Legislative update | March 17: Public Service Commission reform bill unanimously passes in state Senate

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SB360, dubbed the “Power to the People Act,” was filed earlier this week and co-sponsored by all 35 senators. The bill represents a compromise approach to PSC reform after comprehensive restructuring legislation (HB392) failed earlier in the session.

Key Provisions:

• Rate Freeze: Freezes electric rates through June 2029, but allows for rates to be lowered
• Expand PSC to Seven Members: Creates four new seats on the PSC, bringing the total number of commissioners to seven. The first four new commissioners would be appointed by the Governor and serve staggered terms before elections that will be phased in during upcoming election cycles.
• Cost Restrictions: Prohibits an electric utility from including the costs of lobbying, advertising, or the making of certain grants in the determination of rate schedules
• Geographic Districts: Commissioners represent geographical districts that mirror Alabama’s current seven congressional districts
• Secretary of Energy: Creates a cabinet-level Secretary of Energy position, appointed by the Governor, who shall oversee the activities of the PSC and will set the PSC’s agendas for all meetings, provided that the agenda may be amended but only with the vote of at least 5 of the 7 members

Status: Passed the Senate unanimously on Thursday; now pending in the House.

General Fund Budget for FY 2027

The Senate gave approval to SB146, the FY 2027 General Fund Budget, on Wednesday. Senate General Fund Chairman Senator Greg Albritton’s version of the budget adds about $37.1 million in new spending beyond Governor Ivey’s proposed budget, and about $8.5 million more than the current FY 2026 budget.

Highlights of the Budget:

The budget, which funds most non-education spending in Alabama, includes:

• $1.179 billion for the state’s Medicaid program
• $867.9 million to the Department of Corrections
• $240.5 million to the Department of Mental Health
• $148.4 million to the Department of Human Resources
• 2 percent raise for all state non-educational employees
• $18 million increase to pay for state employees’ health insurance, raising the per-member, per-month funding to $1,175
• $2.56 billion in total appropriations to the Alabama Department of Transportation (ALDOT)
• $10 million for the first payment due on the new State House, opening later this year

Budget Language Requirements:

• DHR SNAP Error Rate: Language in the budget requires the Department of Human Resources to lower its SNAP error rate to below 6 percent to receive additional funding. Error rates in SNAP payments have become a flashpoint due to the One Big Beautiful Bill Act passed by Congress last year. States with higher error rates will incur higher administrative cost penalties.
• Corrections Contingency: $40 million of funding to the Department of Corrections is contingent upon completing at least 90 percent of the new prison in Elmore County and the completion of utility infrastructure.
• Local Government Reporting: The budget requires all state agencies that provide direct assistance or support to local governments from state funds to report such spending before the 2027 Regular Session begins.

Status: Passed the Senate 32-2 with 1 abstention on Wednesday; now pending in the House Ways and Means General Fund Committee.

General Fund Supplemental for FY 2026

SB226, the FY 2026 General Fund supplemental, was also debated and passed on Wednesday. The bill provides additional funding to agencies and programs to be spent during the current fiscal year, which ends on September 30, 2026.

Supplemental Highlights:

• $587.5 million from the Public Road and Bridge Fund and the Rebuild Alabama Fund to ALDOT
• $68 million to the State Industrial Development Authority
• $6.4 million to the state’s court system
• $59.8 million increase to the appropriation for the repayment of bonds issued by the state’s transportation authorities, raising the total to $193.5 million. Some senators suggested the increase was to pay for the West Alabama Corridor project along Highway 43.

Status: Passed the Senate 30-3 on Wednesday; now pending in the House Ways and Means General Fund Committee.

Education Trust Fund Budget Package

HB235 – ETF Supplemental
HB236 – Advancement and Technology Fund Supplemental
HB238 – FY 2027 ETF Budget
While the Senate passed its General Fund package, the House worked on its versions of the upcoming FY 2027 Education Trust Fund (ETF) budget and supplemental bills. House Education Budget Chairman Danny Garrett sponsored and shepherded the package to passage.

FY 2027 ETF Budget (HB238):

The FY 2027 ETF budget that passed the House approves approximately $10.5 billion in education spending. Highlights include:

• $7.1 billion to K-12 public school systems
• $2.7 billion to higher education
• $658 million to the Community College system
• $226 million to the state’s Pre-K program
• $100 million to the CHOOSE Act (the state’s education savings account program); with funding from other bills, total CHOOSE Act funding reaches $251.25 million
• $180 million increase to the state’s health insurance plan for employees (PEEHIP). The PEEHIP board had requested a $380 million increase. To make up the $200 million gap, the PEEHIP Board will likely either raise premiums, increase costs for drugs and doctor visits, and/or draw from their reserves.
• 2 percent pay raise for all education employees

ETF Supplemental for FY 2026 (HB235):

The ETF supplemental for the current fiscal year includes the following highlighted allocations across $420 million in new spending:

• $25 million to state school systems for school bus purchases or debt retirement
• $25 million to school systems for school safety purposes
• $20 million for College and Career Readiness Grants
• $30 million for the state’s Summer and Afterschool Program
• $10 million to the state’s Child Health Insurance Program
• $27 million to the Community College system for one-time expenses
• Various amounts to each of Alabama’s public higher education institutions

Advancement and Technology Fund Supplemental (HB236):

HB236 allocates additional funds from the state’s Advancement and Technology Fund, a reserve that allows extra funds to be spent primarily for technology purposes. The bill makes the following allocations:

• $275 million to the Community College system and higher education institutions
• $570 million to local boards of education
• $150 million to local boards of education for grants for career and technical education

Status: All three bills passed the House and now head to the Senate Finance and Taxation Education Committee, where Senate ETF Chairman Arthur Orr will manage the bills.

Data Center Tax Abatement Limits

The Senate approved SB265, a bill from Senator Andrew Jones that shortens the maximum period during which data centers may receive tax abatements in the state.

Key Provisions:

If enacted, beginning on January 1, 2027, the following changes would occur:

• Reduce Abatement Period: Changes the maximum period a data center may receive tax abatements from 30 years to 20 years
• Limit Sales Tax Abatements: Limits, with certain exceptions, the abatement of state sales and use taxes for equipment and construction materials

Status: Passed Senate unanimously on Thursday; pending in the House Economic Development and Tourism Committee.

Data Center Utility Cost Regulations

SB270 – Senator Lance Bell

The Senate also approved SB270 by Senator Lance Bell regarding utility costs associated with large-scale and often energy-intensive data centers.

Key Provisions:

• PSC Review Requirement: Regulates how data centers with an electric load of at least 150 megawatts or more contract with utilities by requiring such contracts to be reviewed by the PSC and be consistent with the public interest
• Infrastructure Cost Recovery: The contract must provide for the recovery of the incremental infrastructure costs associated with the data center
• Ratepayer Protection: The contract must promote positive benefits to all other retail electric customers of the utility, including whether the pricing terms will lower costs for other customers of the utility and whether it will increase the utility’s efficiency

Status: Passed Senate unanimously on Thursday; pending in the House Transportation, Utilities, and Infrastructure Committee.

Solar Farm Moratorium, Regulation Bills Filed

As a result of heavy scrutiny of a large-scale solar farm being built in Baldwin County, Senator Greg Albritton and Representative Matt Simpson, who represents portions of Baldwin County, filed companion bills related to solar power restrictions.

SB354/HB617 – Solar Farm Moratorium

This one-page bill prohibits any solar power facility—which means solar panels installed on a large scale for use off-site or sale to a third party—that is not already operating or under construction from beginning construction or operation for one year, effective from the date the bill is passed.

Amendment: The Senate Transportation and Energy Committee, prior to approving the bill, adopted an amendment that provides an exception to any area of the state served by the Tennessee Valley Authority (TVA) due to their regulatory authority and infrastructure.

Status: SB354 passed committee with amendment; pending Senate floor vote. HB617 pending in the House Transportation, Utilities, and Infrastructure Committee.

SB358/HB618 – Solar Farm County Regulation

The bill, which applies only to Mobile and Baldwin Counties, would allow county commissions to adopt resolutions to regulate the permitting, construction, placement, or operation of solar farms in the county, including standards, specifications, and other criteria. Currently, counties have very limited ability to regulate buildings in their unincorporated areas that otherwise match the zoning and land-use requirements.

Status: SB358 is pending in the Senate Fiscal Responsibility and Economic Development Committee. HB618 is pending in the House Transportation, Utilities, and Infrastructure Committee.