MONTGOMERY, Ala. — The Alabama Senate on Monday evening passed a bill to move $100 million in use tax revenue from the state’s Education Budget to its General Fund Budget, potentially alleviating some of the pressure to pass major tax increases.
The use tax, which is a tax on goods and equipment purchased by Alabamians outside of the state, brings in roughly $225 million annually and increases by a few million dollars each year. It is one of numerous “growth taxes” — revenue streams that increase as the economy grows — that are earmarked to flow into the Education Budget.
Advocates of transferring a portion of the use tax argue that the state’s beleaguered General Fund does not receive enough growth revenue to keep up with the booming costs of Medicaid and prisons. The Education Budget, meanwhile, is enjoying a surplus thanks to the GOP-backed Rolling Reserve Act, which caps the growth of education spending to help the state avoid proration in lean years.
Democrats loudly objected to the use tax transfer, characterizing it as “taking money” from schools.
The legislature passed a Fiscal Year 2016 Education Budget almost unanimously earlier this year, spending $5.9 billion to fund Alabama’s public educational programs. The almost $6 billion appropriation represented a 1 percent increase from the previous fiscal year.
House Education Budget Chairman Bill Poole said on the House floor Monday that transferring $100 million of the use tax revenue into the General Fund would not require the legislature to make any changes to the Education Budget.
Poole is now expected to play a key role in negotiations between the House and Senate over the amount of the use tax transfer. Poole supported and the House passed a $50 million transfer last week. The Senate doubled that number on Monday. A conference committee made up of House and Senate members will meet Tuesday morning to hammer out the difference.
The small but significant budget reform is only the beginning in what promises to be a contentious few days in the Alabama legislature. Numerous tax increases proposals that passed the House last week could be up in the Senate Tuesday.
Several lawmakers Yellowhammer spoke with Monday said the proposed cigarette tax increase is the most likely of the tax bills to pass, although any tax increase will face obstacles in the Senate. A group of staunchly anti-tax conservatives have threatened to filibuster any tax hikes that come to the floor for debate, and Senate President Pro Tem Del Marsh has said the Senate will not consider any revenue measures until the use tax issue is addressed.
“Reform must come before revenue,” the Alabama Senate Republican caucus tweeted out Monday night.
The conference committee will meet at 10:30 a.m. Tuesday. The House and Senate will then reconvene at 2 p.m.
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— Cliff Sims (@Cliff_Sims) June 9, 2015
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