2017 End of Session Report

Volume 18 Number 13 – May 24, 2017

27th, 28th, 29th, & 30th legislative days

Tumultuous Legislative Session Comes to an End

The legislature adjourned sine die on Friday, May 19, 2017 at approximately 7:00 p.m., ending a tumultuous session plagued by resignations, accusations of racism, and uncertainty.

For the first three months of the 2017 legislative session, the dark cloud of impeachment hung over Montgomery. Whisperings of then-Governor Robert Bentley’s impeachment began in 2016, but efforts ramped up during the 2017 session, and on April 10, he resigned after pleading guilty to two misdemeanors.

Hours after Bentley’s resignation, Lt. Governor Kay Ivey was sworn in as Governor.

New Redistricting Plans Approved

In January, a three-judge federal court ordered the Legislature to redraw nine House districts and three Senate districts because of racial gerrymandering.

Republicans say the new maps fix the problems found by the court, such as splitting precincts for the purpose of putting black voters in one district and white voters in another.

Democrats opposed the plans saying the maps continue to disenfranchise black voters and will be struck down again by the courts.

During the contentious debate on the redistricting plan, accusations of racism came to a head after an email sent by a white, Republican legislator was condemned as racist by black legislators.

The email described a fictional experiment showing how punished monkeys will eventually stop reaching for a dangling banana as they accept the status quo.

The extreme tensions in the statehouse threatened to derail the last days of the legislative session, but the House reconvened late Wednesday afternoon and eventually approved the new legislative districts.

Budgets Approved with Little Fanfare

As required by the Alabama Constitution of 1901, the State Legislature passed balanced budgets for the operation and maintenance of state government and the public education system. Alabama’s two major budgets, the Education Trust Fund (ETF) and the State General Fund Budget, passed this session with little public controversy or fanfare, but trouble could be on the horizon as lawmakers face challenges in future budget years.

The ETF, a $6.4 billion spending plan for K-12 public schools, the community college system, and the state’s four-year institutions of higher learning, received final passage in the House early in the morning on Wednesday of last week. The House version, which passed unanimously, is slightly more favorable to higher education than the Senate version of the education budget, which gave small increases to K-12 for the hiring of approximately 150 new teachers in grades 4-6 and also gave a $15 million increase to the state’s pre-kindergarten program.

The Alabama Community College System’s budget increased marginally as well with a new injection of funding for workforce development programs.

In both the House and the Senate versions of the bill, funding for all higher education entities remained flat due in large part to the veterans’ dependent scholarship program and the payments that Alabama continues to make into the PACT program.

The State General Fund Budget, which invests $1.8 billion into state government coffers for next fiscal year, passed without the typical drama of a General Fund debate. This is due in large part to the legislature’s decision in a special session last year to use funds from the state’s settlement of the BP oil spill litigation. The General Fund proposal that Gov. Kay Ivey is expected to sign “holds over” $93 million. Budget chairmen say that it is their intent to save that money for next year when BP settlement dollars dry up or to provide flexibility to the legislature depending on what the United States Congress and President Donald Trump decide to do on healthcare-related issues.

Lawmakers are already gearing up for a battle for the next budget cycle where the BP settlement funds will be fully depleted and the General Fund is expected to face a shortfall of $200 million. This will place pressures on the ETF and the state Medicaid agency in an election year, which could be a difficult situation for members seeking re-election.

Autism Therapy Insurance Mandate Approved

The legislature approved, and Gov. Ivey signed, a bill requiring insurance companies to cover applied behavioral analysis (ABA), a therapy used on children with autism.

The coverage mandate applies to companies with at least 51 employees and to services for children up to age 18.

The mandate for public insurance plans would not take effect until December 31, 2018. Those include the insurance plans for state employees and education employees, Medicaid, and the Children’s Health Insurance Program, known as ALL Kids.

Monument Protection Legislation Approved

The state legislature agreed to an amendment on Friday from Gov. Kay Ivey on the bill preventing the removal of monuments more than 20 years old.

The House and Senate both voted to agree with the amendment, which deals with “memorial schools,” or K-12 and two-year colleges named after people, military service, a group, a movement, or an event.

The bill preserves monuments, “historically significant” buildings, and other structures on private property and establishes a committee that would decide on removal or renaming of buildings, monuments, and street signs.

Ivey’s amendment says memorial schools cannot be renamed without approval from the committee. But such schools would not need committee approval to relocate or make renovations.

The House and Senate passed different versions of the bill, leading to a conference committee to hash out the difference. The Senate approved the revised bill on Thursday, while the House followed suit Friday in a 68-29 vote with two abstentions.

Democrats charge that the bill is disrespectful to African-Americans because it would preserve Confederate monuments and memorials. Sen. Gerald Allen (R – Tuscaloosa), who introduced the bill, offered similar legislation after then-Gov. Robert Bentley removed the Confederate flag from the Capitol two years ago.

Rep. Mack Butler (R – Rainbow City), who sponsored the bill in the House, said the monuments should be preserved as a history lesson.

The approved bill states that monuments between 20 and 40 years old can only be removed, renamed, or relocated through approval by a commission that the legislation sets up. Monuments 40 years and older could not be changed in any way.

Statewide Infrastructure Plan

A statewide coalition of businesses and local government associations including the Business Council of Alabama, the Alabama Association of Road Builders, the Alabama Trucking Association, the Alabama Farmers’ Federation (ALFA) and the Alabama Association of County Commissions worked hard, but ultimately unsuccessfully, to bring a statewide infrastructure plan to the legislature during this session.

The plan, which centered around a $.06 per gallon gas tax that would be used to fund over $600 million worth of bonds for road and bridge construction, was endorsed by both House Speaker Mac McCutcheon (R – Huntsville) and Senate President Pro Tem Del Marsh (R – Anniston) and sponsored by powerful Ways and Means Education Chairman Bill Poole (R – Tuscaloosa).

Despite the political horsepower pushing the plan, including Governor Kay Ivey behind the scenes, sufficient votes could not be garnered to ensure passage in either house, and the bill was not passed.

One of the major hurdles facing the legislation was the distribution formula between counties and cities, which dates back to the 1960’s. The five largest metropolitan mayors, in coordination with the Alabama League of Municipalities, objected to that formula being used going forward for the new bond issue and a major fight ensued, jeopardizing the bill.

At the direction of Speaker McCutcheon, a group of advocates met with Montgomery Mayor Todd Strange and hammered out a new formula, which more fairly represents the needs of Alabama in the modern age and provides significantly more resources for municipal governments, in coordination with their local county commissions.

Despite this important breakthrough, the votes could not be gathered to ensure that the bill had a reasonable chance to pass, and Speaker McCutcheon did not bring the bill to the House floor. Nevertheless, there is hope that this compromise bill will be the foundation for any movement forward on a statewide infrastructure plan, which Alabama so desperately needs.

Christie Strategy Group Client Victories

Government Owned Network (GON) Legislation Fails

The multi-year battle between Opelika Power Services and the cable telecommunications industry heated upon again with the introduction of several bills designed to expand the local utility’s service territory as defined by Alabama law.

Sen. Tom Whatley (R – Auburn) introduced three bills (SB 151, SB 192, and SB 228) to allow the municipally owned utility to expand their cable network into adjacent territories. The Alabama Cable Telecommunications Association (ACTA) led the way opposing these bills along with other members of the telecommunications industry including local cable companies, smaller telecommunications firms, and AT&T.

Both bills were assigned to the Senate Committee on Transportation and Energy, chaired by Sen. Gerald Allen (R – Tuscaloosa), where they were carefully studied and considered by the members of the committee.

Members of the ACTA and other opponents of the bill engaged in a fierce lobbying effort in opposition to the legislation in response to proponents’ vigorous efforts to pass this precedent setting legislation.

A public hearing was granted to opponents of the bill who testified against the ill-advised legislation, including a local Auburn University professor who came to Montgomery on his own time and at his own will to share with Senators his view that local, government owned networks rarely succeed in providing economical and sustainable service to their customers.

After a vigorous public hearing and an intense lobbying campaign from both proponents and opponents, both bills were defeated in the Senate Energy and Transportation Committee by a very close margin.

In the House of Representatives, newly elected Rep. Joe Lovvorn (R – Auburn) joined his Senator by introducing a similar bill, which was referred to the House Committee on Commerce and Small Business. Another public hearing was held on the legislation and it was also ultimately defeated by a voice vote.

Senator Whatley has indicated his intention to pursue this legislation again next year. In the off season, representatives of the cable telecommunications industry continue to work with local citizens and government officials to address their concerns without legislatively expanding the territory served by Opelika Power Services and increasing the liability of the taxpayers who have invested in it.

Taxation of Digital Goods & Telecommunications Tax Reform

The multi-year saga relating to the taxation of digital goods including movies, music, and a variety of other services continued to play out during the regular session.

The Alabama Department of Revenue (DOR) has attempted to pursue the taxation of digital goods for the past several years, including an abortive attempt in 2016 to tax these items under the state’s rental and lease tax by regulation. This proposal was derailed when Senate President Pro Tem Del Marsh (R – Anniston) and other legislative leaders sent the Revenue Commissioner a letter indicating the action was beyond Alabama law and encouraging the rule to be withdrawn.

Subsequent to that letter, Senator Marsh created a task force of industry leaders and officials from the department to study this matter and see if a compromise could be reached. Members of the cable telecommunications industry and others met on several occasions with DOR officials, and little progress was made.

One of the central issues facing the task force is the disparate and inequitable treatment of taxpayers under the current law. Cable providers currently pay local governments a franchise fee of up to 5% of their gross revenues for the privilege of operating within their local jurisdictions.

Satellite providers, which provide access to identical programming and content through a different medium, do not pay local franchise fees. This provides that segment of the industry a significant advantage in the marketplace, which cable providers insist must be rectified in any tax proposal.

Despite a number of face-to-face meetings led by Senator Marsh, satellite/AT&T and cable providers could not reach an agreement on how to address this situation going forward, and the talks broke down. As a result, the Department of Revenue issued a notice of intent to file another rule to tax digital goods under the lease and rental tax, similar to last year.

Simultaneously to this effort, cable providers continued to work with policy makers and revenue officials to explain their position and develop opportunities to move forward. Drafts of legislation were exchanged throughout the middle part of the session with cable and DOR agreeing on the basic tenets of a future telecommunications tax plan.

The resignation of Governor Robert Bentley and the ascendance of Lt. Governor Ivey to the office of Governor put these efforts on the back burner. DOR Commissioner Julie Magee was not retained as a Cabinet member, and the new Administration sent word out to suspend all proposed rulemaking and potential controversial proposals until the new Governor had an opportunity to review them.

ACTA fully expects both issues, the taxation of digital goods and overall telecommunications reform, to be addressed going forward, either in the regulatory or legislative process.

Automobile Recall Legislation Approved

Christie Strategy Group (CSG) also worked with the Automobile Dealers Association of Alabama (ADAA) on used vehicle recall legislation.

SB 178 by Sen. Clay Scofield (R – Guntersville) specifies provisions for the payment of new motor vehicle dealers for recall repairs, including costs associated with a recall when a vehicle is held in a dealer’s used car inventory and parts are not reasonably available to perform a recall repair.

CSG, on behalf of JM Family Enterprises, negotiated with ADAA on the percentage of compensation rate paid to dealers on a used vehicle with an outstanding recall.

The legislation as introduced included a 1.75 percent reimbursement rate. CSG, along with other automobile manufacturer lobbyists, worked with ADAA to reduce that rate to one percent, which is the accepted rate on new vehicles.

At the time the legislation was enacted, Alabama was one of the first states with agreed upon legislation between the dealers and manufacturers.

Local Legislation

Christie Strategy Group worked on behalf of Baldwin County to pass legislation related to sales tax distribution.

Since its inception, the 1984 sales tax has funneled 55 percent of its revenues to the Baldwin County School System and 40 percent to the county.

Under the legislation, the county will get 55 percent, while the school system ill receive 40 percent. The difference is approximately $5 million. Coastal Alabama Community College will get most of the remaining 5 percent.

The swap in percentage shares allows the Baldwin County Commission to earmark more money for road construction, and the Baldwin County Commission and school board endorsed the plan.

CSG also worked with the Mayor Robert Craft of Gulf Shores, Sen. Trip Pittman (R – Montrose), and Rep. Steve McMillan (R – Bay Minette) to pass annexation legislation on behalf of the City of Gulf Shores. The House and Senate approved that legislation unanimously.

Tourism Legislation

Rep. Randy Davis (R – Daphne) introduced legislation very late in the session allowing state employees to receive full reimbursement for their expenses for in-state work-related travel.

Prior to this legislation, state employees could be fully reimbursed for travel outside of the state, but their reimbursement was capped at $75 for travel within the state. Rep. Davis’ bill equalizes reimbursement rates for travel in and out of state.

This legislation was important to GUMBO, the City of Gulf Shores, and Baldwin County due to the impending opening of Gulf State Park Lodge, which will likely house several future conferences for state employees and others.

CSG also worked with the Department of Revenue on legislation affecting lodging taxes.

The Alabama Restaurant and Hospitality Association (ARHA) introduced legislation to exempt rooms not used for sleeping from the lodging tax. The bill as introduced was confusing and unclear and could have significantly negatively impacted the State of Alabama, the City of Gulf Shores and other local governments who rely on lodging taxes for a variety of important programs.

CSG worked with the DOR to clean up the legislation and make it more clear and concise and ensure that it would not have a negative financial impact on state and local governments. The bill passed the Senate and House committee, but ultimately died in the House.

United Way Legislation

Christie Strategy Group also worked with the United Way of Central Alabama and the Department of Revenue on the Tax Exemption Reform Act of 2017, which was signed by the Governor early in the session.

The bill closes a loophole for “united appeals” to receive a tax exemption without going through the legislature and provides definitions and qualifications for United Ways.

Despite significant opposition from some law firms and united appeals who were unfairly taking advantage of this tax loophole, the bill passed the House and Senate with only one negative vote. 

Flu Vaccine Education Legislation

Christie Strategy Group joined with international drug manufacturer Sanofi Pasteur introducing legislation to require local school systems to provide information on the flu vaccine to parents whenever other health information is provided.

CSG worked with the Alabama Association of School Boards and the Medical Association of the State of Alabama to address concerns they had with the bill as it moved through the legislative process.

The bill, sponsored by Rep. Anthony Daniels (D – Huntsville) and Senator Dick Brewbaker (R – Montgomery) was forwarded to the Governor on May 17 for her signature.

Fantasy Gaming Legislation

The Alabama legislature also addressed the issue of gambling during the regular session. HB 354, introduced by Rep. Alan Boothe (R – Troy), who chairs the powerful Rules Committee that sets the agenda in the House of Representatives, and Sen. Paul Sanford (R – Huntsville), would have provided a foundation in Alabama law to allow fantasy football and other fantasy games to legally operate in our state.

Christie Strategy Group was retained by the Choctaw Resort Development Enterprise (CRDE), which operates a major gaming facility owned by the Mississippi Band of Choctaw Indians to ensure that the bill did not pave the way for Class III gaming in Alabama. Class III gaming could include fully operational casinos with table games at the facilities operated by the Alabama Poarch Creek Indians and, potentially, a lottery.

Working with Representatives and Senators concerned about the expansion of gaming in Alabama, CSG encouraged Rep. Jim Carns (R – Mountain Brook) to offer an amendment to the bill on the floor of the House, which would have made it clear that nothing in the legislation was to be construed to provide an opportunity for Class III gaming in Alabama or to authorize the Governor to enter into a compact (legal agreement) with any federally regulated Indian tribe.

The amendment was considered on the House floor three different times as the debate ensued, but was narrowly defeated on each occasion.

During consideration in the Senate, CSG worked with Sen. Dick Brewbaker (R – Montgomery) to offer and pass the amendment. After a short debate on the floor of the Senate, the amendment was passed by a vote of 15 ayes to 14 nays.

Shortly after adoption of the amendment, the Senate sponsor asked that the bill be carried over at the call of the chair, and the bill ultimately died. It is anticipated that the issue will be considered again next year, as fantasy gaming continues to grow in popularity.

Uber

CSG worked with representatives of Uber to develop an amendment to their legislation that would protect municipal governments, such as the City of Montgomery, who already have an agreement with Uber in place.

The bill would have set up a statewide network for Uber to operate in all municipalities across the state.

CSG, on behalf of the City of Montgomery, agreed to Uber’s amendment, but other cities did not, and the bill ultimately died in the Senate.

Alcohol Legislation

The Senate Fiscal Responsibility Committee approved a bill allowing for the direct shipment of wine to Alabama citizens.

Following the committee approval, CSG worked with the sponsor of the bill on behalf of International Wines & Craft Beer to amend the legislation.

Sen. Bill Holtzclaw (R – Madison), the sponsor of the legislation, agreed to several amendments that would favorably impact wine distributors, but the bill ultimately died in the Senate.

CSG also worked with DOR on their Wholesale to Retail Accountability Program (WRAP) legislation to ensure the wine industry received representation on the industry advisory group.

The DOR agreed to add an appointment to the group that would be given to a wine industry representative.

The bill passed and is awaiting Gov. Ivey’s signature.

Municipal Court Judge Legislation 

CSG worked closely with the Alabama League of Municipalities on behalf of the Alabama Municipal Insurance Corporation on legislation that would clarify municipal court judges’ authority to waive fees for indigent defendants and issue bench warrants to those who do not show up for court.

The legislation passed the Senate and the House Judiciary Committee and was placed on the House special order calendar twice, but the bill did not ultimately pass.

Railroad Safety Legislation

The Alabama Railway Association teamed up with rail labor on a bill to increase safety at railroad crossings.

HB 246 by Rep. Napoleon Bracy (D – Pritchard) and SB 202 by Rep. Greg Reed (R – Jasper) would have added maintenance of way equipment to the current statute requiring drivers to stop at railroad crossings.

Despite passing the House unanimously and receiving approval by the Senate Transportation and Energy Committee, one Senator blocked it from passing due to his frustrations with railroad traffic issues in his district.

Payday Lending Legislation

CSG client, Enova, served on the Consumer Credit Taskforce, which met throughout the off-season leading up to the 2017 legislative session.

Rep. Danny Garrett (R – Trussville) introduced HB 535, which was a compromise payday lending reform bill. CSG worked with Rep. Garrett on language within the bill and supported its passage.

Due to opposition from payday lending reform advocates, the bill died in the Senate on the final legislative day.

Looking Forward

Although the 2017 Regular Session just ended, there is already chatter of a special session to be called by Gov. Kay Ivey this summer.

The state is expecting a ruling from a federal court in Montgomery concerning the state’s prison system, which would require enhancements and new facilities to be approved by the Alabama State Legislature. Former Gov. Robert Bentley proposed a plan in the form of a $1 billion bond issue, but it ultimately did not pass, even after several significant tweaks.

In addition to the state’s prison woes, many industry groups are advocating for a special session on a gas tax proposal that would enhance the state’s road and bridge programs that failed to receive a vote during the regular session. The Governor’s office has confirmed that they are considering a special session, but have made no plans publically yet.

This summer should also be interesting due to a specially-called election for a seat in the United States Senate caused by the vacancy of United States Attorney General Jeff Sessions, Alabama’s former Senator. Incumbent Senator Luther Strange, who was appointed to the seat by Gov. Bentley, will seek the full term. Eleven Republicans qualified for the special election (including Strange, ousted Chief Justice Roy Moore, State Senator Trip Pittman, Christian Coalition President Dr. Randy Brinson, and Congressman Mo Brooks). The Alabama Democratic Party qualified eight candidates for the seat including former United States Attorney Doug Jones.

The primary has been set for August 15, the runoff (if necessary) on September 26, and a general election on December 12.

The next regular session of the legislature will convene in January of 2018, a month earlier than usual in order to give members an opportunity to return to their districts to campaign for re-election in June.