Prior to last week’s second special session of the Alabama Legislature, Lagniappe highlighted the efforts of a handful of state agencies like the Alabama Department of Environmental Management (ADEM) and the Alabama State Department of Education (ALSDE) as they lobbied lawmakers to maintain their already depleted funding levels.
After three attempts, state lawmakers finally passed a $1.7 billion budget Sept. 17 with more than $166 million of new revenue coming from increased taxes and an $80 million transfer of use tax to the General Fund from Alabama’s education budget.
Though the move was criticized by proponents of public education, many school officials on the state and local levels are saying, “it could have been worse,” knowing that some lawmakers had eyed a surplus in the Education Trust Fund (ETF) to patch the entire $200 million shortfall.
“Public education in Alabama continues to be underfunded. Any suggestion otherwise is woefully inaccurate,” said Michael Sibley, director of communication for ALSDE. “Still, we recognize that the state’s current financial crisis required extreme measures and sacrifices to stay operational.”
Sibley called the $80 million transfer of use taxes, “as good for schools as it could be.”
Use taxes are the counterpart of sales taxes, and are applied when merchandise is purchased outside of the state and imported into Alabama. It makes up about 3.6 percent of the ETF and only 1.4 percent of its total receipts, which last year generated about $5.46 billion.
Lawmakers have called numbers like those a surplus, but Sibley and Mobile County Schools Superintendent Martha Peek have called that a misconception, arguing the state still hasn’t returned education funding to the levels enjoyed prior to the 2008 financial crisis.
“Taking money from the ETF to prop up the General Fund, in any capacity, is a temporary solution to a much more perpetual problem,” Sibley said.
Locally, the county school system had approved its own budget prior to the conclusion of the special session, but Peek said officials were holding their breath while waiting to see exactly how things would shake out at the state level.
At the time, board members said the school system’s $713 million budget was going “to be tight as usual” and that “any change or reduction from the state would have a detrimental impact” locally.
Peek said the $80 million coming from use taxes in the education budget will not affect the local system’s 2016 budget, something she said was a “big relief” when the state finally ironed out its own finances two weeks before the Oct. 1 deadline.
“We were concerned because we had a budget and teachers in place based on the state allocation, and we had budgeted our funds according to what we knew the state allocation to be,” she said. “If we had to go back and adjust that, it could have been a real problem for us.”
ADEM loses almost all of state allocation
Another agency hit hard during the special session was ADEM, which lost $1 million of the $1.2 million it was slated to receive from the state — meaning the agency has had its state allocation cut 99.6 percent since 2008.
According to ADEM Director Lance R. LeFleur, the agency usually has a $150 million budget when taking into account its state allocation, in-house funding streams and $60 million of federal grants that pass through from the Environmental Protection Agency (EPA).
Despite the significant cut, ADEM was also expecting worse prior to the most recent special sessions. Prior to the new revenue measures, which included taxes on nursing home beds, prescriptions, cigarettes and other items, the state had originally planned to cease its allocation to ADEM altogether and take an additional $7.7 million from the agency’s self-generated revenue.
As it has in the past, ADEM is trying to avoid federal takeover by the EPA by passing the agency’s costs on to the businesses it regulates. LeFleur said the agency “has no choice” but to increase the air and water permit fees environmentally hazardous businesses pay to operate in the state.
A projected increase of 20 percent is planned to go before the ADEM board for consideration in December, which would be on top of the 82 percent increase in fees the agency has added incrementally over the last four years. Altogether, the permit fees in Alabama will have increased by more than 100 percent between 2008 and 2016.
“Basically, we cannot afford to reduce our state-sourced funding by a penny, without putting the state in jeopardy of losing its ability to issue water permits,” LeFleur said. “That’s why we’ve had to increase permit fees each time we’ve seen a cut to the General Fund.”
Though the state is no longer seeking $7.7 million from the agency, ADEM is being asked to send an additional $1.22 million to the General Fund through funding mechanisms that were set up legislatively for specific environmental operations — some of which generate revenue through direct fees on industry, local government and citizens.
Those include a scrap tire fund created in 2003 using a $1 charge added to all tire sales, a solid waste fund assessing a per-ton fee for garbage sent to landfills and a fee paid by businesses utilizing underground storage tanks for fuel and other environmentally hazardous materials.
However, in all three versions of the budget a provision was included forbidding any of the transfers to come from the storage tank fund, which LeFleur said is the most lucrative and acts almost as an insurance policy for businesses that use it.
Though there’s currently no evidence linking that provision directly to any special interest, both Senate Budget Committee Chairman Arthur Orr (R-Decatur) and House Budget Committee Chairman Steve Clouse (R-Ozark) have some ties to the oil and gas industry, which benefits from the underground storage tank fund.
Clouse’s father, James Clouse, owns and operates Clouse Oil Inc. in Ozark, according to state disclosures, while records filed with the Alabama Ethics Commission last April show Orr owns at least 5 percent of Petrol Sales, Inc.
Clouse has not returned calls for comment, but when asked about the provision, Orr told Lagniappe it “originated in the House’s version of the budget in the first special session,” which is why it was kept it in the Senate. However, during the second special session, the House removed the provision yet it remained in the Senate’s version of the final budget.