2015 legislative update: Mental health, DHR, courts would face cuts under Alabama House's General Fund budget

Mental health care, trial courts and the Department of Human Resources (DHR) would be among the vital services suffering cuts next year under the General Fund (GF) budget that the Alabama House passed 59-37 Friday. A Senate committee is set to consider the GF budget Monday.

The House’s budget would fund new reforms of Medicaid and corrections and would prevent the closure of National Guard armories across Alabama. But mental health, public health, DHR and courts – which were funded at their 2015 GF levels under the plan that cleared a House committee Wednesday – would face 2.5 percent cuts under the House’s budget. Many other services would lose 10 percent or more of their support next year.

No business privilege tax bill means deeper service cuts

Cuts to mental health care, DHR and other services emerged Friday when lawmakers retooled the committee’s budget to account for the House’s failure to pass business privilege tax changes Thursday. The measure would have raised an additional $22.5 million a year by cutting taxes for tens of thousands of small businesses while increasing the tax for the largest corporations. The Alabama Farmers Federation opposed the bill, the Montgomery Advertiser reported Thursday.

Narrow majorities in the House voted Thursday for several other revenue measures, including a 25-cent-per-pack increase in the cigarette tax, two provider taxes dedicated to Medicaid, and tax increases on automobile titles and rentals. Together, these taxes would bring in an additional $107 million for GF services next year. But the package falls short of the amount needed to address the GF shortfall without cuts. It’s also well short of the $300 million in new GF revenue that Alabama Arise and more than 200 other organizations have urged.

The provider tax bills won approval from the Senate’s GF budget committee Friday. So did the cigarette tax bill, along with an amendment to dedicate the revenue to Medicaid. But committee members did not vote on the auto title and car rental tax proposals, and those bills’ future is unclear.

Bills would move revenue, expenses from education budget to General Fund

Senate committee members Friday also approved bills to revise the Rolling Reserve Act, which caps annual education spending, and transfer use tax revenues from the Education Trust Fund (ETF) to the GF. But Sen. Arthur Orr, R-Decatur, who chairs the committee, said he expects the bills will be “heavily amended” before a Senate vote.

The use tax measure would shift use tax revenue from the ETF to the GF starting in 2017, accompanied by a transfer of education budget obligations for traditional GF agencies. The use tax is equivalent to a sales tax on goods bought outside the state for use within Alabama. It is commonly discussed in the context of Internet sales and equipment purchases.

Many lawmakers strongly oppose moving money from education to GF services. Alabama’s education funding is still well below its 2008 level, before the Great Recession, and its K-12 cuts and higher education cuts since then are among the nation’s worst.

The GF supports vital services like health care, child care, corrections and public safety in Alabama. The budget relies on a hodgepodge of revenues, most of which grow slowly even in good economic times. That leaves the GF with a structural deficit, meaning revenue growth is not strong enough to keep pace with ordinary cost growth. Without significant new revenue, Alabama will not have enough money to continue investing in vital services that make the state a better place to live and work.

By Chris Sanders, communications director. Posted Sept. 11, 2015.

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