Alabama Governor Defends Abandoning No-New-Taxes Pledge

by | March 4, 2015

By Tim Lockette

Gov. Robert Bentley defended his proposed $541 million tax increase in his State of the State address Tuesday.

"Revenue must increase," the governor said in his address at the Alabama State Capitol. "There must be growth money in the state's General Fund."

MORE: Text, highlights and video of every governor's annual address.

It was Bentley's fifth time delivering the address, given annually at the start of the Legislative session. This year's speech may also have been Bentley's toughest: Re-elected last year on a no-new-taxes campaign, the governor last week announced a tax plan that would double the tax on purchases of cars and nearly triple the tax on cigarettes, part of a larger plan to make up for what Bentley says is a $702 million shortfall for the state's General Fund, the budget that pays for all state agencies except for schools.

Problems in the General Fund are nothing new. The $1.8 billion budget is paid for largely by slow-growing revenue sources such as a tax on insurance policies. Still, lawmakers set a budget timebomb ticking three years ago when they borrowed $437 million from a state trust fund to shore up the General Fund. That money runs out Oct. 1, and Bentley claims there are hundreds of millions of dollars in additional obligations that have to be repaid.

"Our state is in debt," Bentley said in the speech. "We owe millions to the federal government. We owe millions to the bank. We owe millions to the taxpayers by way of a borrowed-out rainy day fund."

Hours before the speech, in a workshop for lawmakers, Bentley's budget director Bill Newton laid out the details of those obligations. After federal audits, the state has to return millions to the Medicaid agency this year, Newton said. In addition to the $437 million loan three years ago, Newton said, the state must begin repayment on another loan taken out under the administration of former Gov. Bob Riley in 2010.

Some within Bentley's own party have already balked at the tax plan, with one Republican senator putting up a billboard to say he'd oppose any new taxes. In his Tuesday speech, Bentley made the argument that paying one's bills is the conservative thing to do.

"We cannot put off solving these problems any more," he said. "We cannot cut our way out of this. There is nothing more conservative than paying your debts and getting your financial house in order."

Bentley won applause from lawmakers for other proposals, though there was little mention in the speech of how much those proposals would cost.

Long a proponent of pre-kindergarten education, the governor said he'd yet again seek an increase in funding for free pre-kindergarten, which is now available only to about 12 percent of the state's 4-year-olds. He also announced he'd seek money to provide two-year college tuition for the state's foster children when they reach adulthood. Money for both proposals would likely come from the Education Trust Fund, which pays for schools. Unlike the General Fund, the ETF isn't facing a large budget gap this year.

Lawmakers in both parties said Bentley made a good case for more money -- and said they weren't impressed with the lack of specifics in the speech.

"He didn't give us a lot of detail, did he?" said Rep. Steve Clouse, R-Ozark, who chairs the House committee that oversees the General Fund.  "We'll see more when we see his budget. The devil's in the details."

Rep. K.L. Brown, R-Jacksonville, said he wasn't sure about the tax increases, but agreed it was time to fix the General Fund.

"For the past four years, we've been putting Band-Aids on it," he said. "I think that for once we are going to have to find a way to do this."

Senate President Pro Tempore Del Marsh, R-Anniston, said he's still not convinced the budget hole is as large as the governor claims. He said he'd like to see cuts to the budget before a tax increase is proposed -- but he also said people might favor a tax increase if proposed cuts went too deep.

"I'm not seeing a groundswell in favor of new taxes," Marsh said. "But when people come to understand that this could lead to letting people out of prison, they may change their minds."

Alabama's overcrowded prisons are driving some of the growth in the General Fund. When lawmakers proposed the $437 million loan to shore up the fund in 2012, they argued that a mass release of prisoners would happen if the measure didn't pass.

Bentley's Democratic opponent in the 2014 election, Parker Griffith, watched the speech from the back of the Old House Chamber. He said he didn't hold Bentley's no-new-taxes campaign slogan against him.

"What's disappointing is not that he told a white lie," Griffith said. "It's wondering whether we can believe anything else he says."

Like other Democrats at the speech, Griffith said he wished the governor had chosen the lottery as one of his revenue solutions, as well as a compact with the Poarch Band of Creek Indians, who run casinos in the Black Belt. Democrats have long proposed those options -- in addition to cigarette taxes, which made it into the governor's proposal -- as a way to raise money from people who don't absolutely have to pay the tax.

"It's disappointing that we don't have a lottery," said House Minority Leader Craig Ford, D-Gadsden. "We're funding other states' education programs."

Ford said he agreed that the General Fund needs growth sources of revenue. Even though rates of smoking have historically been on the decline, Ford said he saw the cigarette tax as a growth source.

"It's a new source, so it's a growth source," he said.

Bentley, in his speech, said the state had no choice but to fix the budget hole.

"It is time we change course," he said.

(c)2015 The Anniston Star (Anniston, Ala.)