Justin Bogie: Legislature should not seek permanent solutions for temporary problems
Last week, the Alabama Legislature held the second in a series of informal budget hearings aimed at determining how inflation and the possibilities of a recession are impacting state agencies. Much like the first hearing, the general theme was that inflation is increasing the day-to-day operating costs of agencies and contributing to a shortage of workers. So, what is the solution to the perceived inflation problem? If you only listened to the officials presenting their case to legislators last week, you would think more funding is the answer. In reality, the current period of record inflation is temporary. Government spending increases tend to be permanent, leaving you, the taxpayer, on the hook to pay for the expansion of government. There is no doubt that inflation is hurting many Alabamians right now, whether they are public or private sector employees or business owners. In June, inflation rose to 9.1% year over year, with record high gas prices being the underlying cause. But no one expects that trend to last. The Congressional Budget Office projects that inflationary pressures will begin to ease later this year and fall to 3.1% in 2023. From 1960 to 2021, the average annual inflation rate in the United States was 3.7%. It is also important to recognize that the current rise in inflation was caused by the actions of the government, which pumped $4.5 trillion into America’s economy through COVID-19 stimulus legislation. The government is now attempting to correct the problem through monetary policy, namely interest rate hikes. Alabama Department of Mental Health Commissioner Kimberly Boswell spoke about how inflation is impacting her agency, saying that some employees had been forced to work second or third jobs to make ends meet. For the agency, this means that there are fewer workers willing and able to work overtime at the state’s mental health hospitals. The agency’s biggest need is for more nurses and mental healthcare technicians. But is inflation really the cause of the problem? Though the COVID-19 pandemic highlighted America’s nursing shortage, it began in 2012 and is expected to continue through 2030. The inflation rate was approximately 2% in 2012, meaning that inflation didn’t cause the shortage. The more important factor may be supply and demand. Nurses are currently in high demand. In general, nurses have a higher earning potential and greater flexibility when working in a private or for-profit healthcare setting, as opposed to working for a state agency. Boswell acknowledged these realities while speaking to the legislature, saying, “What people are really looking for is flexibility.” Traditionally the Department of Mental Health has not hired part-time workers or allowed employees to have more flexible work schedules. In today’s post-pandemic work environment, those factors may be just as, if not more, important than salary. Boswell said that “we at this point are considering looking at part-time employees as well as multiple flexible schedules so we can attract the folks that are looking for that flexibility.” Inflation has nothing to do with wanting a more flexible work schedule. And while the salary discrepancy between public and private sector jobs may play a role in shortages, the state is already taking steps to retain its workforce. The fiscal year 2022-23 enacted state budgets included permanent pay increases, at an annual cost of nearly $400 million to taxpayers, for all state employees. In addition to those already approved pay raises, in June, the State Personnel Board amended its pay schedule to add four new steps to the top of the pay scale for most state jobs. This means that some employees could see an additional 10% raise in two years, outpacing inflation and private sector wage growth projections. At last week’s budget hearing, state officials also addressed how inflation is impacting capital construction projects, saying that it has increased costs by about 25%. This should not come as a surprise to anyone. The legislature approved a $1.25 billion bond issue for school construction projects in May of 2020, the height of the pandemic. Construction prices were already on the rise. The legislature enacted $750 million in supplemental appropriations, mainly for more capital projects at Alabama schools, during the 2022 regular legislative session. Inflation was more than 8% when that bill was passed. In the meantime, Alabama’s government took more taxes from you and spent more of your money than ever before. Tax revenues are expected to continue to boom this year. Our government doesn’t need to spend more money to fight inflation. It needs to be a better steward of what it has already taken from us. Inflation is a temporary problem, created in no small part by the government. It is not a reason to extend the unprecedented expansion of state government. The lagging impacts of inflation will continue to hurt workers for several years. Shouldn’t the government have to share in the pain felt by so many Alabamians? Justin Bogie is the Senior Director of Fiscal Policy for the Alabama Policy Institute.
Justin Bogie: In the aftermath of Roe, Alabama should not rush to fully expand Medicaid
In the wake of the U.S. Supreme Court’s decision to overturn Roe v. Wade, will Alabama lawmakers make a renewed push to expand Medicaid in Alabama? The early indications suggest yes, but lawmakers should be in no rush to take action. Governor Kay Ivey and the Legislature have already expanded Medicaid coverage for new mothers, and full Medicaid expansion would come at a hefty cost to taxpayers. The day after the Supreme Court decision was released, the calls for Medicaid expansion began. Tuscaloosa Mayor Walt Maddox took to Twitter, saying that Medicaid expansion “would make quantum leaps for Alabama’s ability to ensure healthy pregnancies and births. The time must be now.” While not specifically referencing the Roe v. Wade decision, Alabama Arise Executive Director Robyn Hyden published a column renewing the call for Medicaid expansion. Other policymakers have followed suit. The call to expand Medicaid coverage for new mothers in a post-Roe world is understandable. While the specifics of how the decision will impact the number of births in Alabama are unknown, we can assume that the state’s ban on abortions, with limited exceptions, will result in more babies being born. But using the Roe decision as a means to push for full Medicaid expansion is disingenuous at best. Expanding Medicaid would almost certainly improve health outcomes for new mothers and their children. It would also provide relief from the financial burdens of having a child. But the reality that so many pro-Medicaid expansion advocates seem to ignore is that Alabama already expanded Medicaid coverage for new mothers and their children before the Roe decision. During the 2022 regular legislative session, the Legislature enacted a budget that extends Medicaid coverage from six weeks to 12 months for postpartum care. The General Fund budget signed by Governor Kay Ivey included $4 million in funding for the extension of care, and the Alabama Medicaid Agency had previously designated another $4.5 million for the program. As of now, the extension is part of a one-year pilot program, which will allow the Alabama Medicaid Agency to evaluate its cost, how many eligible mothers use the services, and whether it improves health outcomes. If the pilot program is successful, it will almost certainly be extended. This is a much more fiscally responsible and reasonable approach than bowing to the pressure of calls for full-blown Medicaid expansion. The cost of expanding postpartum care is $8.5 million. That could fluctuate based on how many mothers utilize the program over the coming years, but in the scope of a $2.7 billion General Fund budget, the costs to the state are negligible. The same cannot be said for full Medicaid expansion. The Public Affairs Research Council of Alabama (PARCA) recently estimated that full expansion would cost the state over $225 million per year on average. Total expansion costs would rise to $243 million by 2027, and the increases would likely continue thereafter. One common argument in favor of Medicaid expansion is that Alabama will receive more federal Medicaid funding and realize net savings from the expansion. PARCA estimated net savings to be over $1 billion from 2022-2027. Saying that the state will save money is an oversimplification of the issue though. While the state may see a net gain within the Alabama Medicaid Agency, it will be at the cost of other agencies funded by the General Fund budget. If the state expands Medicaid, nearly a quarter of a billion dollars from the General Fund budget will be going towards that by 2027. Most of the federal dollars that the state receives as a result of expansion would go back into the Medicaid program. Apart from potential new tax revenues, they could not be used to pay for Corrections, Mental Health, or other General Fund expenses. The decision to expand Medicaid would have ramifications far outside of the Medicaid budget. Despite the current period of record state revenues, if there is a gap left to be filled, lawmakers might turn to tax increases on the citizens of Alabama to pay the bill. Because of the required state matching funds to expand Medicare, it also means that lawmakers will have less autonomy in making budget decisions. The looming threat of an economic recession could mean less budget flexibility. While the U.S. Supreme Court’s decision to overturn Roe v. Wade may increase the need for postpartum Medicaid coverage, Alabama’s lawmakers have already addressed that issue, extending postpartum coverage from six weeks to 12 months. The Roe decision is not a reason to undertake full Medicaid expansion. Doing so could come at a high cost to Alabamians. Justin Bogie is the Senior Director of Fiscal Policy for the Alabama Policy Institute.
Justin Bogie: What is a labor union, and what could unions mean for Alabama?
Over the past year, unionization has been a hot topic in Alabama. An Amazon facility in Bessemer has twice voted on the issue of unionization, with workers choosing not to form a union both times. Recently, workers at a Starbucks in Birmingham voted to organize, becoming the first Starbucks in Alabama with unionized labor. But what does being part of a workers union really mean, and how might continuing efforts to expand unionization impact Alabama? Worker’s unions have existed in America almost as long as the country itself, with the first being formed in Philadelphia, Pa., by shoemakers in 1794. According to the Bureau of Labor Statistics (BLS), 10.3% of America’s public and private workforce (14 million individuals) belong to unions. When the BLS first began collecting unionization data in 1983, membership was almost twice as much. The highest unionization rates are among workers in education, steelworking, automotive manufacturing, electrical workers, and public safety-related occupations. Half of the U.S.’ unionized workforce comes from the public sector, which creates a concerning conflict of interest given the fact that these jobs are funded by elected officials who may be dependent on those same union members’ votes to remain in office. Nationally, Hawaii (22.4%) and New York (22.2%) have the highest union membership rates, while South Carolina (1.7%) and North Carolina (2.6%) have the lowest. In 2021, union members comprised 5.9% of Alabama’s wage and salary workforce, down 2.1% from 2020. Ten states had rates below 5% last year. In 2019 it was estimated that 34% of Alabama’s public sector workers were union members, while just 6.4% of private-sector employees were unionized. A union can be defined as “an organized group of workers who unite to make decisions about conditions affecting their work.” The idea is that by joining a union, a collective group of workers will have more power than they would as individual employees. This could mean negotiating for better pay, hours, benefits, and addressing workplace safety issues, among other things. Unions are supposed to work as a democracy, where elections are held to choose officers who will then make decisions on behalf of union members. Often there will be a local union that is affiliated with a national or international organization. Some of the supposed benefits of being a union member include higher wages and better benefits, greater personal upward mobility, improved working conditions, and improved job security. While in theory, these may sound like good things, in practice, it is more complicated. Just as with the United States’ democratic government structure, structuring a union to function as a democracy means there will be those who wield great power, while rank and file members may have little say in decisions. There are numerous potentially negative consequences of being part of a labor union. First, unions require members to pay dues, which go towards paying the salaries of union leadership and are supposed to supplement workers’ salaries during a work stoppage. Being part of a union means that you have less autonomy to make your own decisions. Like it or not, union members are bound by the decisions made by the group as a whole. Another potentially harmful impact of union membership is that it could slow your chances for workplace advancement. As with our government, in many cases, advancement is tied to seniority. Regardless of merit or your work performance history, if you have less experience than other employees, then you will be more likely to get passed over for a promotion or laid off when company cutbacks are implemented. Workplace promotion should be based on performance, not who has been there the longest. It has also been found that unions create tension within the workplace. Unions can put workers at odds with their employers more often than if employees were not part of an organized labor force. This can lead to lower levels of trust and satisfaction in the workplace. Finally, there is the question of how those dues that workers pay to unions are being used. A recent example of the potential misuse of union funds is the National Education Association (NEA). To clarify, the NEA and its subsidiaries are technically professional organizations but perform many of the same functions as a labor union. According to an NEA report filed with the U.S. Department of Labor last year, the organization had total revenues of more than $588 million in 2021. Just $32 million of that revenue (5.4%) was used for what is referred to as “representation activities.” In other words, only a small percentage of the dues collected by the NEA was going towards bargaining for better pay and improving the working conditions of rank-and-file teachers. Meanwhile, the NEA’s president was paid an annual salary of more than $430,000. Four other NEA executives were paid salaries ranging from $334,219 to $406,951. Another $65 million – more than twice what NEA spent on representing teachers – was spent on political campaigns and lobbying, with 94% of NEA’s political contributions supporting Democrat candidates. Virginia Gentles, director of the Education Freedom Center of Independent Women’s Voices, responded to the report saying, “Rather than advocating for increased salaries for teachers, union leaders lobby for more federal and state funding so school districts will hire more dues-paying members, many of whom aren’t actually teachers.” While questionable motives and use of funds are not limited to teachers’ unions, it would lead you to question what one of Alabama’s largest unions and the NEA subsidiary, the Alabama Education Association (AEA), is doing with dues collected from its membership. According to the AEA, its membership is more than 84,000 of the state’s education employees. That includes not only teachers but administrators, support personnel, etc. Each AEA member pays annual dues that start at $210 per year and then increase depending on your job and where you live. According to fiscal year 2020 tax filings with the Internal Revenue Service, the AEA reported more than $17 million in revenues that year and spent more than $15.5 million. Over $13 million in revenue came from membership dues. More than half of AEA’s expenses went towards salaries, other compensation,
Justin Bogie: State government on pace for another record surplus; will it give Alabamians a break?
State government continues to take more money from Alabamians than ever before. Will it use that money to continue the historic expansion of state government or finally take less taxes from citizens? As first reported by Alabama Daily News, 2022 is on pace to be another banner year for state government. Through the end of May, state revenues totaled nearly $1.4 billion more than they did at this point last year. The state has already collected almost $8.7 billion in gross revenue. With four months remaining in the fiscal year, that revenue surplus will likely grow. If the current trend holds, lawmakers will have another historic opportunity to reduce taxes and take less from Alabamians next year. That should be priority number one. But remember, we found ourselves in this same situation just a few months ago. Alabama’s government began 2022 with a combined revenue surplus of $1.5 billion. Nearly all that surplus – excess tax dollars taken from you – went back into state government. The lone “victory” for taxpayers was around $160 million in targeted tax cuts, less than 1.3 percent of the total revenue available to the state. Most citizens saw no benefit from these tax cuts. Nothing was done to repeal the state’s sales tax on groceries, which could have mitigated some of the impacts of rising inflation. Nothing was done to suspend the state gas tax or repeal the governor and legislature’s 2019 tax increase, despite gas prices being at an all-time high. And while Alabama’s government hasn’t raised any tax rates since 2019, it has continued to collect record revenues on the backs of citizens. Gross income tax receipts are up almost 30% – more than a billion dollars – so far this year. Online sales tax collections are up over 20%. Our government is taking around 10% more in taxes from Alabamians every year than it needs to pay for an already bloated budget. Surely if the state finds itself with another massive revenue surplus heading into 2023, then that money will be used to tax citizens less, right? Don’t count on it. Based on comments made by lawmakers to Alabama Daily News, they are already looking for reasons to put any potential surplus back into government spending. Both Rep. Steve Clouse (R-Ozark) and Sen. Greg Albritton (R-Range), who are chairman of their respective General Fund Budget committees, pointed to rising inflation as a potential need for increased spending. Rep. Clouse said, “[We want to know] how inflationary pressures are hitting agencies and to see how they’re handling it.” Sen. Albritton indicated that lawmakers need more information from agencies so that they can better develop a plan to mitigate inflation impacts. While inflation may hurt the bottom line of state government, as it does Alabama families, state revenues are growing far faster than inflation. Through May, General Fund revenues had grown by 8.7 percent, while in the Education Trust Fund, which accounts for more than three quarters of state spending and receipts, revenues were up almost 22 percent. At the end of April, the U.S. inflation rate was 8.3 percent and is expected to gradually decline to around 3 percent by the end of next year. State revenue collections actually benefit from inflation at the expense of Alabama’s consumers. As the price of goods rises, so do tax collections. Through May, Alabama’s gross sales tax collections were up 8.5 percent, well above average. All the more reason for lawmakers to enact laws that will take less money from citizens. Sen. Albritton also pointed to federal stimulus funds as part of the reason for continued revenue growth. Albritton said, “That money is going to run out,” and questioned what will happen when revenues shrink. This could be the next line of reasoning that lawmakers use if they fail to pass meaningful tax cuts in the coming months. And while it is a valid concern that once all the federal intervention of the past few years wears off, state revenues will decline, this isn’t news to anyone. Lawmakers warned last year that revenue growth was unsustainable. That didn’t stop them from passing the largest budgets in state history for 2023 and adding another $1.5 billion in spending to the already then record-high 2022 budgets. If you really think that a downturn is fast approaching, why is Alabama growing spending more than California or New York? What was lost from Rep. Clouse and Sen. Albritton’s comments was how inflation, rising gas prices, increased home energy costs, and any number of other issues are impacting the citizens that they and their colleagues in Montgomery have been elected to represent. In the past few years, Alabama’s government has fared much better than many of the people it is supposed to serve. The state government continued to operate throughout the pandemic. All state employees received raises in the past two years. The same cannot be said of private businesses and their employees. It is time for the people of Alabama to demand that they be a higher priority than the government. Our neighbors are doing it, yet we continue to trail behind. Not one extra penny should be spent on Alabama’s government until the legislature enacts real tax relief that will benefit all Alabamians. Justin Bogie is the Senior Director of Fiscal Policy for the Alabama Policy Institute.
Justin Bogie: Gas, grocery taxes crushing Alabama families; is this the leadership we want?
Next week, Alabama voters will cast their votes for the 2022 Primary Election. While the races for U.S. Senate and Governor are getting most of the media attention, who walks the halls of the State House for the next four years will have just as much, if not more, impact on your life. As we prepare to elect the next Alabama Legislature, it’s important to look back at what our legislators did in the last four years. Did they represent and protect the values and principles that they promised to back in 2018? Has your life improved in the last four years? For many Alabamians, the unfortunate answer to both of those questions is no, and some of the blame lies with the current legislature. Many of those same legislators’ names will appear on the ballot next week. There are two missteps by the legislature that stick out when making the argument that life has gotten harder in the past four years: the passage of the $.10 gas tax increase in 2019 and the unwillingness of our lawmakers to repeal the state’s sales tax on groceries. What our governor and some legislators might consider to be the “crowning achievement” of the past four years is the passage of the Rebuild Alabama Act (RAA) back in 2019. It was one of the first actions of the newly elected legislature and passed by a wide 111-26 margin. The RAA implemented a $0.10 per gallon gas tax increase and, by the end of this year, is projected to generate more than $320 million annually. The state keeps about two-thirds of the new revenues while counties and municipalities get the rest. Nearly $12 million per year is set aside for the Port of Mobile. When the bill was being debated, the Alabama Policy Institute argued that the gas tax increase should only be approved if some other tax, such as the grocery tax, was repealed. That didn’t happen, and the tax burden on citizens has continued to climb, culminating in Alabama’s government taking more taxes than ever from Alabamians in 2021. That extra $0.10 may have seemed absorbable to some back in 2019. It isn’t anymore. When the RAA passed, gas prices were $2.25 per gallon. Today, AAA reports that the average gas price in Alabama is $4.24 per gallon, an 88% increase in just over three years and the highest at any point in state history. The $0.10 gas tax increase approved by the current legislature and signed by the governor is hurting many Alabamians. What’s more, with the passage of a massive federal infrastructure bill last fall, Alabama will see hundreds of millions of additional transportation dollars flowing into the state over the next five years. The RAA should be repealed. Doing so would provide at least some relief from the pain at the pump that we are all experiencing, but it seems no one in Montgomery is willing to give up the revenue that it provides. In March, our current governor was asked if she would even be willing to suspend the $.10 tax increase. She responded with a resounding no and instead blamed high energy costs on President Joe Biden. Alabamians may blame Biden for many things, but he had nothing to do with raising Alabama’s gas tax. The Alabama Legislature’s failure to repeal the sales tax on groceries is much like the imposition of the new gas tax. It is hurting citizens now more than ever. This is a bipartisan issue that would immediately help all Alabamians, yet in the past four years, Alabama’s Republican supermajority has never brought a bill to repeal the grocery tax to the Alabama House or Senate floor for a vote. Thus, Alabama remains one of three states that still fully taxes groceries. The cost of groceries is up 9.3% in the last year. The price of meat, poultry, fish, and eggs has increased by over 14%. Americans haven’t seen inflation like this in 40 years, and it is having a crushing effect on family budgets. Our state government began this year with a $1.5 billion revenue surplus. That’s on top of tens of billions of federal dollars that have flowed to the state in the form of COVID-19 relief since 2020. Yet they weren’t willing to give up around $500 million in revenue to help literally every resident of this state. The fact that the Alabama Legislature has done nothing about the grocery tax is indefensible. Combined with raising the gas tax, the effects are even more damaging. Is this the kind of leadership that we want for the next four years? Justin Bogie is the Senior Director of Fiscal Policy for the Alabama Policy Institute.
Justin Bogie: State parks amendment is more of legislature’s fiscal malfeasance
In less than two weeks, Alabama voters will head to the polls to cast their votes in the 2022 Republican and Democratic primary elections. One question that both ballots will have in common is whether to approve a constitutional amendment that would provide additional funding to Alabama state parks and the Alabama Historical Commission. If the amendment passes, the state will issue $85 million in bonds that would be paid off over the next 20 years; $80 million of the funding would be dedicated towards state parks, while the remaining $5 million would fall under the jurisdiction of the Historical Commission. I’m not here to tell you that our state parks do or do not need the funding for maintenance, renovations, and upgrades to facilities. What I can tell you is the fact that our legislators have decided the only way to provide that funding is through taking on more state debt is just the latest example of the fiscal malfeasance we have witnessed over the past four years. As a refresher, Alabama’s state government began 2022 with more cash on hand than at any point in state history. Our government took $1.5 billion more in taxes from citizens last year than it expected to, resulting in a historic surplus. What did lawmakers do with that money? They put nearly all of it back into 2022 spending through a massive supplemental appropriations bill. They passed the largest budget in state history for fiscal year 2023, with almost $11 billion in combined spending. If revenues are higher than expected this year, like in 2021, that total is sure to climb. They gave raises to every state employee while providing only limited and targeted relief for the rest of Alabama’s citizens. The list goes on, but you get the point. It is unfathomable that somewhere in the almost $11 billion in spending approved for 2023 or the $1.5 billion in supplemental funding for 2022, the Alabama Legislature couldn’t find $85 million, less than 1% of next year’s budget, to dedicate towards state park projects. Instead, if approved by voters, the state will take on $85 million in new debt to finance the projects. But $85 million is just the start. The Alabama Legislative Services Agency estimates that debt service payments will be $6 million per year for the next 20 years, $120 million total. In other words, the state will pay an additional $35 million in interest costs to borrow the $85 million. Even if the projects are needed, why would the state take on new debt for what is the equivalent to a rounding error in the scale of an $11 billion budget, especially when Alabama’s government had more cash on hand than ever just a few months ago? Would you take out a 20-year loan to pay for your family’s dinner tonight if you have plenty of money sitting in the bank? Of course, you wouldn’t. If such a loan were even possible, the long-term costs would be much more than whatever you paid for your meal. No family would budget that way. So why does our legislature think it is acceptable? Maybe the answer is that they don’t care about the long-term costs because they aren’t spending their own money. They’re spending yours. The current class of legislators has shepherded a historic period of government expansion. Alabama’s government spending grew by 36% from 2019-2022, faster than California or New York. By borrowing the money to pay for state park projects, instead of spending $85 million next year, state government will only make the $6 million debt service payment. Meaning that they have an extra $79 million right now that they can funnel into whatever else they choose. Our legislators are out of touch with the people of Alabama when it comes to spending our taxpayer dollars. It is up to us to bring them back to reality. Justin Bogie is the Senior Director of Fiscal Policy for the Alabama Policy Institute.
Justin Bogie: When it comes to spending, Alabama is “bluer” than New York and California
When you rank states in terms of their political leanings, places like California and New York are probably near the top of the list of liberal states. And that’s certainly true in terms of social issues. And while Alabama may be one of the most socially conservative states, would it shock you to know that when it comes to spending and tax issues, Alabama’s state government is about as blue as it gets? That’s right. Alabama is more liberal than California and New York when it comes to spending your money. It takes only a look at recent government spending trends to verify this. From 2019 to 2022, the liberal strongholds of California and New York expanded government by 30% and 26%, respectively. What may surprise you is that right here in Alabama, what was once predicted to be the most conservative legislature in state history increased spending by over 35%. Almost $3 billion in new spending in just three years. That’s not a stat that Alabamians should be proud of. Meanwhile, other southern states that most people would consider staunchly conservative are acting much more like it. Over that same three-year time frame, Florida increased government spending by 12.5%. Mississippi grew government by a much more sustainable 5.5%. Our neighbors in Georgia actually cut the size of government by 2.5% from 2019 to 2022, reducing total spending by almost $800 million dollars. Remember, Alabama found itself in a unique situation the past few years. State government started the year with an unprecedented $1.5 billion revenue surplus. That’s excess taxes that came directly from your pocket. On top of the revenue surplus, the state and local governments have received more than $6 billion in direct COVID-19 stimulus funding. Nearly all that money has gone back into government. More government means more regulation of businesses, more corruption, and more interference with your freedoms and rights. Many states have found themselves in a similar situation in the past few years. In no small part because of federal intervention, state governments have more cash on hand than ever before. The difference is what other states are doing with that money. Over the past year, 14 states, both red and blue, enacted laws to reduce personal and/or corporate income tax rates. Alabama is not one of them. Alabama lawmakers are touting the fact that they enacted around $160 million in tax cuts during the 2022 Regular Legislative Session, the most in state history. About half of those cuts came from a decision to not tax federal stimulus payments to Alabamians. That’s money that the state never anticipated having in the first place. The other half of the cuts came in the form of targeted tax relief, meaning that many of us will see no benefit. The bottom line is that Alabama’s government missed a historic opportunity to take fewer taxes from the people of Alabama. Instead, it used that money to continue the unsustainable growth of government. Again, we need only look to our neighbors to see what conservative tax policy should look like. Over the past year, Georgia enacted a tax reform package that will save citizens $2 billion in the coming years. Florida was able to pass tax cuts that could total $800 million once fully implemented. Just last month, Mississippi enacted a law that will phase out some individual income taxes entirely and leave Mississippi with the lowest top marginal tax rate among southern states that collect income taxes. The plan will provide about half a billion in tax relief to Mississippians. Arizona, which cast its electoral votes for Joe Biden in the 2020 election, enacted $1.9 billion in income tax cuts last year. When you consider all the money that Alabama’s state government has had at its disposal over the last few years, the fact that the legislature could enact less than $80 million in real tax cuts is insulting and a breach of duty to Alabamians. The people of Alabama must demand better. It’s our duty to tell our elected officials that we don’t want to be like California or New York. We want to be more like Georgia or even Mississippi when it comes to what government does with our money. We can all help send that message during the May 24th primary elections. Justin Bogie is the Senior Director of Fiscal Policy for the Alabama Policy Institute.
Justin Bogie: Tax cuts seem to be everywhere – except in Alabama’s future
Kansas, one of a handful of states alongside Alabama that still fully taxes the sale of food, recently announced a bipartisan plan to “Axe the Food Tax.” Just before Thanksgiving, North Carolina Gov. Roy Cooper signed a budget into law that will make sweeping changes to the state’s tax code, fully repealing the corporate income tax by the end of the decade and cutting the personal income tax rate by 1.26% over the next five years. And the tax cuts that North Carolina just enacted and that Kansas is proposing are not outliers. According to the Tax Foundation, North Carolina became the 12th state to enact personal or corporate income tax rate cuts in 2021. So, what did Gov. Kay Ivey and the Alabama Legislature do in 2021, and what could be on the horizon? Despite taking more revenue from citizens than ever before, there was no meaningful effort to reduce taxes this year. Instead, the 2021 Regular Legislative Session was consumed by a failed effort to legalize, and of course, heavily tax casino-style gaming in Alabama. Lawmakers also found time to legalize the use and sale of medicinal marijuana in Alabama, which could mean financial windfalls for state government and the chosen few businesses allowed to grow, process, and distribute marijuana in Alabama. Given the progress made by other states and Alabama’s failure to pass any meaningful tax reforms this year, surely they are coming in 2022, right? If tax cuts are in the cards, our elected state leaders are not talking about them. Most lawmakers seem focused on how to spend money that has already been taxed from citizens or find ways to take even more. Just this week, State Sen. Greg Albritton, chairman of the Senate general fund budget committee, said that he expects gaming legislation to be a hot topic when the legislature reconvenes on January 11. According to a report from Yellowhammer News, Albritton said that he was hopeful gaming legislation would pass in the upcoming session. And while he said getting control of existing gaming in the state was a driving factor, money may be the biggest motivation. Albritton said, “We’ve got to have some taxing on it. We’ve got to have some benefits on it.” It was estimated that the 2021 gaming legislation would have brought in $260 million to $393 million annually, just from a new tax on gaming revenue. Much of that revenue would have, of course, come out of the pockets of Alabamians. What are other priorities? Sens. Del Marsh and Bobby Singleton have bonuses for retired state workers and teachers on their minds. Marsh’s pre-filed bill would give a minimum bonus of $300 to retirees. Senate education budget chairman Arthur Orr has indicated support not only for retiree bonuses but another pay raise for the state’s teachers. If those priorities pass, Orr has said that it might be the right time to look at limited tax breaks for retirement age and lower-income Alabamians. But surely Gov. Kay Ivey is talking about taking less money from the people of Alabama? Not exactly. On Monday, Ivey announced a state-sponsored plan to expand electric vehicle use in Alabama. Interestingly, when asked if she would move to an electric vehicle, Ivey said her car is “still in good shape,” but she might consider a change in the future. Perhaps Ivey is like many other Alabamians who don’t know much about or have little interest in driving an electric vehicle. According to the Alabama Department of Revenue, nearly five million passenger vehicles were registered in 2020. Less than 3,000 of those vehicles were electric. Are these really the major priorities for Alabama citizens? If the recent gubernatorial election in Virginia is any indication, no. After a 12-year drought in statewide elections for Virginia Republicans, Glenn Youngkin was able to win because he focused on conservative principles such as school choice and lowering taxes. Exit polling conducted by Cygnal found the driving issues for Youngkin voters were education, taxes, the economy, and public safety, among others. Electric vehicles and expanded gambling appeared nowhere on the list. Few would argue that Alabama is a conservative state. Yet, the current tax and spend priorities of state lawmakers do not reflect conservative principles. If the governor and Republican supermajority legislature want to get back to those roots, they need only look to other states for inspiration. Justin Bogie is the Senior Director of Fiscal Policy for the Alabama Policy Institute.
Justin Bogie: Alabama lawmakers must choose the people over bigger government
Despite the pandemic, the business of state government is booming in Alabama. It is past time for the state to give some of its newfound wealth back to citizens. A recent court ruling should pave the way for Alabama’s elected officials to do so if they choose to. But lawmakers already missed one opportunity. To recap, in March, Congress passed a second massive COVID-19 stimulus bill, the American Rescue Plan Act (ARPA). Alabama’s state government has already received half of its $2.1 billion allotment from the bill and will receive the second half early next year. So far, the state has committed $480 million of its ARPA funds, with the bulk of that going towards prison construction projects. In total, state government alone has been handed $4 billion in federal stimulus funds since the start of the pandemic. In addition to the stimulus money, the state saw $1.2 billion in new revenue flow into the state in 2021. Most of that money has been reinvested in the public sector. A controversial provision of ARPA blocked states from being able to cut taxes and then use stimulus funds to replace lost revenue. In response, 13 states, including Alabama, sued the Treasury Department, arguing that the federal government had no Constitutional authority to dictate state tax policy. On November 15th, U.S. District Court Judge L. Scott Coogler issued a permanent injunction against the provision, writing that the restriction is “a federal invasion of State sovereignty.” Coogler further wrote that the mandate pressures states into adopting federally preferred tax policy and disincentivizes states “from considering any tax reductions for fear of forfeiting ARPA funds.” The bottom line is that the federal court ruling clears the way for Alabama to use its ARPA funds for tax relief. It also proves that elected officials missed an opportunity to provide relief much sooner. Alabama received $1.8 billion from the Coronavirus Aid, Relief, and Economic Security Act (CARES) in 2020. In June of last year, the Alabama Policy Institute (API) presented a proposal to Governor Kay Ivey that would have set aside a portion of the state’s CARES funding to implement an extended statewide sales tax holiday. If the proposal had been adopted, it would have saved citizens money and provided a much-needed boost to Alabama’s brick and mortar businesses during the heart of the pandemic. Before presenting the proposal, API commissioned an outside legal opinion that determined a sales tax holiday was a permissible use of CARES Act funds. Ultimately the governor’s office refused to implement the sales tax holiday, hiding behind U.S. Treasury guidance that said the money couldn’t be used to replace lost revenue. However, other states, like Idaho, went full speed ahead with measures to reduce citizens’ tax burden. The federal government never intervened. If state government wanted to use CARES Act funds to provide a sales tax holiday, it likely would have been allowed. But the desire to use the money to grow government outweighed the need to help struggling citizens and businesses. While we as citizens cannot change past government actions, we can demand better for the future. There are a number of ways that Alabama’s government could use ARPA funds to help the citizens and business owners of this state. API believes that an extended sales tax holiday would still provide benefits to both, but there are other ways. Alabama is one of just three states that fully taxes grocery and food items, something that every person living here relies on. The stimulus funds would go a long way towards permanently eliminating that tax burden. Because of a rise in unemployment claims over the last two years, employers are now paying more in unemployment compensation tax than they were before the pandemic. In 2021 the employer tax rate increased by 92 percent, adding additional strain to businesses already hit hard by COVID-related shutdowns. The state could use ARPA funds to reduce unemployment taxes in 2022. The state has more than $1.5 billion in remaining ARPA funds at its disposal. To put that in perspective, it is enough money to eliminate unemployment taxes for up to six years. It could wipe out the grocery tax for three years. That’s not including this year’s $1.2 billion revenue windfall. Regardless of the method, Alabama citizens deserve tax relief. A federal court has already ruled that Washington cannot tell Alabama and other states how to use that money. If lawmakers fail to provide tax relief to the citizens of Alabama, it is because they chose government over the people they are elected to serve, not because they can’t. Justin Bogie is the Senior Director of Fiscal Policy for the Alabama Policy Institute.
Justin Bogie: State government takes more revenue from citizens than ever before
In 2021, Alabama’s state government took more money from taxpayers than ever before. The big question is, what will state government leadership do with it? It should be used to provide tax relief to citizens and businesses, not to continue to grow government. According to end of fiscal year, 2021 data from open.alabama.gov, the Education Trust Fund, and General Fund budgets took in a whopping $11.2 billion in revenue last year. That’s nearly $1.2 billion (11.6%) more than the state collected in the fiscal year 2020. Don’t forget, this is on top of nearly $4 billion that has and will continue to flow directly to state government because of a series of federal stimulus bills designed to help states recover from the COVID-19 pandemic. The state’s Legislative Services Agency recently estimated that almost $47 billion total has been given to the state from the federal government over the past two years. That includes money such as direct payments to individuals, payments to county and local governments, the Paycheck Protection Program for businesses, and expanded unemployment benefits, among others. While it is good that Alabama’s economy has seen a swift recovery from the pandemic, especially compared to states with more restrictive environments, much of that growth is coming directly out of your wallet. Individual income tax receipts rose by $631.6 million last year, an increase of 15 percent. Sales tax receipts rose by nearly 15 percent, or $372 million. The state’s recently implemented online sales tax had another big year, adding $72 million more in revenue, almost 40 percent growth. And it wasn’t just individuals bearing increased tax burdens. According to open.alabama.gov, corporate income tax receipts to the Education Trust Fund increased by 72.6 percent in 2021, more than $355 million in new revenue. While the numbers are important, don’t get lost in them. The point is that while the state is taking in record amounts of revenue, you, the citizen, as well as businesses that are the life-blood of the economy, are in turn paying more than ever before. 2021 is not an anomaly. Since the end of the Great Recession, Alabama’s economy has generally seen steady growth. Since fiscal year 2019 state government has enacted record-high budgets and seen more revenue each year. But what have lawmakers done for citizens and the business owners of Alabama? Instead of looking for ways to return their money to them, government has looked for new ways to tax and spend even more of your money. In 2019 the Legislature and Governor Kay Ivey enacted a gas tax that is projected to bring in over $300 million in new revenue this year. Lawmakers also allowed for the tax to be raised by an additional $.01 every two years without ever having to take another vote on the issue. The 2021 Regular Legislative Session was dominated by two other issues that are in no small part about bringing in more revenue. The Legislature was successful in legalizing medicinal marijuana, which could bring in tens of millions of dollars in sales tax revenue in the future. While combined gambling and lottery legislation failed again, its potential to bring hundreds of millions of dollars in annual revenue to the state means that it will likely come before lawmakers again. When asked recently about the latest revenue windfall, Senate education budget committee chairman Arthur Orr, R-Decatur, identified contributing to the education budget’s stabilization fund, teacher pay raises, bonuses for retired educators, and tax cuts for retirees and low-income families as priorities. While tax cuts should be the top priority, why not find a way to provide tax relief that will benefit almost all Alabamians, such as eliminating the sales tax on groceries? Alabama’s corporate income tax rate is higher than many neighboring states and is highly susceptible to changes in the federal tax code. Why not lower the rate and change the deduction structure so that Alabama’s business environment is more competitive with other southern states? Pay raises and bonuses are the default that lawmakers always seem to go to when there is extra money. This mentality is why state government continues to grow. When the state collects more revenue than projected, that means that it took more from your pocket than it needed. That money should be given back to you, not used to expand state government. Justin Bogie is the Senior Director of Fiscal Policy for the Alabama Policy Institute.
Justin Bogie: Alabama legislature continues to consider medical marijuana. Is it to help people, or make money?
Late into Tuesday night, in the waning hours of the 2021 Regular Legislative Session, the House of Representatives spent nine hours passionately debating Senate Bill 46, which would legalize the use of medical marijuana in Alabama and create a cannabis commission akin to the ABC Board on steroids. No vote was held, but debate will continue Thursday with a vote possibly coming any time. The bill’s sponsor, Senator Tim Melson, and other proponents of the bill claim that it would provide an alternative to patients who haven’t gotten pain and symptom relief through the use of conventional medicines. While that point is debatable, two others are not. Possessing or selling marijuana is illegal under federal law. If Alabama legalizes medical marijuana, it will do so in direct defiance of those laws. But sometimes greed outweighs legality. Medical marijuana is a multi-billion dollar business. If the bill passes, those chosen by the state to grow, process, and dispense the drug could see a windfall of profits. Of course, state government would also take its cut in the form of new tax revenues and license fees. State governments nationwide are trampling on federal law and health guidelines so that government, and those fortunate to be chosen by government, can make lots of money. The federal government poses a risk to the marijuana cash cow. If anyone could grow and possess marijuana, there would be little demand for large farms, processors, dispensaries, etc. That’s why pro-marijuana groups spend millions of state-level dollars each year trying to convince legislatures to legalize marijuana now and beat the federal government to the punch. The 2021 session marks the third recent attempt by the Alabama Legislature to join the District of Columbia and 36 other states that have legalized the use of medical marijuana. Under the current proposal, individuals diagnosed with one of 16 conditions would be eligible for a prescription. One argument made by proponents for its legalization is that so many other states have done it. Justifying legalization because other states have adopted bad (and illegal) policy is a weak argument. The other argument is that medical marijuana will truly benefit people with chronic conditions. But the research on that is murky at best. For every study expounding the benefits of medical marijuana, there’s another warning of the dangers and ineffectiveness of its use. There is also the fact that the Federal Drug Administration (FDA) has not approved marijuana for medical use. In addition to violating federal law, states authorizing the use of medical marijuana have taken it upon themselves to make a medical determination that the FDA has been unwilling to do. So why are state governments willing to legalize and approve the use of medical marijuana when the federal government is not? What proponents of Senate Bill 46 leave out when singing the virtues of its use is the fact that it’s also big money. Individuals and businesses selected by the state to participate in the process would reap millions of dollars in financial benefits. In addition to states already allowing medical use, 14 states have legalized recreational marijuana. In 2020, marijuana sales totaled $17.5 billion, an increase of 46% compared to 2019. BDSA, an analytics firm, estimates that by 2026 industry sales will more than double. According to marijuana industry data, medicinal sales alone totaled $5.8-$7.1 billion in 2020. In addition to lining the pockets of growers, processors, and distributors, this booming industry also means more money for state government. Tax revenues from medical marijuana sales totaled an estimated $287-$345 million last year. On the recreational side, California and Washington alone brought in nearly $1 billion in tax revenues last year. We should hope that those advocating to reject federal law and legalize medical marijuana in Alabama are doing so because they want to help those suffering from chronic medical conditions that have exhausted all other treatment options. But let’s be clear, it’s also about the money. Justin Bogie serves as the Alabama Policy Institute’s Senior Director of Fiscal Policy. API is an independent, nonpartisan, nonprofit research and educational organization dedicated to free markets, limited government, and strong families, learn more at alabamapolicy.org.
