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State budgets sent to governor, school choice bill dies

After 17 hours of work, the Legislature sent both budgets to the Governor early Friday morning, burning an extra legislative day in the process. Highlights from this week’s legislative activity are included in the report below.

The Legislature has now completed 27 legislative days of the 30-day Regular Session.

Both chambers will reconvene Wednesday.

Budget Bills Barrel Towards Finish Line

In a relatively rare move by the Alabama Legislature, both the House and Senate worked diligently through the day on Thursday, past midnight, and into early Friday morning to send both the Alabama General Fund budget, Education Trust Fund budget, and corresponding supplemental bills to Governor Ivey. All four budget bills passed between 12:30 and 2:15am this morning after going through a conference committee process where members from both chambers met to hash out their differences. Passing both budgets removes the Budget Isolation Resolution (BIR), a procedural vote that is required prior to the passage of both budgets.  Removal of the BIR makes it easier for the Legislature to quickly work through its remaining bills in the final three legislative days of the Session. Additionally, because the Legislature is still in Session, Governor Ivey must sign, veto, or executive amend the budgets.  This gives the Legislature a chance to override a veto or executive amendment it if they so choose. Below is a summary of each budget and its supplemental appropriation bill.

HB124 – State General Fund

The total expenditure for the State General Fund in the 2024 Fiscal Year is $2.557 billion, which is an increase of $30 million from the House passed version and $35 million from the Senate passed version. The final conference committee report reinstated $2.5 million to pay off the World Games debt and added an additional $23.5 million to the Alabama Law Enforcement Agency. The bulk of the General Fund’s spending is from Medicaid – $863 million, and the Department of Corrections – $661.7 million.  State employees will also receive a 2 percent raise.

HB125 – State General Fund Supplemental

The supplemental makes immediate appropriations in the amount of $207.6 million. The highlights of the supplemental are as follows:

$10 million to the Department of Veteran’s Affairs;

$10.9 million to ADECA for various projects across the State;

$39.9 million to pay off State bond debt;

$22 million to the Department of Mental Health, including $18 million for the construction of the Taylor Hardin mental hospital;

$50 million to the General Fund Budget Reserve Fund;

$6 million to the Department of Finance for elevator upgrades in the State Capitol;

$12.4 million to the Alabama Forestry Commission, $10 million of which is to be used for grants to volunteer fire departments across the State;

$2.5 million to the World Games, totaling $5 million across both budget bills to help extinguish the World Games’ debt;

$5 million to the Montgomery County Commission for economic development

$5 million to the Mobile Airport Authority for relocation of commercial airline operations; and,

$20 million to the Port of Alabama for coal loading/unloading equipment.

Allocations to the Montgomery County Commission, Port of Alabama, and Mobile Airport Authority were originally in the Governor’s education recommendations. The money is now being spent in the General Fund bills.

SB 88 – Education Trust Fund

The total expenditure for the Education Trust Fund in the 2024 Fiscal Year is $8.78 billion. Very little changed in the overall budget.  The budget chairs were able to appropriate the exact amount of money, though allocated differently, in the budget as recommended by the Governor. The University of Alabama system will receive $672.5 million, the Auburn University system will receive $362 million, while the State Department of Education will receive a large increase, up to $534 million, primarily due to the passage of recent bills such as the Alabama Numeracy Act – $40 million, Career Tech and Career Coaches – $49 million, and Math and Science initiatives – $94 million. The ETF includes a 2% increase for education workers.

SB87 – Education Trust Fund Supplemental

The ETF supplemental immediately makes appropriations in the amount of $2.787 billion. The highlights from the supplemental are as follows:

$393 million for tax rebates, which is $150 for individual income filers, and $300 per joint filers to begin on November 30, 2023.

$18 million to pay off State bond debt;

$64 million to the State Board of Education, including $20 million for new buses and $20 million for student materials;

$10 million to existing charter schools;

$40 million for school safety grants;

$360 million to school systems to help offset inflationary increases as it relates to a 2020 bond issuance for construction and maintenance projects;

$59 million to the education employees’ insurance fund for Covid-related expenditures;

$111.6 million to the Department of Commerce for various workforce training centers and workforce programs;

$51 million to the Alabama Innovation Fund;

$46.6 million to the Alabama Commission on Higher Education;

Varying amounts to each higher-education institution in Alabama for priority projects;

$486.4 million to the Alabama Community College System, including $103 million for the construction of inmate education in state prison facilities;

$179 million to the K-12 Capital Grant Program which will be managed by the Lieutenant Governor and used to provide grants to eligible school systems with deferred maintenance, technology needs, or capital projects;

$30 million to the Distressed Higher Education loan program, which was designed to provide a backstop to institutions, like Birmingham-Southern, who are in financial distress;

$353.9 million to the Educational Opportunities Reserve Fund which will provide access to funding, even outside of proration, to programs such as the Literacy and Numeracy Acts which require significant funding; and

$9.5 million to the Department of Mental Health.

School Choice Legislation

The Legislature continued work on school choice bills this week. The wide-reaching PRICE Act, a universal voucher bill for all school-aged children, has died without reaching either the House or Senate floor. Instead, leaders have focused on two bills, SB263, pertaining to the Alabama Accountability Act (AAA), and HB363, pertaining to charter schools.

SB263 passed the Senate 26-7 after hours of bipartisan debate. The AAA is a tax-credit based school choice program that allows students zoned for underperforming schools and low-income students to receive scholarships to attend the public or private school of their choice. SB263 immediately increases the AAA cap from $30M to $40M, and allows the cap to increase to $60M over time if certain conditions are met. The bill also expands the number of families who are eligible for the program. Currently, families who earn less than 185% of the federal poverty level can apply for scholarships. The bill allows families that earn up to federal poverty level to 250% to participate.

Democrats, who have rarely voted for school choice legislation, argued that increasing funding for the AAA takes money from public schools in the state. Republicans argue that the AAA provides choice and hope for thousands of children throughout the state who would otherwise be stuck in problematic schools.

SB263 passed out of the House Ways and Means Education Committee on Thursday without any changes. The bill is scheduled to be on the House floor on Wednesday.

Likewise, HB363 remains one step away from final passage. The bill, which clarifies how conversion public charter schools receive funding and modifies the appointment process for the commissions on the Alabama Public Charter School Commission has passed the Senate Education Policy Committee and is awaiting a final floor vote.

Tax Cut Bill Updates

The grocery sales tax cut bill, HB479, unanimously passed the House on Thursday. The bill’s ultimate effect is to gradually cut the State’s 4 percent sales tax on food to 2 percent if certain state revenue metrics are met. The 4 percent tax would immediately drop to 3 percent beginning on September 1, 2023. The bill is expected to pass in the Senate, despite opposition from the Alabama Education Association who oppose the expected $300-plus million cut to ETF revenue and cities who oppose the prohibition against future municipal grocery tax increases. Legislators have been worried that any cut in the State’s rate would simply be backfilled by cities and counties hungry for revenue, which would keep the overall rate the same, but funnel more money into local coffers at the expense of state revenues.

The status of other tax cut bills, such as cutting the state individual income tax rate by .05 percent and exempting overtime from income tax, is murky at best, as budget chairs have warned against going “too big” on cutting taxes as the economy creeps toward a possible recession and downturn in future State revenues.

The Legislature will reconvene on Wednesday, May 31 with a maximum of three legislative days left in the 2023 Session.

This update provided by the Economic Development Authority of Alabama

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