gambling Legislation

In what one Alabama political publication dubbed “a wild day,” Tuesday began with the conference committee negotiating compromise language on the two-bill gambling package (HB151 and HB152) reaching an agreement and issuing a unanimous committee report. The House took up the report later in the day and after some discussion, approved HB151 by a 72-29 margin and HB152 by a 70-29 margin (with 1 abstention). With much closer margins in the Senate, it was widely anticipated that the upper chamber would not take up the conference committee report until Thursday or next week. However, in a surprise development late Tuesday night, Senate leaders apparently believed they had the votes for passage and brought forward a vote on the gaming bills. HB151 was considered first, and since it is the constitutional amendment it required a 2/3 supermajority of 21 votes in the 35-member Senate. After a roll call vote, there were 20 ayes and 15 nays and the Lt. Governor immediately announced that the vote had failed (by one vote). However, the Secretary of the Senate quickly offered his procedural interpretation that the initial motion to approve the committee report had passed by a majority vote, but since HB151 was a constitutional amendment, a subsequent vote would need to be taken to get the 21 votes for a constitutional amendment. The Secretary of the Senate later explained to the media that if the initial vote had garnered 21 or more votes, the subsequent vote would not have been needed. There was considerable debate among Senate leaders about this unusual circumstance and interpretation, but ultimately the Secretary of the Senate’s recommendation prevailed. At that point, a motion by a pro-gaming senator was made to carry over (or postpone further action on) the bill, thus allowing more time for proponents to pick up the one additional vote needed to get to 21. With that, the gaming package narrowly survived for a few more days of the session – although very wounded. On Thursday, the Senate did not bring back up the gaming bills which means they could be considered next week. But the inaction on Thursday led to speculation that the package was facing long odds, and might be dead for the session.

The Alabama Legislature will reconvene today at 2 PM. If you have any questions this report, please contact our office.