2017 legislative update: Budgets that would do little to boost investments in education, health care advance in Alabama Legislature

Running in place was the emerging theme this week as Alabama lawmakers advanced state budgets that would provide little additional money for education, Medicaid, mental health care and other essential services. Both the Education Trust Fund (ETF) and General Fund (GF) budgets await further action when the Legislature returns from spring break on April 4.

The House voted 72-28 Tuesday to pass a GF budget that would lean heavily on one-time money to prevent deep cuts to Medicaid, mental health care, corrections and other vital services. The next day, the Senate’s education budget committee approved an ETF budget that would provide essentially flat funding for K-12 and universities. The Senate debated the budget Thursday, adopting several changes, but postponed a final vote on it until April. However, senators did pass a plan Thursday to allow the construction of several new men’s prisons in Alabama.

Federal health care changes could send state Medicaid, ALL Kids costs soaring

As in past years, Medicaid funding is a major concern for both legislators and advocates in the GF debate. A one-time infusion of $105 million from the state’s BP oil spill settlement will help prevent massive Medicaid cuts in both 2017 and 2018, but it is not a long-term funding solution for the program that insures more than one in five Alabamians – mostly children, seniors, and people with disabilities.

The House budget would allocate $701.4 million from the GF to Medicaid, $42.2 million short of Bentley’s request. The agency could keep providing basic services at that funding level but would have to “evaluate” its ability to proceed with regional care organization (RCO) reforms that would emphasize preventive care, Medicaid spokeswoman Robin Rawls told the Montgomery Advertiser last week. Alabama would give up $747 million in promised federal funds if it fails to complete RCO reforms by October 2017.

The House’s $1.84 billion GF budget would set aside $97 million as a buffer against potential major changes to federal health care programs like Medicaid and ALL Kids, but that still might not be enough to avoid a special session later this year. U.S. House leaders have proposed a per capita (or per-person) cap on federal Medicaid funding, which accounts for about 70 percent of Alabama Medicaid’s support. That change could force coverage cuts and leave the state on the hook for cost increases in the event of a sudden disease outbreak.

The future of ALL Kids is another major question mark. Congress must reauthorize the Children’s Health Insurance Program (CHIP), which supports ALL Kids in Alabama, by Sept. 30. The state didn’t have to put up any of its own money in 2016 or 2017 to support the ALL Kids program, which insures children whose low- and moderate-income families don’t qualify for Medicaid. But if Congress reverts to an earlier CHIP formula, Alabama once again would have to pay a share of ALL Kids’ cost. Medicaid and the Department of Public Health would need an additional $91 million to meet such a requirement.

Most state agencies would receive flat funding under the House budget, making it increasingly difficult for Alabama to meet changing needs in the face of growing costs and population increases. The Department of Public Health, for example, asked for a $4.6 million increase (not including ALL Kids funding) to help boost preparations for potential widespread epidemics like the Zika virus, or more localized epidemics like last years tuberculosis epidemic in Perry County. But the House’s 2018 GF budget would provide public health with exactly the same amount it received in 2017.

Other level-funded services would include mental health care, corrections and the Department of Human Resources, which oversees crucial services like child protection, child care and food assistance. Collectively, these three agencies had asked for an additional $125.8 million for 2018. The House budget also would not give state employees a raise, a point of deep contention throughout Tuesday’s debate.

Regular shortfalls for services like Medicaid, mental health care and child care are a common refrain. The GF relies on a hodgepodge of revenue sources, 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. Read The Alabama Tax & Budget Handbook for more on how this deficit came to be and how Alabama can end it.

Increases for pre-K, juvenile probation officers in otherwise relatively flat education budget

As with the GF, funding increases in Alabama’s education budget next year would be the exception, not the rule. The Senate’s education budget committee Wednesday approved a $6.42 billion ETF budget that would boost state education support by only 1.4 percent next year. The K-12 Foundation Program would see a $14.5 million increase, allowing schools to hire about 150 new teachers in grades 4-6. Operating budgets for two-year colleges and universities would receive flat funding.

The ETF’s small increase would not be spread evenly across all educational services. K-12 schools would receive just 0.36 percent more. But debt service, primarily for university construction projects, would increase by more than $10 million – a 42 percent jump in one year. State-funded college scholarships for many Alabama veterans and their families are projected to cost $26.5 million more in 2018 than in 2017 – a 40 percent increase. SB 315, sponsored by Sen. Gerald Dial, R-Lineville, would tighten eligibility requirements for those scholarships in an effort to reduce the state’s future obligations.

Sen. Vivian Figures, D-Mobile, was one of several senators concerned about growing debt service costs because, she said, it was not immediately clear which projects had incurred those debts. “I’m sure none of us pay bills at home when we don’t know what they are,” Figures said.

Pre-K and juvenile probation officers are two major services that would receive more ETF money. Pre-K, which enjoys broad bipartisan support at the Legislature, would get an extra $15 million, a 23 percent increase. The state also would boost funding for juvenile probation officers by 19 percent, providing an additional $1.25 million from the ETF and an extra $500,000 from the GF.

Pared-down prison construction plan clears Alabama Senate

The budgets themselves weren’t the only major budgetary news at the Legislature this week. The Senate passed a major milestone in its two-year prison construction debate when it voted 23-11 Thursday for a plan that would fund construction of up to three new men’s prisons. The bill now awaits House action.

SB 302, sponsored by Sen. Cam Ward, R-Alabaster, would allow local jurisdictions, such as counties or regional associations of counties, to bid to build prisons. Successful bidders would be allowed to issue bonds to build two or three prisons to Department of Corrections (DOC) specifications and then lease the prisons back to the DOC for 30 years. The state would gain ownership of the prisons at the end of the lease period. The state would close all but three existing men’s prisons, leaving six total.

The bill would allow the state to borrow up to $325 million to build one new prison and renovate others, including Julia Tutwiler Prison for Women in Wetumpka, but only if localities agreed to build at least two new prisons. Those numbers are down sharply from Ward’s original plan, which would have let Alabama borrow $800 million to build four new prisons.

Ward estimated that the additional prison space would allow Alabama to reduce the population of each prison to less than 150 percent of capacity and reduce DOC operating and personnel costs. That would free up funds for lease payments to local governments, he said.

Sen. Linda Coleman-Madison, D-Birmingham, argued strongly during floor debate that the state needed to build a new women’s prison, as Ward’s original plan would have. “There are only 800 women in Tutwiler, and they’re not rioting or attacking guards,” she said, accusing the Legislature of ignoring the needs of incarcerated women. “The foundation is crumbling. Water is leaking. There is nowhere to sit other than your bed.”

Ward agreed that Tutwiler needed replacement or major renovations. But he said the cost savings from closing it wouldn’t be enough to pay the lease on a new prison.

The Southern Poverty Law Center also has criticized Ward’s bill, saying it would not solve problems with staffing, overcrowding and mental health care access in Alabama prisons. The bill is not a wholesale solution to the state’s corrections issues but is a step in the right direction, Ward told AL.com.

By Carol Gundlach, policy analyst, and Chris Sanders, communications director. Posted March 16, 2017.

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