Goat Hill Weekly: Week 5

A couple of important things to pay attention to this week:

1. Alabama New Markets Development Act, House Bill 257 sponsored by Rep. Jamie Ison (R-Mobile)

• This bill passed the House on Tuesday by a vote of 75-22

Background information:

• The New Markets program currently offered through the U.S. Treasury Dept. has incentivized roughly $30 billion in private investment in businesses across the country over the past decade.
• Louisiana has benefited from more than $1.5 billion in New Markets-based investments, and Mississippi has reaped almost $500 million in direct capital while Alabama has seen only $77 million flow into the state through the federal incentive program.
• Since passing its New Markets state tax credit in 2010, Florida has seen its investments quadruple.
• Economic impact studies of the Florida program showed that for every $1 in tax incentives offered, roughly $4 flowed back to state coffers.

What you need to know:

• Under the provisions of HB257, the state would create an investment tax credit to complement federal New Markets program.
• In exchange for their investments in qualified businesses and projects located in low-income areas throughout Alabama, the state will offer investors a future tax credit.
• Investors could claim a 50 percent graduated tax credit over the course of seven years for investments up to $240 million. The credit is zero for the first year and 8 percent for each of the next five years, the ten percent the seventh year.
• The state’s portion of tax credits would be capped at $20 million a year, or $120 million over a span of six years.

2. Pension Reform Bill

• This bill has not been filed yet but can be expected soon

What you need to know:

• Like most states, Alabama is looking at making changes to the way retirement benefits are calculated for new hires. This is because every year the state’s contribution to the RSA eats up a larger and larger portion of the budgets.
• Taxpayers’ contributions to fund RSA have tripled since 2001 from $330 million to almost $1 billion this year. By the RSA’s own projections, that funding will need to increase by another 77 percent over the next eight years in order for RSA to continue operating at its current pace.
• If changes aren’t made, the system will simply run out of money. One study from the Northwestern University predicted that Alabama’s Retirement Systems will completely run out of money by 2023. That means either a painful reduction of benefits for those already in the system or a massive tax increase on Alabama families and businesses to make up the difference.
• These scenarios are avoidable if modest changes are made. Legislative leaders are working with Governor Bentley and RSA chief Dr. David Bronner to craft a reasonable plan to that will shore up the system going forward and protect the retirement savings of so many beneficiaries.

Other bills we’re keeping an eye on:

1. Legislative Pay

• Keep in mind, last year, members of the House Republican Caucus voluntarily cut their own pay by 15 percent to correspond with proration currently being experienced by state agencies.
• Lawmakers are now working on a plan to repeal the 2007 pay raise (which was passed by a Democratic controlled legislature) and allow voters to determine legislative pay at the ballot box.

This plan would:

• Tie legislative pay at median household income so it would increase or decrease based on how Alabamians are doing economically
• Modernize the reimbursement system so that lawmakers are treated like any other state employee for travel, hotel stays, etc.

2. Charter Schools / School Flexibility

• Opponents (read: AEA) have the fear factory running full-tilt. Their missinformation campaign is completely out of control on this issue.
• Charter schools can offer students in struggling areas an alternative to failing schools and greatly increase their chances at graduating high school.
• Other districts that maybe aren’t candidates for charter schools can still benefit from seeking waivers to burdensome state regulations and policies.
• Under this bill, all communities will be given more options for dealing with local education issues. Why shouldn’t we give communities as many tools as possible for addressing education problems and improving local schools?