Legislative Report – May 18, 2021

Volume 22 Number 13 – May 18, 2021

30th legislative day

Gaming stumbles at the finish line

Legislation to allow Alabama citizens to vote on whether to legalize gambling including a lottery, casino games, and sports betting failed as the 2021 regular legislative session concluded.

Despite the efforts of former Senate President Pro Tem Del Marsh (R – Anniston), Governor Kay Ivey, her chief of staff former Congressman Jo Bonner, Senate Minority Leader Bobby Singleton (D – Greensboro), House Speaker Mac McCutcheon (R – Huntsville), House Majority Leader Nathaniel Ledbetter (R – Rainsville) and House Financial Services Chairman Rep. Chris Blackshear (R – Phenix City), the gaming package never made it to the floor of the House of Representatives.

The issue took a number of unexpected twists and turns as it worked through the process; failing on the Senate floor by two votes, being resurrected/changed and finally passing the Senate, and a last minute attempt to bring a “clean lottery” bill to the House on a one bill special order calendar late in the night on the 29th legislative day before being hastily withdrawn by the House leadership.

The “put it all in one package” political calculus upon which the multi bill gaming package was based proved too heavy a lift even for the Ivey Administration and the House and Senate leadership.

Rumors continue to swirl in Montgomery about whether Governor Ivey will call a special session to address gaming either later this summer or in the fall. Most political observers believe she will not wade into these murky political waters without a clear path forward towards passage.

How this issue will play out over the next several months as the campaign for Governor intensifies is equally unclear. What is certain is that Alabama citizens will continue to question why their legislature cannot give them an opportunity to vote on a simple, clean lottery going forward.

Broadband bill enacted

SB 215, the Connect Alabama Act by Sen. Del Marsh (R – Anniston), passed during the recent legislative session and has been signed into law by Governor Kay Ivey.

The Connect Alabama Act creates the Digital Broadband Expansion Authority, a group of private individuals and public officials appointed by representatives of the executive and legislative branches of government who are charged with the responsibility of developing an overall broadband development plan for the State.

The Authority will work through a newly created Alabama Digital Expansion Division within the Alabama Department of Economic and Community Affairs (ADECA), the state agency that manages the current broadband grant program.

The bill also creates a new Connect Alabama Fund that will receive state and federal funds earmarked for broadband expansion.  The legislation also creates the Alabama Digital Expansion Finance Corporation and outlines the duties of this new state entity, including bonding authority.

The legislation also provides for a new statewide research and education fiber network designed to link all the state’s four-year research institutions, traditional black colleges, and universities and the state junior and technical colleges.

The initial funding source for this ambitious proposal includes several hundred million dollars in the most recent round of federal stimulus funds. It is rumored that the Governor could call a special legislative session later this summer to provide an opportunity for legislative input on how these funds will be allocated.

Originally, the legislation included proceeds from expanded gambling in Alabama, but that legislative package collapsed during the final days of the session without positive action by the Alabama House of Representatives.

Key compromises in the final version of the broadband issue center around provisions and definitions that impact those who are eligible to receive grant funds and whether available funds will be used to serve new customers or to overbuild current infrastructure using fiber.

Much of the political machinations surrounding the broadband issue will now turn to the appointment process with various interests jockeying for position within the new Digital Broadband Expansion Authority. Most observers believe that this issue could also require further refinement in future legislative sessions.

Medical Marijuana bill becomes law

On Monday May 17th, Alabama Governor Kay Ivey signed SB 46 by Sen. Tim Melson (R – Florence) into law. This legislation legalizes limited, permitted medicinal use of cannabis in the state of Alabama.

The legislation creates a complicated regulatory system to govern the cultivation, processing, transporting, testing, and dispensing of medical cannabis. Only patients with a listed qualifying medical condition would be granted a valid medical cannabis card allowing the use of marijuana.

Proponents of the bill cited studies and testimony from medical experts which indicate that the use of medical marijuana can significantly benefit individuals suffering with chronic conditions including Alzheimer’s, ALS, cancer, Crohn’s disease, epilepsy, seizures, hepatitis C, AIDS, glaucoma, multiple sclerosis, and others.

Opponents of the legislation argued forcefully that marijuana is a “gateway drug” that leads to further illegal drug use and that passage of this bill would eventually lead to legalization of recreational marijuana in Alabama.

Passage of this legislation was far from certain at many stages in the legislative process. Credit is due both bill sponsors, Sen. Melson who is a licensed, practicing physician and Rep. Mike Ball (R – Madison) who is a former Alabama state trooper.

Both legislators devoted countless hours to educating themselves and their fellow members on the medicinal benefits of cannabis leading up to the debate.

The regulatory system created by the legislation will not be fully implemented until late 2022, so the medical use of marijuana in Alabama will not be available until that time.

Tax credit for storm shelters receives final passage

What was supposed to be a simple tax credit for the construction of storm shelters in the state hit a major snag on the last day of the session. HB 227 by Rep. Joe Lovvorn (R – Auburn) would establish an income tax credit for eligible taxpayers who incur costs for the construction, acquisition, or installation of a qualified storm shelter.

Under the legislation, Alabamians building a storm shelter on their personal property would qualify for a $3,000 credit or 50 percent of the total cost of the construction, whichever is less.

The bill passed the House unanimously on a one-bill Special Order calendar in early March; the Senate Finance and Taxation – Education committee approved the bill with a clarifying amendment in mid-April. On Monday, the final day of the session, the bill came up as the first bill on the Senate Special Order calendar.

During the Senate debate, two floor amendments were added to the bill. The first, by Sen. Dan Roberts (R – Mountain Brook), inserted language to ensure that federal restaurant revitalization grants are excluded from Alabama income tax. Despite the original bill not dealing with restaurants at all, the sponsor was amenable to the amendment due to the time sensitive nature of the issue.

The second amendment was much more problematic. Sen. Arthur Orr (R – Decatur) added a seven-page amendment that he described as a reporting requirement for tax credits. The amendment was adopted quickly with no discussion. After review, business and economic development entities sounded the alarm that the amendment, if signed into law, would completely overhaul the economic development incentive landscape in the state.

Christie Strategy Group, on behalf of the Alabama Concrete Industries Association, worked in support of the bill and also encouraged legislators to remove the amendment.

When the bill was returned to the House, Rep. Lovvorn moved to non-concur and go to conference. The conference committee, made up of Rep. Lovvorn, Rep. Rodney Sullivan (R – Northport), Rep. Jeremy Gray (D – Opelika), Sen. Clay Scofield (R – Guntersville), Sen. Tom Whatley (R – Auburn), and Sen. Rodger Smitherman (D – Birmingham), unanimously moved to remove the Orr amendment.

Late Monday night, the House and Senate voted to approve the conference committee report, which allowed for final passage.

Multiple alcohol bills enacted

2021 was the year for alcohol. Dozens of bills intended to expand access to alcohol were introduced and several passed during this session.

Wine shipment

After years of debate and negotiations, Rep. Terri Collins’ (R – Decatur) bill to allow for direct shipment of wine from a manufacturer to a customer’s home was signed into law by Governor Ivey.

The bill will allow wineries to obtain a direct wine shipper license from the Alcoholic Beverage Control Board (ABC) to ship limited quantities of wine directly to Alabama residents 21 and older. It also sets up statewide wine franchise protections for wine wholesalers in the state. Franchise protections are already law in Jefferson, Mobile, Montgomery, Baldwin, and Shelby counties.

Christie Strategy Group, on behalf of International Wines and Craft Beer, worked closely with Rep. Collins to ensure that franchise protections were included in the bill along with other compromise language limiting the scope of wine shipment.

The bill goes into effect on August 1, 2021, which gives ABC time to establish rules and regulations.

Alcohol delivery

SB 126 by Sen. Jabo Waggoner (R – Vestavia) will allow licensed retailers and restaurants to deliver limited amounts of alcohol to customers.

Beer delivery would be limited to the equivalent of 120 12-ounce beer containers per customer per day (or 288 ounces of draft beer). Wine delivery would be limited to 12 750-mL bottles per customer per day. Liquor deliveries would be limited to 9,000 mL per customer for off-premises retailers, and 375 mL for restaurants.

Deliveries would be limited to people 21 and older. Payments would have to be processed before delivery could take place. The state would charge a $100 fee to apply for a delivery license, and a license fee of $250. Restaurants could only deliver liquor in connection with a meal.

The bill goes into effect on October 1, 2021.

Wine festivals

In the past, wine manufacturers were allowed to pour tastes of their wines at festivals, but they could not sell their wines directly to festival attendees. Under Alabama law, winemakers in the state must go through a distributor in order to sell wine at festivals or other special events outside of their premises.

SB 167 by Sen. Andrew Jones (R – Centre), dubbed the “wine festival bill,” allows wineries in the state to host special wine festivals or large tasting events without going through a distributor. It also allows certain organizations, such as incorporated arts districts, to apply for licenses from the ABC to host festivals featuring Alabama wineries without having to use a distributor to provide the wine. The law requires organizers to pay a fee of no more than $50 for an event license, and wineries participating in the events must pay a fee of no more than $15.

Governor Ivey signed the bill in April, and it goes into effect on July 1, 2021.

Pharmacy benefit manager legislation now law

A bill to increase state regulations on pharmacy benefit managers (PBMs) was signed into law by Governor Ivey.

SB 227 by Sen. Tom Butler (R – Madison) prohibits PBMs from giving consumers a financial incentive to choose one pharmacy over another. It also says that PBMs cannot require consumers to use a mail-order pharmacy or a pharmacy affiliated with a pharmacy benefits manager.

An amendment added on the House floor ensures that the parts of the bill that are pre-empted by federal law will remain intact. The amendment was important to many large employers, including several represented by Christie Strategy Group.

The bill represents a compromise between insurers and pharmacists. BCBS was originally opposed to the bill, arguing that the increased regulations would ultimately lead to higher prescription costs for Alabamians. After many hours of negotiation, the interested parties reached an agreement, and BCBS agreed to be neutral on the bill.

State park bond bill going to voters for approval 

A bill to propose a constitutional amendment allowing the state to borrow $85 million to improve state parks will appear on the primary election ballot in 2022. The money would be used to expand and improve campgrounds and recreational areas.

Alabama Department of Conservation and Natural Resources Commissioner (ADCNR) Chris Blankenship has said that attendance was up about 1.2 million for a total of 6.2 million visitors to state parks last year.

Alabama voters approved a $110 million bond issue in 1998 to help improve state parks and historical sites. House Majority Leader Nathaniel Ledbetter (R – Rainsville), the sponsor of the legislation, says now that the bond issue is almost paid off, the state can enter into this new one.

ADCNR said their renovation plans include expanding campgrounds, modernizing day-use areas, adding cabins or swimming pools, and providing internet connectivity to overnight accommodations.

State parks are not funded by the State General Fund, but rather through fees. They generate 80-90% of their revenue directly through entrance, rental, lodging, golf, and other recreational fees.

From 2011-2015, around $15 million was transferred from the parks budget to the state general fund and in 2015, five state parks had to shut down due to lack of funds. In 2016, Alabama voters approved a constitutional amendment that would prevent future reallocating of state park funds for other uses in the state’s budgets.

There are 21 state parks in Alabama that have an estimated $375 million economic impact for the state. The Legislative Services Agency estimates that paying off the bonds would cost the state about $6 million a year over 20 years.

Upcoming schedule

The Alabama legislature adjourned sine die at midnight on Monday, May 17. There is much talk of multiple special sessions this summer and fall on issues such as the disbursement of federal relief funds, prison construction/funding, and redistricting. The timing of those special sessions is not yet known.