AFA 2015 Roadshow to Visit Talladega County

selwoodThe Alabama Forestry Association will host its Piedmont District Meeting and Childersburg Regional Reception on Thursday, October 8th at the beautiful lodge at Selwood Farm. The District Meeting is slated to begin at 5pm with the Regional Reception to follow at 6pm.

 

The District Meeting is open to all AFA members and is the official annual business session for the membership in the district. A presentation will be made to update the membership on the latest forestry related news and issues. The current Piedmont District Board member is Chris Langley and he will serve through the conclusion of the 2017 year.

Regional Receptions are held with three objectives in mind. First, we use them as an opportunity to express our appreciation to our members for their support and interest in the Association. Second, these receptions are excellent opportunities to bring new prospects for AFA membership to meet and experience what it means to be a part of the AFA family. Finally, we invite local public officials to the receptions and this is a great time to meet and get to know the folks that represent us and to let them see and hear issues of importance to the timber industry.

If you have not already done so, you can register on-line at www.alaforestry.org or contact Liz Chambers at 334-481-2135.

Please plan to come join the staff and have a festive evening! Feel free to bring your family and guests, as there is no cost for the event.

2015 2nd Special Session- Wrap Up

skyThe second Special Session of 2015 has finally concluded and the hay is in the barn. The Alabama Legislature passed several measures that allowed them to cobble together a FY16 $1.75 billion appropriation bill for General Fund spending on non-education state agencies.

 

This appropriation level is 4.5% less than the FY15 funding level of $1.84 billion.  According to the mainstream media, state employees and state agencies, the world is going to come to an end. “The Sky is Falling.”

What you don’t hear is that state government in FY16 will be 1.5% bigger than FY15.

sky2The State’s General Fund Appropriation represents only 6% of the total expenditures of the state. In FY16, the state will spend $29.4 billion and, by far (74%), the greatest source of funding is earmarked taxes and federal funds. That means the legislature only has control over 26% of state expenditures. That has to change, but we will address that in the future.

Back to what happened in the second special session, where the legislature essentially passed five meaningful pieces of legislation.

First was the increased tax on cigarettes which is estimated to increase revenue to the General Fund by $66 million. This bill passed in the House by a vote of 52-46. Of the 46 “no” votes, only 17 were Republicans. 48 Republicans in the House voted for the tax increase. In the Senate, the bill passed on a 21-13 vote. Of the 13 “no” votes, 9 were Republicans. 16 Republicans in the Senate voted for the tax increase. The Republican members that supported the tax increase were essentially telling the taxpayers of Alabama that no further reductions in state government were achievable.

The second and third items were referred to as Medicaid “provider” taxes that increase revenue to Medicaid (and thus the General Fund) by $17 million. An increase paid by nursing homes and pharmacies on their services were spread over the entire base of their clients. This additional revenue allows the state to match more federal dollars. Ahem…federal dollars are tax dollars as well, aren’t they?

Pharmacists will pay a “supplemental fee” of $0.15 for every prescription they fill in Alabama. In return, they will receive an increase in the amount of reimbursement they get through dispensing fees approved for Medicaid recipients. According to testimony before the legislature, a pharmacist will need to be serving a clientele composed of 8% Medicaid recipients in order to “break even.” So if they serve over 8%, they will make more money than before. Medicaid beneficiaries are estimated to be 25% of Alabama’s population. No wonder they agreed to this tax increase. The losers will be Alabama’s tax payers that pay federal taxes. Uhhh….isn’t that most of us?

The fourth major item was the transfer of part of revenues derived from the use tax to the General Fund. Previously earmarked for the Education Trust Fund, the use tax is a tax that is put on products purchased out of state to make up for the loss in sales tax from in-state purchases. Prior to the passage of this legislation, the use tax was distributed 25% to the General Fund and 75% to the Education Trust Fund. Now it will be 53% to the General Fund and 47% to the Education Trust Fund. This results in $80 million more to the General Fund and, of course, $80 million less to the Education Trust Fund.  But don’t worry, the education community has been well taken care of.

The fifth and final important item was a change made to the Rolling Reserve Act which sets a cap on education spending. At the end of each fiscal year, any “excess” between actual revenue the state receives and the cap is placed in a “stabilization” account. Prior to the change, all the excess transferred to the stabilization account was to be put into a proration prevention account, up to 20% of the prior year’s education appropriation (approximately $1.2 billion). Once that was filled up, any further excess could be used for any education related non-recurring capital related expense. This legislation changes the cap formula (takes out the lowest year of the prior 15 years appropriations, thus raises the cap allowing more spending) and also changes the distribution to the proration account (instead of 20% and $1.2 billion in protection, it’s now 7.5% or $450 million in protection) and also changes the rate of distribution to the proration account (unlimited previously, now its, for the first year, 2% of prior year education appropriations or an estimated $120 million and 1% each year thereafter).

So what does this mean? Well at the end of this fiscal year (September 30, 2015), there will be an estimated $150 million surplus. Previously, this surplus would have completely gone to fill the proration account. With this legislation, $120 million will go to the proration account and $30 million will be increased spending set forth in a supplemental appropriation that will come in the next Regular Session.

During the special session, education interests were screaming bloody murder about the “raid” to prop up the General Fund. Here’s the truth…after all is said and done, education expenditures increased by 1.42% for FY16. This does not even take into the account what will occur in future years with an increased cap, immediate spending from the surplus and, oh yeah…bills were passed during the 2015 Regular Session that resulted in increases to the ETF of approximately $40 million.

The drumbeat for raising revenue has already begun in anticipation of the 2016 Regular Session which begins next February where work will begin on the FY17 appropriations. We will continue to hear that the state will shut down, state parks will close, troopers will be off the roads and on and on and on….

By the way…did you know that the Alabama Law Enforcement Agency got an increase of 39% for FY16? Hmmm….wonder why they don’t tell us that?

Stay tuned…..

2015 2nd Special Session – Day 6

senate1

The Alabama State Senate voted yesterday to increase taxes.

16 Republicans joined with 5 Democrats to approve the tax measures. 13 “no” votes included 9 Republicans; Paul Bussman, Clay Scofield, Phil Williams, Paul Sanford, Shay Shelnutt, Slade Blackwell, Bill Holtzclaw, Rusty Glover and Bill Hightower.  Senator Dick Brewbaker did not have a recorded vote.

The Senate increased taxes on cigarettes ($66 million), prescription drugs ($13 million, $8 million net to Medicaid) and nursing home beds ($10.5 million, $8.3 million net to Medicaid).

They transferred $80 million in use tax from the Education Fund to the General Fund.

They also amended the Rolling Reserve Act to raise the cap for Education spending (by taking out the lowest year’s spending level of the prior 15) and reduced the size and manner of filling the Stabilization fund (now 7.5% of the prior year education funding level as opposed to 20%, filled). Net effect creates an estimated additional $30 million in spending for education in FY16.

Both the Senate and House will be working now to finalize the FY16 General Fund Appropriations bill that will fund state operations beginning October 1st.  The changes passed yesterday will most likely increase the spending levels by approximately $163 million over the bill that was passed in the General Session, but will still require cuts when compared to the current year spending levels.

Early indications are that the Governor will sign the budget at this level.

Stay tuned…..

 

 

2015 2nd Special Session- Day 4

diseaseThe liberal tax and spend disease permeating the Alabama House of Representatives appears to be contagious and has potentially seeped up to the seventh floor of the Statehouse, the home of the Alabama Senate.

 

On this, the 4th day of the 2015 2nd Special Session, the Alabama Senate’s Finance & Taxation General Fund Committee met and in a matter of minutes passed three bills that increase taxes, one bill that drastically changes the Rolling Reserve Act and another bill that transfers use tax revenues from the Education Fund to the General Fund.

Wow.

The Senate Finance & Taxation General Fund Committee is composed of 14 senators; 11 Republicans and 3 Democrats. The votes came so fast and furious that it was difficult to follow, but here is what we know for sure. First, all of them passed. Second, one member, Senator Bill Holtzclaw (R-Madison) voted no to all of them.

The 10 other Republican members are Chairman Arthur Orr (Decatur), Clyde Chambliss (Prattville), Steve Livingston (Guntersville), Greg Albritton (Range), Tim Melson (Florence), Trip Pittman (Montrose), Paul Sanford (Huntsville), Larry Stutts (Tuscumbia), Jabo Waggoner (Vestavia Hills) and Cam Ward (Alabaster).

Senators Sanford and Stutts were not present for the meeting. Sanford said he left because he “couldn’t stomach watching” what was going to happen.

Supposedly, the Committee agreed to vote the bills out in order to allow the Leadership to continue negotiations throughout the weekend. The rationale offered was that the Senate needed to show a “good faith effort” to the House and the Governor that it was willing to “compromise” at some point in order to get an appropriations bill passed that “everyone could live with.”

In case anyone is wondering…the position of the Alabama Forestry Association is clear and has not changed throughout the 2015 Regular Session and the ensuing two Special Sessions.

Here it is:

The Alabama Forestry Association opposes any new revenue without systemic meaningful reforms that limit the size and growth of state government.

Do we support taking Education Fund revenues and shifting them to the General Fund? No. This does nothing to limit the size and growth of state government.

Do we support taking Education Fund revenues and shifting them to the General Fund if that is the only choice other than raising taxes? Yes, but only for a one-year period.

What exactly does it mean when we say “systemic meaningful reforms that limit the size and scope of state government?”

At a minimum, address the state pension system and Medicaid. Remove earmarks that limit the legislature’s ability to prioritize spending. Enact legislation that requires zero based budgeting as opposed to prior year budgeting.

No tax increase (or other measure like gambling or a lottery) is going to address Medicaid on a long term basis. Medicaid was funded at $685 million in FY15. The Governor requested $795 million in the Regular Session. He desires a whopping 16% increase. No taxes that the legislature passes will grow at that level and thus the state would be right back again looking for revenue in a short period of time.

Meanwhile, today, the House of Representatives passed HB1, their version of the General Fund Appropriations Bill. Their bill provides $1.765 billion in spending as compared to the FY15 spending of $1.839 billion and FY14 spending of $1.811 billion.

Keep in mind that the the FY15 and FY14 spending levels were artificially inflated by $145 million each year as a result of the removal of $435 million from the Alabama Trust Fund over a three year period, which is no longer available.  Had this amount not been included, the resultant spending levels would have been $1.67 billion in FY14 and $1.69 billion in FY15.

The bill that passed during the Regular Session that was vetoed by the Governor appropriated $1.635 billion.  That was the amount of revenue the State had prior to the recent tax increase proposals.

So the House version passed today includes approximately $130 million in new revenues including at least $107 million in new taxes.

The final passage vote was 59 for and 37 against. Republicans that voted against the bill were Bob Fincher (Woodland), Ed Henry (Hartselle), Mike Jones (Andalusia), Allen Treadaway (Morris), Steve Hurst (Munford), Ritchie Whorton (Owens Cross Roads), Phil Williams (Huntsville). 31 Democrats voted against the bill. 5 Republicans and 3 Democrats “passed” on the vote. All 59 votes for the bill were Republicans.

The legislature plans to reconvene on Monday and at that point most of the action will shift to the Senate.  It will be interesting to see what the “deal” is that comes from a weekend of negotiations.

Stay tuned….

2015 2nd Special Session- Day 3

taxes

 

 

 

The Alabama Legislature met Thursday for the 3rd day of the 2nd Special Session and the theme of the day was increasing taxes.

The House of Representatives met and passed five tax bills that will raise approximately $107 million in new revenue. These bills increased taxes on cigarettes ($66 million), raised auto title fees ($19 million), increased the car rental tax ($6 million), increased pharmacy taxes ($8 million) and increased nursing home taxes ($8 million).

The House also tried to increase the business privilege tax ($22 million) but that bill was carried over due to not having the number of votes necessary for passage.

The House also passed a bill that would dramatically affect the Rolling Reserve Act.

This legislation, passed in 2011 and considered one of the fiscally responsible centerpieces of the new Republican majority, sets a cap on spending for education based on the prior 15 years average spending. The current law requires any funds in excess of the cap that are received (the “surplus”) to be set aside in a rainy day account until 20% of the current education appropriation is accumulated. Beyond that, “surplus” funds were then available to be used for capital improvements.

The “surplus” anticipated at the close of FY15 (the current year which ends September 30th) is anticipated to be approximately $150 million. Currently, that amount would be placed in the rainy day fund. 20% of the current year budget would be approximately $1.2 billion (the Education Fund appropriation was nearly $6 billion), so all of the $150 million anticipated “surplus” would be preserved for a downturn in the economy.

The House passed legislation that would change the distribution formula. The bill would transfer (or “loan”) the General Fund $50 million and then would limit the amount to the Rainy Day Fund to 1% of the prior year Education Fund appropriation up to a cap of 7.5%. The remainder would then be available for other education uses.

So, with this legislation, the distribution of the $150 million “surplus” would be $50 million to the General Fund, $60 million to the Rainy Day “Stabilization” Fund and approximately $40 million available for other education projects.

There is no requirement on how the $50 million loan will be repaid other than it cannot be paid out of Education funds. Discussion centered around the repayment coming from proceeds derived from the settlement of the BP Oil Spill litigation.

The Senate passed a bill to raise taxes as well.

SB13, sponsored by Senator Trip Pittman (R-Montrose), would remove the deferral of ad valorem taxes paid when purchasing a new vehicle. The legislation is expected to have a $47 million one-time impact for FY16 which includes $2.9 million to the General Fund and $3.4 million to the Education Fund.

Additionally, the Senate passed legislation that would create a tax amnesty program to encourage taxpayers to file and pay their back taxes and also a bill that would require state agencies to follow the Administrative Procedure Act prior to closing state parks, offices or programs.

The House is expected today to possibly revisit the business privilege tax and begin deliberations on the General Fund Appropriations bill (HB1). The Senate’s Finance and Taxation Education Committee and Finance and Taxation General Fund Committee are expected to address the House passed increases.

If you want to know how House members voted on the tax increases, go here.

Stay tuned…..

2015 2nd Special Session- Day 2

clock

Ninety Minutes….

That’s all the time it took for the House Ways & Means General Fund Committee to approve approximately $130 million in new taxes. The committee is comprised of 15 members; 10 Republicans and 5 Democrats.

That’s right…you read it correctly….a committee comprised of a 2:1 majority of Republicans passed $130 million in new taxes.

And the Governor has stated publicly that it is not enough.

The committee, after passing the new revenue, then passed HB1, the General Fund Appropriations Bill that sets forth approximately $1.73 billion in spending for operations of the non-education state agencies.

But the Governor wants $1.9 billion…at least. The current fiscal year (FY15) appropriation is $1.8 billion. Before the tax increases, the Legislative Fiscal Office has estimated that expected revenues for the General Fund for FY16 will be $1.6 billion. So he wants $300 million in new taxes.

$130 million in new taxes is not enough?

Will he veto the appropriation bill that has $130 million in new taxes? Probably not, because he probably will not see an appropriation bill that has these new taxes. The tax increases and the appropriations bill will be addressed by the full House today. The House convenes at 9:00 am and there are numerous Republican members that are opposed to the $130 million in new taxes.

Oh yeah…there are also 33 Democrats that are involved in the process as well. The Democrats have said they will not support new taxes unless Medicaid is expanded. In other words, even with the new revenue….it’s not enough.

Today, when the bills come before the full House, the Republican leadership needs 53 votes in order to pass their new taxes and the appropriations bill. And they will probably get them.

But then the bills have to go to the Senate and the mood is quite different there. So there is a long way to go.

Back to the Ways & Means General Fund Committee…and the 10 Republicans…

mooney Two voted no on each tax. They are Mike Holmes (Wetumpka, pictured below) and Arnold Mooney (Birmingham, pictured to the left). Representative Holmes and Mooney are great examples of fiscally responsible conservative members that are willing to stand against those that have caved to the pressure of increasing the size of government.

 

 

holmesThey have principles and they stick by them. So should we. Please contact these two men and express your appreciation for their courage and commitment.

 

 

 

 

Eight Republicans voted for $130 million in new taxes. They are Chairman Steve Clouse (Ozark), Vice Chairman Ken Johnson (Moulton), Victor Gaston (Mobile), Lynn Greer (Rogersville), Paul Lee (Dothan), Mike Millican (Hamilton), Chris Sells (Greenville) and Rich Wingo (Tuscaloosa).

The clock is ticking on the Legislature to get an appropriation bill in place before the end of the fiscal year on September 30th.  The new taxes and the appropriations bill go before the House today. It will be interesting to watch what happens.

Stay tuned…..

Alabama Legislature Convenes for 2nd Special Session

statehouse3The Alabama Legislature met yesterday for the first day of the 2015 2nd Special Session. Convening pursuant to the Governor’s call at 5pm, both the House and the Senate took bill introductions and then convened until today.

The purpose of the session is to pass a General Fund Appropriations bill to fund the non-education agencies for fiscal year 2016 beginning October 1, 2015. The Governor vetoed a $1.6 billion appropriation during the Regular Session and the Legislature failed to agree on a bill during the 1st Special Session.

The Legislative Fiscal Office is projecting $1.6 billion in current revenue for FY16 general fund operations.

The Governor continues to request an appropriation of $1.9 billion in order to level fund from the current year FY2015 at $1.8 billion plus seeks increases for the Department of Corrections and Medicaid.

The House of Representatives is expected to pass an appropriations bill that will provide the level funding at $1.8 billion which will include approximately $200 million in new revenue to include increases on cigarette taxes, business privilege taxes, motor vehicle taxes for vehicles purchased for out of state use and increased Medicaid provider taxes.

The Senate does not appear inclined to support any revenue increase measures.

A central theme to the debate is the projected surplus in the Education Trust Fund created by the fiscally responsible budgeting process implemented with passage of the Rolling Reserve Act in 2010. One of the first pieces of legislation passed by the Republican leadership when they took control of the legislature in 2010, the Rolling Reserve Act has prevented proration in education funding each year the Republicans have been in control.

The Rolling Reserve Act puts in place a spending cap based on an average of the prior 15 years of spending. The cap has resulted in creating an annual surplus in the Education Trust Fund while still allowing the FY16 educational appropriation to be the second largest in the history of the state.

A good many senators oppose raising taxes when this surplus exists that can be transferred to be used for general fund appropriations.  Lobbying by Higher Education Institutions makes the prospect of this happening unlikely.

Another alternative being discussed is a proposal forwarded by Senator Paul Sanford (R-Huntsville). SB1 has been introduced which would essentially have all state revenues go to one fund which will be then distributed 78% to education and 22% to general fund agencies. This reallocation will allow the general fund agencies to benefit from growth taxes currently trapped by education. It would not lower the amount going to education currently.

The legislature will meet again today and will have 10 more meeting days after that to try and gain consensus on the general fund appropriations.

Stay tuned…..