Turn About is Fair Play

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The Alabama Senate this week did to the Alabama House of Representatives what the House did to the Senate last year. On Thursday, the Senate passed a stripped down General Fund Budget that, for the most part, level funds most agencies and Departments of state government including Medicaid. Nearly two weeks ago, Governor Bentley announced that the Centers for Medicare and Medicaid Services (CMS) had approved the state’s application for an 1115 waiver that under certain circumstances would provide the Alabama Medicaid Agency over $700 million for the implementation of the Regional Care Organizations (RCOs). There was one major requirement for that money to be available. The state MUST fully fund Medicaid. Rewind to last year. After the House, in Committee, refused to increase any taxes the House Ways and Means Committee – General Fund passed a budget that left Medicaid in the lurch. The Senate made adjustments and sent the budget back to the House. The budget went to Governor Bentley and he promptly vetoed the General Fund budget leading to two Special Sessions. Well, this year the Senate has turned the tables on the House and is going to let the House make the tough decisions. When the Senate passed version of the budget came out of the Senate Finance & Taxation Committee – General Fund, Governor Bentley almost immediately indicated that he would veto a budget resembling the Senate passed version. Attached is a copy of the Legislative Fiscal Office spreadsheet detailing the Senate passed version. One of two things is going to happen with the budget. The House will find the additional $100 million dollars needed to get the Medicaid appropriation where it needs to be or the House will pass the Senate designed budget, send it to the Governor, have it vetoed and be back this Summer in Special Session. Time will tell. Now in years past the state has always been able to pull a rabbit out of the hat. One year it was including “unrealized capital gains” in the revenue stream. By definition, unrealized capital gains do not exist.

There is no gain or loss until something is sold. If securities have been sold, the gains or losses are realized. Until there is a sale, there is only a valuation not a gain or loss. Another year the stimulus money from the Federal Government bailed the General Fund out. What will that rabbit be this year? Some have suggested that there is a special fund that holds the proceeds of the 1 mil ad valorem tax designated to support the Confederate Memorial Park in Chilton County. There is not a public source available that we have found disclosing the balance in that account. Could it possibly be that that special account might have the balance that could be diverted to the General Fund to bail it out yet again? The fund obviously must be generating a large sum of money as this tax has been designated as a proposed revenue source to repay the proposed $800 million bond issue to construct new prisons. Time will tell.

Another event this week was the Senate giving final passage to the minimum wage preemption legislation. Also on Thursday, the Senate passed HB 179 by Representative David Faulkner (R-Birmingham) that reserves to the State Legislature the sole authority to set a minimum wage in Alabama. Within an hour after its passage by the Senate Governor Bentley signed HB 179 and in the process blocked Birmingham’s attempt to set its own minimum wage. Passage of this legislation could have a material impact on the mood in the Legislature for the balance of the 2016 Regular Session.
In the Senate Sen. Gerald Dial (R-Lineville) introduced SB 279. This legislation would make significant changes to the Ethics Commission legislation and, in effect, repeal many of the changes adopted by the Alabama Legislature immediately after the Republicans took control of the Legislature in 2010. It will be interesting to follow the path of this legislation. There are a number of folks around the State House who would like to see SB 279 pass. Also, a significant number question the motives behind the legislation. We make no opinion on this legislation other than to say that it is going to be fun to watch the debate. Years ago when ethics legislation was first being debated in the Alabama Legislature a veteran lawmaker indicated that he could not vote for the legislation because it was not tough enough. His comments were significant enough for others to help kill the proposal under the guise that it needed to be tougher. Many years passed before ethics reform came back before the Alabama Legislature. Time will tell what happens here.

It is expected that in the very near future the Education Trust Fund Budget will be moving to the House Floor and then to the Senate. It is conceivable that the Legislature might finish its work before the scheduled Spring Break the week of March 28. Regardless of if they finish that early it is the consensus opinion around the State House that the Legislature will adjourn before the constitutionally mandated last day the Legislature can meet of May 16. Last week we mentioned that love had broken out in the Legislature. This past week love appeared to be on the rocks. With the pace the Legislature is moving and with some of the more contentious issues before the Legislature, tempers are getting frayed and the cooperation witnessed in the first month of the 2016 Regular Session may very well be on the way out the door.

It has been said that you need to be careful about who you step on when you are going up the mountain because it is very likely they will step on you on the way back down. We have talked about Political Physics in the past. In the real world it is a given that for every action there is an equal and opposite reaction. The first law of Political Physics is there is no such thing as an equal reaction. Everything is an overreaction. If the Legislature keeps overreacting and trying to outdo the other side regardless of it being Republican against Democrat or the House versus the Senate we/they will continue to underachieve. It is a time that we, all of us, elected or observing, need to take a deep breath and do our best to work together to find a solution rather than just trying to win. Now please understand that we are not suggesting that winning is not important but we need to win as a state, not just as a subset. It is amazing what could happen if all of us look to what is best for US as opposed to what is best for ME.

Have a great weekend.

The Alabama House will reconvene at 2:00pm on Tuesday, March 1, 2016
The Alabama Senate will reconvene at 2:00pm on Tuesday, March 1, 2016

The views and opinions contained in this report do not necessarily reflect the views or opinions of the clients of Public Strategies, LLC.