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March 19, 2004   Email to Friend 

House committees fail to act on proposed reform packages

While most legislators have spoken in favor of reforming state government, House committee votes Wednesday indicate many of them are more interested in raising taxes than raising their level of accountability.

The House Education Finance and Appropriations Committee, chaired by Rep. Richard Lindsey, D-Centre, voted to carry the bills over, meaning the reform measures aren’t likely to come up again during the session.

Wednesday afternoon the House General Fund and Appropriations Committee took a similar route, failing to pass out a single bill dealing with reform of state government.

Most committee members were more interested in talking about ways to raise money to spend than conserving what they already receive from taxpayers.

Among the reform bills considered by committees on Wednesday were measures that would have strengthened accounting standards for all agencies and state departments that receive state funding; would have extended retirement requirements for state employees and teachers; would have created the Alabama Health Insurance Board to consolidate the health systems for state employees and teachers; and would create a rainy day fund for the state’s Education Trust Fund.

Jimmy Baker, representing the Foundation for Education and Economic Development (FEED), told members of the House Education Finance and Appropriations Committee that the Legislature had been addressing the state’s financial needs in a “crisis mode” for too many years. He said the reform measures submitted by FEED would help restore the public’s trust in government. “The public is not particularly concerned about increasing revenue unless they are comfortable that reform has occurred,” Baker said. “I have had legislators tell me they know what they need to do, but they say they can’t take the pressure.”

Some of that same pressure was evident during the hearing as Dr. Paul Hubbert, executive secretary of the Alabama Education Association, testified against the reform bills. Hubbert gained additional support in his opposition to the bills from Mac McArthur, executive director of the Alabama State Employees Association, and Mark Reynolds, assistant director of the Retirement Systems of Alabama.

“It’s barely been six months since the voters of Alabama rejected a gigantic tax increase proposal, but many Legislators only want to talk about raising taxes,” said Federation Director of Governmental Affairs Freddie Patterson. “Our reform package included proposals to control the excessive costs of health care benefits and bonus retirement provisions for state employees and changes the way the Legislature budgets its money. There was no desire to move in that direction in the hearings Wednesday.”

Rep. John Rogers, D-Birmingham, serves as vice chair of the House Education Finance and Appropriations Committee and told fellow committee members that the proposals before them weren’t the answer.

“You can come up with all the formulas in the world,” he said. “You can call it anything you want to call it. But the only way you can solve the problem is to find more money.”

Rogers went on to call portions of the plans “hogwash” adding that he believes an increase in property taxes would go far in solving the state’s financial worries. “The only thing that’s going to solve it is to levelize taxes,” he said. “Until we raise more money, this is not worth the paper it’s written on. You’re trying to do an end run around raising property taxes.”


Subcommittee proposes $326 million increase in taxes and fees

A Legislative ad hoc committee made up of 10 state lawmakers has proposed $326 million in taxes and fees that could be used to fund the state’s 2005 budgets that begin Oct. 1.

But Gov. Bob Riley said he would reject some of the larger tax proposals, and Republican leaders say they will not approve any new taxes until the Democratic-controlled Legislature passes the governor’s 20-bill accountability package.

Legislative leaders refused Gov. Riley’s request earlier this year to recess and call a special session to consider his package.

Legislators said Riley’s bills would be adequately considered during the regular session, but they have been stalled or killed by legislative committees so far.

Legislators on the special ad hoc committee were appointed by legislative leaders. In their report issued Wednesday afternoon, they call for four “broad-based taxes” that would raise an estimated $185 million annually.

A vote in the House or Senate on the bills is probably weeks away and even if they do pass, the governor could exercise his veto power. However, lawmakers could choose to override any veto and pass a tax over the governor’s objection.

Some of the items proposed by the governor and the ad hoc committee are very similar to what voters rejected in Amendment One. The items the committee included in its broad-based plan would:

• Increase the sales and use tax on cars, trucks and other vehicles from 2 percent to 2.75 percent, which would generate nearly $75 million a year.
• Increase the business privilege tax on a company’s net worth, in part by raising the maximum tax from $15,000 to $50,000 per company, per year, which would generate approximately $48 million annually.
• Double filing fees on deeds and mortgages, which would raise about $45 million a year.
• Raise the state tax on vehicle leases and rentals from 1.5 percent to 2.75 percent, raising $17 million a year.

Gov. Riley has called for several measures to increase revenue as well, but those have failed to gain much popularity among legislators. Among those ideas was a proposal by the governor that would have delayed a state employee payday by a few days so it would fall in the next fiscal year, which would have subtracted $21.5 million in the General Fund for 2005.

The plan would generate $72 million from higher cigarette taxes, but complete details of that proposal are still being worked out.

The result of the proposed tax increases would allow the Legislature to pass a General Fund budget close to the $1.2 billion proposed by the governor.

However, news reports indicate the governor isn’t likely to support many of the tax increases. Riley told the Associated Press that the Legislature needs to make government more accountable before considering tax increases.

“We’ve seen no reforms,” Riley told the Associated Press. “To ask for the largest tax increase in state history without any reforms makes no sense.”

Alfa is a member of the Business Associations Tax Coalition which has come out against the tax plan, adding that the voters already have rejected many of the items included in the package.

Other tax increases proposed by the ad hoc committee include raising the tax on municipal electric services to equal those of private utilities to generate $25.2 million; raising the tax on nursing home beds to about 40 percent of what the governor recommended which would produce about $10 million; increasing the cost of getting driver’s records from the Department of Public Safety, which would generate about $10 million; and raising court fees, which would generate about $22.8 million.

The panel claims its package includes reform, however, it is limited compared to other proposed reform measures. Its package called for a ban on pass-through pork projects and limiting money transfers between political action committees.


State employee health costs will top $10.9 billion

Alabama taxpayers will have to come up with an additional $10.9 billion over the next several years to help cover health insurance costs for retired state employees and teachers.

State Finance Director Drayton Nabers this week announced that the state’s unfunded liability for retiree health insurance grows by more than $1 billion each year.

“It overwhelms any other financial challenge that the state has,” Nabers said. “If we don’t reach a solution, this state financially will be on its knees.”

Nabers said possible solutions could include increasing retiree contributions toward health care and changing retirement eligibility requirements. These suggestions drew immediate criticism from the Alabama’s powerful teachers’ and state employees’ unions.

In the wake of Nabers’ announcement, Gov. Riley said he is considering reintroducing some of the accountability measures that were killed earlier this year by the Alabama Legislature.

“The Legislature has killed every bill that talks about reforming our retirement system, but it’s inevitable,” Riley said. “We are going to have to do it.”


Senate passes bill to expand gambling at dog tracks

In a late Thursday night vote, the Alabama Senate approved SB 381 that would allow the state’s four dog tracks to expand gambling there to include electronic bingo. The tracks are located in Eutaw, Birmingham, Shorter and Mobile.

The legislation still must be passed by the House of Representatives and approved by Alabama voters in a referendum Nov. 2 before taking effect. Proponents were unsure how the legislation would fare in the House.

The Senate bill was sponsored by Sen. Gerald Dial, D-Lineville.


BILLS IN BRIEF

Two bills that would allow voters to put specific issues on local or statewide ballots by collecting signatures were assigned to a subcommittee Wednesday by House Constitution and Elections Committee Chairman Rep. Ken Guin, D-Carbon Hill. Guin asked the subcommittee to study the bills and come up with a proposal for a ballot initiative process in Alabama.

HB 579, sponsored by Rep. Mike Ball, R-Huntsville, would allow citizens to put an issue on a statewide referendum if they collected the signatures of 7 percent of the voters in the last gubernatorial election, or about 95,000 signatures.

HB 88, sponsored by Rep. Blaine Galliher, R-Gadsden, would set up a similar process for local and county issues. THE FEDERATION OPPOSES HB 579 and HB 88.

HB 286, sponsored by Rep. Mike Hill, R- Birmingham, more clearly defines insurance fraud and would increase penalties for those convicted of insurance fraud. The bill was passed by the House Banking and Insurance Committee this week and is awaiting action by the full House. The companion bill, SB 271, sponsored by Sen. Zeb Little, D-Cullman, has been assigned to the Senate Judiciary Committee. THE FEDERATION SUPPORTS THIS BILL.

SB 261, the Family Farm Preservation Act, sponsored by Sen. Zeb Little, D-Cullman, remains stalled in the Senate Judiciary Committee. However, Little continues to lead discussions with committee members to obtain a consensus of support for the bill in the committee.


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