Private Property Rights; Kelo v. City of New London, 10 Years Later

kelo1June 23, 2015 marks the ten year anniversary of the United States Supreme Court’s ruling in Kelo v. City of New London which struck considerable fear into the hearts of private property owners nationwide.

 

The Supreme Court has not returned to the subject, and its decision therefore stands as the Court’s last word on the meaning of the Public Use Clause. The problem for public and property rights advocates is that Kelo has essentially been forgotten.

If Kelo should return to prominence because some state or city prefers one private property owner over another, the U.S. Constitution will likely offer property owners no protection against whatever public benefits a majority of a state or local government can imagine.

Government uses its eminent domain power for a host of reasons. Classic examples are the need to construct a road or bridge, a port, a national park, or a government office building. More contemporary instances include the elimination of a public nuisance like an unprotected hazardous waste dumping site or a row of dilapidated crack houses.

The public generally understands that the government will exercise its eminent domain power to take private property in only three circumstances; when government will use it, when the public will use it, or when private parties will use or develop it for the public’s benefit in a quasi-governmental capacity (such as a regulated utility).

A decade ago, however, the Supreme Court of the United States gave its approval to an unprecedented and remarkable use of the eminent domain power. In Kelo v. City of New London, the Court ruled that as long as a property owner is paid the fair market value of what is taken, the U.S. Constitution permits a city to transfer that property from one private party to another, in this case, from a homeowner to a real estate developer, because the city prefers what, in their opinion, is a better use of the land.

Kelo decided that certain particular tracts of private property would be more profitable to the community if the property belonged to different owners and was put to a different use. Unlike what is supposed to happen in an urban renewal program, the city took perfectly maintained and functioning homes away from long-term city residents and gave the homes and the ground land to a private real estate developer in the hope of enticing a large corporation to locate a facility in the area.

The homeowners challenged the takings in court. They lost in the state courts, but the U.S. Supreme Court agreed to hear their plea. Unfortunately for the landowners, however, the Court ruled by a five-to-four vote that as long as just compensation is paid, the government may transfer property from one private party to another not to remedy a social ill, but as long as the government can mount the claim that the latter party will use the land in a manner that improves the local economy.

kelo2The sad irony in this instance is that the property, that was taken ten years ago, sits idle today. As the picture to the left indicates, no development ever materialized.  And the people that were displaced have essentially all left the area.

 

So what was the response to Kelo in Alabama?

Alabama was the very first state to react legislatively to the Kelo decision. Senate Bill 68 (2005) specified that eminent domain could not be used for “private retail, office, commercial, industrial, or residential development; or primarily for enhancement of tax revenue; or for transfer to a person, nongovernmental entity, public-private partnership, corporation, or other business entity.”

However the law left an exception for the seizure of so-called blighted properties. This would have allowed property to be condemned under blight law if it might become blighted in the future, or if the property is deemed “obsolescent”; which is code for “We want something else here.” And, if the property was condemned for blight, cities could then turn it over to private interests.  This problem was addressed in House Bill 654 (2006) which significantly closed the blight loophole by narrowing the criteria by which property could be designated as blighted.

This legislative fix however was not imbedded in the state’s constitution, and thus is subject to the whims of future lawmakers to amend as they see fit.

As we watch our current legislators, county commissioners and mayors frantically searching for every available source of revenue possible, we need to be particularly diligent to make sure the thrill and excitement in the guise of “economic development” does not overwhelm their sensibilities.

Maybe, now that ten years has gone by, it’s time to amend the constitution to protect private property ownership rights in perpetuity. AFA is studying the issue and may propose legislation in the next year to accomplish that objective.

AFA Bandwagon Hits the Road Next Week

The 2015 Regional Receptions are about to get underway as we will be visiting Florence and Auburn next week. Actually, two receptions have already been held, prior to the legislative session, in Birmingham and Tuscaloosa.

But next week they begin in earnest and over the summer we should be stopping in a location near you.

DSC_0033There are several purposes for the Regional Receptions. First, and most important, is they provide an opportunity for the AFA staff to say thank you to our members for the support they provide to the Association. Good food and drink with no significant program…just good fellowship and fun.

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Second, we invite local public officials so that they can see and get to know our members. They have probably met most of you, but they rarely get an opportunity to associate you as an integral part of AFA.

 

Lastly, they provide us an opportunity to invite prospective members to come see what AFA is all about.

The receptions are made possible by our Associate Member Sponsors. When you attend an event, please take a moment to express your appreciation to them. Associate Membership is reserved for those companies that benefit indirectly from the timber industry. They recognize that we are all in this together!

DSC_0004Monday, June 22nd at 6pm, we will be at the River Bottom Grille in Florence. Located at a marina directly beneath the US43/US78 Bridge crossing the beautiful Tennessee River, this venue has proven to be quite popular with our local membership. Senators Tim Melson and Larry Stutts are expected to attend and provide a brief update on their take on their first experience in the Legislature.

DSC_0055On Thursday, June 25th at 6pm, we will be in the Auburn area at Coach Pat Dye’s Crooked Oaks Lodge. Regardless of your college football preference, visiting with Coach Dye is always a treat. He sure loves his trees! And his dogs are always sure to visit and provide entertainment

 

Great sandwiches and ribs provided by The Barbeque House (and don’t forget the world famous peanut butter pie) are always a favorite of the locals.

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Senator Tom Whatley and Representative Mark Tuggle (former AFA board member) are expected to be there to give us their feedback on the legislative session.

At both of these events, we are additionally hosting an AFA District Meeting. The state is divided into 10 Districts from which our board members are selected. AFA hosts a district meeting in each district every year. The District Meetings begin at 5 pm and are open to all current AFA members.

Please RSVP to Liz at lchambers@alaforestry.org or 334-481-2135 (or better yet, do it on-line at www.alaforestry.org) so that we can know how much food to order.

Congressman Palmer Confirmed for AFA Annual Meeting

palmerNewly elected Congressman Gary Palmer (R-Hoover) has confirmed that he will participate in the Alabama Forestry Association’s Annual Meeting to be held September 13-15th at the Perdido Beach Resort in Orange Beach, Alabama.

Palmer will provide a keynote speech and then will moderate a panel of national industry CEOs on Monday morning, September 14th. The CEO panel will focus on integrating and maintaining an ethical corporate culture during the process of restructuring. Participating on the panel will be Don Kayne, CEO of Canfor (recently made an acquisition of Scotch Gulf Lumber), David Nunes, CEO of Rayonier (recently went through a corporate divestiture) and Steven C. Voorhees, CEO of WestRock (new company name based on a recent merger between RockTenn and MeadWestvaco).

Congressman Palmer grew up in the small northwest Alabama town of Hackleburg and attended the University of Alabama where he was a walk-on member of the football team under the tutelage of legendary Coach Paul “Bear” Bryant. After earning a B.S. in Operations Management, he worked in the private sector for 12 years; including nine with two major engineering construction companies, before involvement with Focus on the Family led him to start the Alabama Family Alliance which later became the Alabama Policy Institute.

Palmer served as President of the Alabama Policy Institute for 24 years. During his tenure, API became a full-spectrum public policy organization that engaged in virtually all policy issues that affected Alabamians.

In 2014, he was elected to the 114th Congress and represents the 6th Congressional District. In Congress, Palmer is focused on paying down the national debt by cutting spending; regulatory reform by reducing the number and expense of federal regulations; lowering energy costs and spurring economic growth and job creation by accessing America’s vast energy resources; and replacing Obamacare with a health care plan the puts people back in charge of their health care decisions.

Palmer serves on the Oversight and Government Reform Committee and also serves on the Budget Committee as well as the Space, Science and Technology Committee.

Congressman Palmer declared his candidacy for the 6th District following the retirement announcement of 11-term incumbent Spencer Bachus. In the crowded field in the Republican Primary election, Palmer finished second behind State Representative Paul DeMarco. In the ensuing runoff, Palmer garnered 64% of the vote and in the General election defeated Democrat Mark Lester while receiving 76% of the vote.

Registration for the AFA Annual Meeting will begin soon.  Check the AFA website, www.alaforestry.org for on-line registration next week.

Senator Paul Sanford: “To Heck with Sausage, Laws should be made like Barbeque”

We have all heard the saying “Laws are like sausages, it is better not to see them being made,” which is widely attributed to Otto von Bismarck, a German Prussian politician (1815-1898). A little research indicates that there is some controversy over its actual origin.

A competing theory indicates that the phrase actually originated in the United States from an unknown member of the Illinois legislature in the 1870’s who is reported as stating…”I have come to the conclusion that the making of laws is like the making of sausages- the less you know about the process the more you respect the result.”

porkRegardless of the origin, perhaps a better analogy for lawmaking can be drawn from the making of good southern style barbeque.

Tasty barbeque is derived from slowly cooking pork until it literally falls apart. In the same manner, good laws require the slow test of time and need to be pulled apart to the point that all potential inadvertent consequences can be evaluated.

Who better to guide the lawmaking process than the only master barbeque chef in the Alabama legislature?

sanford2Senator Paul Sanford (R-Huntsville) was born in 1967, graduated from Huntsville High School and the prestigious Culinary Institute of America in Hyde Park, New York. He was first elected to the Alabama Senate’s District 7 in a special election in 2009 to determine the replacement for Parker Griffith who resigned after being elected to Congress. He was re-elected in 2010 and again in 2014.

He is the great-grandson of “Big Bob” Gibson the famous barbeque pioneer from Decatur. Big Bob Gibson Barbeque is nationally known for its award winning white sauce and barbeque. Four generations of Gibson’s have now carried on the family tradition. Sanford’s grandparents moved to Huntsville from Decatur and brought with them the well-known name and recipes.

littlepaulsUpon his return to Huntsville after Culinary school, Sanford desired to carry on the family business but also wanted to chart his own course. He stayed in the barbeque business but founded Little Paul’s Barbeque to distinguish himself from his roots.

 

Distinguishing himself from others has become his trademark in the Alabama Senate as well. Considered somewhat of a maverick, Sanford has developed a reputation for not necessarily going along with the crowd. “Sometimes ‘no” is the best vote that I cast,” says Sanford.

He approaches every piece of proposed legislation from the standpoint of his strict adherence to constitutional principles. “I believe that our founding fathers intended for government to be limited, so I am going to be opposed to growing government…both in size and services. I am also going to make sure that the money we send to Montgomery is used wisely.”

The recently concluded 2015 General Session of the Alabama Legislature proved to be particularly irritating to Senator Sanford. He does not necessarily agree that there is a “short fall” in the General Fund. “We don’t have a revenue problem, we have a spending problem.”

The revenues available for the FY16 General Fund Appropriation are $200 million less than the amount appropriated for FY15. However, that’s primarily because the legislature no longer has the $145 million per year that was created by taking money from the corpus of the Alabama Trust Fund.

“I was opposed to taking that money when that legislation passed, and just because we no longer have access to it, I certainly don’t think we need to be raising taxes to cover the difference. We should have made some hard decisions then, but that did not occur and the can was kicked down the road.”

“There are lots of alternatives to reducing the size of government. I can’t believe we didn’t pass the bill to remove the ABC Board from retail sales. Who in their right mind would even think about putting Government into the liquor business today? That was $20 million right there. I just don’t think our guys are ready to take on all the lobbyists and former legislators yet. Ironically, some would rather raise taxes than irritate the government sector. Is that really what Conservative Principles and the Republican Party are about today?”

In this past session, he introduced legislation that would have combined all tax revenues into one pot and then redistributed the proceeds on a percentage basis to education and general fund needs. This distribution plan would have kept education appropriations at their current levels but would have proportionally split the “growth” of the tax revenue for future years. Currently, education gets the benefit of the state’s “growth” taxes.

His frustration with his colleagues is evident. “My bill did not get the consideration it deserved. It was killed in committee without any legitimate debate. I have serious doubts that, when the Governor calls a special session, we will take up anything that could be considered controversial, unless of course it is to extract more tax dollars from the Alabama economy.”

“I know one thing…if they try to just pass some targeted taxes, I am going to do everything I can to stop it. We don’t need more taxes; we need more flexibility to do what we are supposed to do as legislators. We need to prioritize the spending, but right now our hands are tied with all the earmarks.”

pork2Perhaps, like good barbeque, some ideas just take some time to be evaluated until they are ready to be served.

Hurricane Season has begun and there is a Low Pressure System forming over the Statehouse

hurricaneJune 1st marked the official start of Hurricane Season and the first dark clouds are forming in Montgomery over 11 South Union Street, the home of the Alabama Statehouse.

 

The Alabama legislature finished up its 2015 Regular Session without passing a General Fund appropriation bill for the FY16 operations of the non-education agencies of state government. Therefore, a special session looms sometime during the summer months; exactly when it will occur, will be up to the Governor.

If the currently forming low pressure system grows to a full blown storm, the first named storm of the season might be Tropical Storm Ainsworth, named for Representative Will Ainsworth (R-Guntersville).

Representative Ainsworth introduced legislation during the Regular Session that would “un-earmark” all statutorily earmarked taxes.

Why is that important?

Before we get into that, let’s put some perspective on the General Fund Appropriations bill.

For FY16 (October 1, 2015 through September 30, 2016), the state is expecting approximately $1.64 billion in recurring revenue for General fund operations. The current year appropriation (FY15) was $1.84 billion. So there is a “perceived” shortfall of $200 million.

During the Regular Session, the legislature passed a $1.64 billion General Fund Appropriations bill, but the Governor vetoed it. The Governor wants to not only provide level funding, but also wants to expand the appropriations to enhance Medicaid and Corrections spending and also retire debts. In order to accomplish this, he has proposed $541 million in new taxes to cover the difference, much greater than the “perceived” shortfall.

The state has two primary appropriations bills, the Education Fund Appropriations and the General Fund Appropriations (all non-education related agencies). The two appropriation bills are offset by revenues that are generated through taxes, fees, etc.

The Education Fund Appropriations are offset principally by income taxes ($3.7 billion estimated for FY16) and sales taxes ($1.78 billion). These two taxes are considered “growth” taxes. The income tax revenue is directed to education through a provision in the Alabama Constitution. The sales tax revenue is directed to education through a statutory law. These “directives” are also referred to as “earmarks.” Therefore, the funding for education is “earmarked.”

The General Fund Appropriations are offset by over 40 various taxes that are not “earmarked” for any specific purpose. As mentioned previously, these taxes and fees add up to $1.64 billion. These revenue sources have had little to no growth in recent times.

And that’s a problem, because expenses in the General Fund agencies continue to grow. Especially Medicaid and Corrections.

Now back to Tropical Storm Ainsworth.

ainsworth2Representative Ainsworth plans to continue to push for “un-earmarking” the statutorily “earmarked” taxes. He maintains that this would give the legislature the flexibility to address priorities and to allow the entire government to benefit from future growth taxes.

The income tax will not be affected with his proposal, as it is protected in the Constitution and would require a Constitutional Amendment and a vote of the people. The main one that would be affected is the sales tax.

The education community is going nuts over this idea.

Why is that? Because they are concerned that if you remove the earmark to education, the legislature might be tempted to swipe some of that revenue and use it for General Fund purposes. In other words, they argue that “money from kid’s education will be used to fund prisoners.” Hard to disagree with that.

However Representative Ainsworth is not advocating providing less funding to education. He is thinking about the future years. If the current “growth” tax revenue (income and sales) is “locked-in” for education purposes, then so is the future growth that comes with those taxes.

He believes that the future “growth” should be shared with the General Fund agencies, and that future growth will dramatically assist in reducing the year-to-year struggle to find revenue to offset growing needs in the General Fund appropriations.

Historically, going back to 1960, Representative Ainsworth maintains that the income tax revenue has only gone down, compared to the prior year, three times; 1982 (1.82%), 2002 (1.5%) and 2009 (7.54%). Sales tax revenue has only gone down two times; 2001 (1.11%) and 2009 (9.86%).

By the way, the FY16 education appropriations bill funded education at one of the highest levels in the state’s history; $6.0 billion as opposed to the all-time high of $6.7 billion in 2008 (prior to the recession and the beneficiary of federal stimulus dollars).

But the education community is adamantly opposed to this (as are other state agencies that have earmarked revenues) and will put up a tremendous fight to oppose his legislation.

Thus the looming tropical storm. Stay tuned….

It’s Déjà Vu All Over Again

yogi4 Yogi Berra’s quote from the 1960’s is fully applicable to the budgetary mess that Alabama’s political leadership finds itself in for the FY16 General Fund Budget.

 

“Déjà vu” is French for “already seen” and is defined as a phenomenon of having the strong sensation that an event or experience currently being experienced, has already been experienced in the past, whether it has actually happened or not.

Here is a short trip down memory lane…

In 2012, the Legislature and Governor determined that revenues for General Fund operations were still languishing from the economic recession. They recognized that there was opportunity for downsizing state government, but needed time to get it done. In the interim, they asked the voters of Alabama to approve removing $145 million a year from the Alabama Trust Fund for three years in order to give them the time to make systemic changes.

Bumper StickerThe Alabama Forestry Association opposed this plan and was one of the few special interests that expressed its position. However, Alabama voters approved the plan, but they also sent a clear message; enact the reforms and, oh yeah, by the way, pay the money back.

 

First, let’s look at how the payback is working.

In 2013, based largely on AFA’s grassroots work, the first bill passed by the legislature and signed into law was a payback plan for returning the $435 million back to the Alabama Trust Fund. In the FY14 appropriation bill, $5 million was repaid. In FY15, $10 million. In the recently vetoed proposed FY16 appropriation bill, $15 million was included for repayment.

So it appears that the legislature is honoring its commitment to repay these funds.

Ummm, maybe not.

Representative Steve Clouse (R-Ozark), the Chairman of the Ways & Means General Fund Committee, introduced HB490 during the Regular Session. This bill would have put off the repayment plan by one year. Thankfully the bill did not get out of committee. But it will probably be back during a special session.

yogi3And, frankly, it will probably continue to emerge year after year. The repayment plan was designed to be somewhat easy up front and more difficult in the out years; because, of course, the legislators that designed it will not be around to deal with that problem down the road.

The repayment was a 13 year plan, starting in FY14 ($5 million) and ending in FY27 ($53.7 million). We suspected then that future legislators would balk when it came time to make these payments and it’s just going to get harder as time goes on.

Now let’s look at the restructuring and/or downsizing of government.

Consolidations? A few. A newly created Alabama Law Enforcement Agency combined all the police functions into one entity. Savings? Not sure, maybe a little. Also, all the Information Technology functions have been combined. Savings? Again, not sure, but avoided future costs most definitely.

Elimination of state functions? Nope. The easiest one would be removing the state from the retail liquor business. Estimated to save $15- $20 million annually, the effort failed miserably as certain legislators wanted to protect constituents that have long-term sweetheart lease deals with the state.

Un-earmarking taxes? Nope.

Combining budgets? Nope.

Pension system reform? Nope.

Medicaid reform? Yes, but will it really save money? Not sure until the changes get adopted several years down the road.

Prison reform? Yes, but it actually required $25 million in additional funding for the short term.

The picture is becoming clear. There has been no meaningful, systemic restructuring of state government since the promise was made in 2012.

A good read on this topic is provided by Kyle Whitmire of Al.com. You can read “Bridge Loan to Nowhere: How Bentley and Lawmakers squandered Alabama’s Savings for Nothing.”  see:  http://www.al.com/opinion/index.ssf/2015/06/bridge_loan_to_nowhere_how_ben.html#incart_m-rpt-2

So now fast forward to 2015.  Same problem, but this time the proposed answer is tax increases?

Albert Einstein is attributed with the following quote; “Insanity is doing the same thing over and over again and expecting different results.”

yogiPerhaps our public policy leaders have adopted another Yogiism. “When you come to a fork in the road, take it.”

2015 General Session of the Legislature is in the Books

statehouseYesterday, the legislature ended their work for the 2015 General Session by adjourning sine die after utilizing 29 of their allotted 30 days.

By the way, in the event you might be curious, “sine die” is derived from the Latin phrase “without day”. So when the legislature adjourns sine die, they adjourn “without assigning a day for further meeting or hearing.” Thank goodness for Wikipedia.

Why did they quit early?

 

Frankly there wasn’t much left to do except to pass a bunch of bills that have been piling up which weren’t all that important.

They passed the important bills though. The legislature’s main responsibility is to ensure the funding for the continuing operations of state government. They accomplish that principally through two bills; the Education Fund Appropriations and the General Fund Appropriations.

They had passed the Education Appropriations Act earlier in the session and the Governor had already signed it.

The challenging one, that has everyone wringing their hands in consternation, is the General Fund Appropriations Act which essentially allocates all the non-earmarked revenues for the benefit of non-education state agencies.

Last year’s General Fund appropriation was approximately $1.84 billion, which was based off of revenues made up of $1.64 billion of recurring taxes and $200 million in “one time” transfers (including $145 million that was taken from the Alabama Trust Fund).

This year, there were no more “one-time” transfers (the Band Aids) and the recurring taxes were level from last year at $1.64 billion.

piggybankSo they had $1.64 billion to spend and that’s the size of the appropriation bill that ultimately passed.

One could make a quite legitimate argument that the legislature has taken the fiscally responsible approach by only spending what they have.

Unfortunately, the state’s media, the general fund agencies and the Governor do not agree. The Senate passed the FY16 General Fund Appropriations Act yesterday and it was returned to the House of Representatives (because it had a few changes from the previously passed House version). The House quickly took it up, concurred with the Senate changes and passed it and sent it to the Governor.

The Governor vetoed it.

After passing the bill, the Senate adjourned sine die, so they were done for the session. The House chose to override the Governor’s veto and then sent it to the Senate. But, whoops…they are no longer around, so it dies without becoming law.

So what happens now?

Thankfully, Alabama’s constitution requires that the legislature pass a balanced budget. So they will have to come back at some point in a Special Session to finish their constitutionally mandated work.

The Governor will choose when that will be and what can actually be addressed during the session.

So what are the options that are on the table?

Option One. Force efficiencies in state government, take the savings and apply those revenues to adequately fund priorities. Sounds good right? Wrong.

The easiest and lowest hanging fruit was to get the state out of the liquor business. It would have generated at least $15- $20 million in savings. Dead on arrival. Legislators wanted to protect ABC landlords and the Governor wanted to protect his turf. The failure of that effort sent a signal that government efficiency measures were not going to happen

Option Two. Raise Taxes. Republicans raising taxes? Don’t laugh. It almost happened. The House Republican Caucus had essentially agreed to move forward with $150 million in new taxes. Thankfully, a small group of conservative House members came to their senses on the day of the vote and was able to convince their peers that they were about to take an action that they would deeply regret later on. But there are plenty members left that think targeted tax increases are ok. Tobacco and soft drink taxes seem to be especially vulnerable. They probably hope that maybe nobody will notice these taxes and they can get away with it without political consequences.

Option Three. Increase Revenues through gambling. Though nothing moved along these lines, it’s still a possibility.

Option Four. Do nothing. Be fiscally responsible and spend only the revenue that you have. Wait to see if the sky falls. This option was adopted during the regular session.

save-spendOption Five. Totally restructure how state government is funded. Set priorities, drive efficiencies, put limits on growth, set aside savings for economic downturns, remove earmarks from tax revenues, adopt “zero based budgeting” and develop a tax revenue base that is broad and equally distributed to all taxpayers.  And put the solutions in the Constitution to make sure future generations are protected.

The Governor desires a $2.3 billion General Fund appropriation.  Be prepared, because over the next several months, all you are going to hear about is that state government is going to shut down.

Most legislators would be happy with “level funding” at FY15 levels.

Regardless of who prevails, there will be a “frenzy” to find $200 million up to $700 million of new revenue.

Most likely a special session will result again in Option Four. We will be advocating for Option Five.

Stay tuned…..

Representative Mike Holmes to Release State Budget Alternative

panicFirst there was the Governor’s plan which would increase taxes in targeted areas by $541 million, then there was Senator Del Marsh’s broad gaming solution and after that came Speaker Mike Hubbard’s plan raising taxes and giving exclusive gaming rights to the Poarch Creek Indians.

A fourth plan is about to be publicly released…and it’s certainly representative of thinking “outside the box.”

Representative Mike Holmes (R- Wetumpka) is offering the “Bold Tax Reform for Alabama” as a conservative alternative to previously released plans. Whether one supports it or not, it certainly is bold…

Holmes plan would require a constitutional amendment and would include repealing the state income tax. In return, the state sales tax would be expanded to include services, increased from 4% to 6.5% and most exemptions would be removed. The result is an increase of an estimated $475 million to the state.

Yes, it would be a tax increase. But before anyone goes nuts, the plan has much, much more to it.

First, the two main appropriations bills would be capped at FY15 baseline levels ($5.9 billion for the ETF and $1.85 billion for the GF) and would change annually based on changes with the Consumer’s Price Index.

Second, within the General Fund appropriation’s bill, Medicaid and Corrections would be capped relative to a percentage of total expenditures.

Third, immediate needs such as repayment to Alabama Trust Fund for the General Fund Rainy Day Account, funding the prison reform initiative and funding for $60 million bond for prison capital construction needs are all addressed.

Fourth, sales taxes would be removed from groceries. At an annual estimate of $330 million, this would reduce the burden on lower income taxpayers.

Finally, any excess funds left over cannot be used for recurring expenses. Excess funds are estimated to be $197 million the first year the plan is implemented.

With the Holmes’ plan the excess will be distributed; 10% to the Alabama Trust Fund increasing the amount available for General Fund Rainy Day Account, 25% to the Alabama Trust Fund increasing the amount available for the Education Fund Rainy Day Account, 25% to an Education Capital Project Fund, and 40% will be available annually for critical non-recurring needs appropriated by the Legislature. To the extent there is a remainder, the excess would go into the general corpus of the Alabama Trust Fund.

So, in essence, the plan will raise revenue (translation: raise taxes), but in return the state’s taxpayers are assured that growth in government is contained, priorities can be addressed and a fiscally responsible plan to grow savings is adopted so that the state will be prepared for another inevitable economic downturn.

The most intriguing part of it? It will be in the state’s Constitution. Future legislative bodies will not be able to simply ignore it when tough choices have to be made.

So what does the Alabama Forestry Association think about it?

“Obviously, when you are talking about change this dramatic, we will need to look carefully at the details. Clearly, we are not interested in the Band-Aid approaches that have been discussed and we certainly are not interested in raising revenue without some substantial reform measures being adopted. Representative Holmes’ plan appears to offer a thoughtful and meaningful approach,” said AFA Executive Vice President Chris Isaacson.

He went further to say, “I like the limits on growth, the required savings and the fact that all of it will be protected in the Constitution. We are interested to see what the economists predict the dynamic impact will be of putting $3.7 billion (income taxes not being paid) back into the state’s economy. Replacing a required income tax with a voluntary broadened consumption tax has a certain appeal to it. We look forward to seeing the plan in the form of legislation and we will make a decision at that point.”

Representative Holmes, on whether the plan would have a chance for serious consideration by the legislature, stated, “we have all been talking about really addressing systemic change, now is the time to have that discussion. It appears we will have a couple of months to get all the details out before a potential special session. We’ll see whether the state’s leadership is serious about truly fixing this mess we are in.”

Holmes is a member of a conservative group of House legislators that have been clamoring for meaningful reform to the way government is currently funded.

It will be interesting to see whether this group will coalesce around the Holmes’ Plan and whether the legislative leadership gives the alternative legitimate consideration.

Stay tuned…..