The Alabama Legislature will meet on Tuesday, Wednesday, and Thursday this week for days 24, 25, and 26 of the 2023 Alabama regular legislative session. The 1901 Constitution of Alabama limits the regular session to no more than thirty legislative days, and the primary constitutional purpose of the session is to pass the state’s budgets. Alabama has two budgets: the state general fund (SGF) for non-education spending and the education trust fund (ETF) for education spending.
Speaker of the House Nathaniel Ledbetter told reporters that he anticipates the House Ways and Means Education Committee will advance the 2024 education budget bills, including a large one-time supplemental appropriation for the current budget year, on Wednesday. If that happens, the Speaker intends to have the education budget bills on the floor of the House of Representatives on Thursday. Ledbetter said that he expects the House to address cutting the state’s four percent tax on groceries at that time.
“I think we will see that come out next Thursday,” Ledbetter said of the bill cutting grocery taxes.
House Bill 479 (HB479), sponsored by State Rep. Danny Garrett, is the bill cutting the sales tax on food. HB479, as introduced, would use the definition of food used by the Federal Supplemental Nutritional Assistance Program (SNAP). The legislation would cut the state groceries tax from 4.0 percent to 3.5% on September 1, 2023.
The legislation also provides for conditional future tax cuts on food.
On November 1, 2024, the rate would drop again to 3.0%, but only if net receipts to the ETF increase by 2.0% or more during the FY2024 fiscal year. In years where net receipts to the education budget increase by 2.0% or more, the tax on foodstuffs will drop .5% until it reaches a floor of 2.0%. If we have a robust economy, that could be reached as soon as November 1, 2026. If the economy stagnates and growth fails to reach 2.0% or more, there will be no tax cut that year.
HB479 does not affect county or local governments’ existing sales taxes on food sales. It would be left up to the local governments whether or not they would follow the state’s example and reduce their own sales taxes – which in many jurisdictions are much higher than the state’s tax. Some
The state brings in over $600 million from the sales taxes on food. HB479 could cut state revenues by over $300 million, with $75 million being felt in FY2024.
“We will address the budgets on Thursday,” Ledbetter said.
The FY2024 education budget that passed the Senate, Senate Bill 88, was $8,798,591,041. That is an increase from $8,261,590,649 in FY2023 2023 – a $537,000,392 ( 6.5% increase). The budget package that passed the Senate included a $2,787,667,309 supplemental appropriation, Senate Bill 87, in one-time money.
“There will be some changes in the House side,” Ledbetter said.
Senate President Pro Tempore Greg Reed told reporters that the general fund budget should be voted on by the Senate Finance and Taxation Committee on Wednesday and that budget will be addressed by the full Senate on Thursday. He also anticipates movement on cutting the grocery tax this year.
The SGF budget that passed the House, House Bill 124, was $3,024,167,948, an increase of $169,030,561 – 5.92% – over FY2023. There is also a supplemental appropriation to the 2023 general fund of $201,738,865 – House Bill 125.
Both budgets have already passed in their respective House of origin, but it is highly unlikely that the second house will pass both budgets without making changes. Both budgets will then have to go back to the House of origin for their consideration. It is likely that they will then vote to non-concur – in which case the differences will be resolved in conference committees before returning to both houses.
Alabama is 49th in per capita taxation. High poverty and low labor force participation rates adversely affect total state revenues.
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