Riley’s tax package Will state government be more accountable?
Editor’s Note: This is the third in a series leading up to the Sept. 9 statewide vote.
Shelby County Rep. Cam Ward, R-Alabaster, understands the average Alabamian’s &uot;natural distrust&uot; of a strong, central government.
&uot;Look at our history. People have heard the stories over and over about our governors &045; George Wallace and racism, Guy Hunt and his trouble, the corruption of the Siegelman administration,&uot; Ward said. &uot;Their natural distrust of government after hearing those stories is amplified 10 times.&uot;
The accountability measures set out in Gov. Bob Riley’s plan will address some of those problems, Ward said.
The governor’s tax and accountability package will come to a vote on Sept. 9.
&uot;When the people read what a few have done (dishonestly or illegally) in Montgomery, they assume everybody’s doing it, and that creates a problem,&uot; Ward said.
Those who oppose the plan have argued, however, that the plan’s &uot;lack of accountability&uot; is a point of contention.
Roger McConnell, chairman of the Tax Accountability Coalition contends that lack is a major concern for his organization, which was created to fight passage of the plan.
&uot;There is no guarantee that one thin dime of the Riley tax hike will go to education,&uot; he said.
&uot;Unfortunately, given the opportunity to enact some much needed and long overdue restraints on the way taxpayers’ money is spent, the Riley administration dropped the ball.&uot;
&uot;This is more accountability than we’ve ever had before,&uot; he said. &uot;We can always do better. Everyone knows that. But for the first time, there will be substantial measures in place to ensure accountability.&uot;
According to the Alabama Partnership for Progress, the governor’s plan features three specific accountability reforms including the practice of not earmarking new money; the banning of pass-through pork; and measures to control the state’s cost of health insurance for state employees and teachers.
No earmarking of new money
Amendment 1, if enacted on Sept. 9, would create the Alabama Excellence Initiative Fund, into which all state funds raised by Riley’s plan would flow.
Money in the fund would not be earmarked or reserved for any specific purpose other than teacher scholarships during 2006-07.
At that point, Alabama’s legislators would step in and decide how best to spend the money.
According to information provided by the Alabama Partnership for Progress, the money would be used to improve education, protect senior citizens and fund state services such as corrections, mental health, child welfare and public safety.
Although these areas are suggested in the legislation, there is no specific mandate on how the money must be spent.
State Sen. Mike Hubbard, R-Auburn, who sponsored the Excellence Fund bill, has said Riley could suggest how the funds will be spent, but lawmakers will have the final say just as with the current general fund and education trust fund budgets.
Ward acknowledged that the funds would not be earmarked.
&uot;No, that money’s not earmarked,&uot; he said. &uot;But a board of everyday citizens will be set up to watch and report how the money is being spent.&uot;
The Governor’s Fiscal Oversight Task Force will consist of citizens who serve staggered terms and are appointed by the governor. They will meet monthly.
According to media reports, however, they will have no legal authority to stop or direct legislative appropriations.
An article written recently by former Shelby County Sen. Bill Armistead questioned the wisdom of allowing members of the Legislature like Sen. Roger Bedford, D-Russellville, free reign with more of the state’s money.
Bedford has been known as the &uot;king of pork&uot; since his chairmanship of the General Fund budget-writing committee during the Siegelman administration.
Regarding the governor’s plan, Bedford told one media outlet, &uot;This is free money, unearmarked, and it can be spent on anything that the
Legislature deems appropriate, whether the governor supports it or not.&uot;
Bedford’s attitude is unfortunate, according to Armistead.
&uot;This undisputed ‘king of pork’ knows of what he speaks and will be one of the primary legislators who will determine how this money is spent.&uot;
Banning pass-through pork
Construction of high school football stadium and pool, $1.5 million
Refurbishing one county’s airport, $250,000
A farmer’s market and conference center, $200,000
AlaTom Resource Conservation & Development, $185,000
Northwest Resource Conservation & Development, $185,000
Chilton County Peach Queens Pageant, $160,000
Trip to France for one legislator’s family, $25,000
SUV for one county’s sales tax office, $20,000
Refurbishing one town’s fire department, $12,000
One school’s athletic boosters, $5,000
One town’s public library, $5,000
These are actual examples of pass-through pork in Alabama, a way that many current and former lawmakers have found to transfer state funds to pet projects.
Pass-through pork is a method used to give legislators discretionary control over state funds.
Cooperative agencies in state government receive both budgeted funds and additional, unallocated funds, and governmental entities hold these unallocated funds until the legislator requests that they be used for specified projects.
If Gov. Riley’s plan is approved by voters on Sept. 9, a ban that he placed on pass-through pork near the beginning of his term would become permanent.
The plan also makes the act of moving money in this secretive way a punishable crime. All funds spent must be specified as &uot;a line-item appropriation.&uot;
If the funds are not handled in the specified manner, the person to be punished would be the state agency director.
The act states that &uot;an agency director who violates this section shall be guilty of a Class C misdemeanor,&uot; which carries a maximum three-month jail sentence and a $500 fine.
There is no punishment, however, for the legislator who attempts to secretly move the funds to his &uot;pet project.&uot;
Rep. Ward believes this banning of pass-through appropriations will go far to eliminating a long-time problem in state government.
&uot;We’re all allotted a certain amount of discretionary money for our districts,&uot; he said. &uot;The problem comes when some legislators try to hide funds.
&uot;This will prevent them from doing it. From now on, it must be a line-item expense.&uot;
Ward said the measure will probably not completely stop the problem.
&uot;But I would say it will stop at least 80 percent of it,&uot; he said.
The bill also requires each state agency director approached by a legislator who is attempting to move funds in this manner make a report to the governor.
Controlling health insurance costs
Currently, state employees and teachers are charged little or nothing for their health insurance.
The State Employees Insurance Plan provides insurance for employees at no cost while charging for dependent coverage.
The Public Education Employees Health Insurance Plan for teachers is a similar plan requiring an employee contribution of $2 per month.
The rising costs of health insurance have caused legislators to include a revamping of the system in Gov. Riley’s tax and accountability package.
The bill addressing these changes was sponsored by Shelby County Reps. Ward and Mary Sue McClurkin.
&uot;In 1992, the state was paying roughly $200 million for health insurance for employees. Today, the state pays $700 million,&uot; Ward said.
&uot;As the population gets older, the costs rise, and health insurance is going through the roof anyway. We have to find some way to pay for it.&uot;
Ward said the state’s finance director Drayton Nabors’ solution was to bring the employee contribution to the costs of health insurance to the southeastern average during the next five years.
States considered when determining the southeastern average include Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Texas, Virginia and West Virginia.
The bill establishes six classes of employees or retirees: active employee; active employee with dependent; non-Medicare retiree; non-Medicare retiree with dependent; Medicare retiree; Medicare retiree with dependent.
Based on the southeastern average, the bill targets a contribution percentage to be reached by the six classes.
Active employees will go from paying 0 percent to 12.5 percent; active employees with dependents will go from paying 29.6 percent to 26 percent; non-Medicare retirees will pay 30 percent instead of 32.9 percent; and non-Medicare retirees will pay 32 percent instead of 38.8 percent.
Medicare retirees will pay 20 percent instead of the current 0 percent; and Medicare retirees with dependents will pay 20 percent instead of the current 23.2 percent.
&uot;This is a gradual change,&uot; Ward said, &uot;And the only time anything will happen is when the employees are given a payraise.&uot;
For example, if the legislature grants a 3 percent cost of living increase to active and retired employees during one year, health insurance contributions will increase 3 percent that year.
Savings to the state has been estimated at $300 million to $350 million each year.
Shelby County Superintendent Evan Major said the changes will affect about 75 percent of the school system’s 3,000 employees.
Determining the savings cost to the system is difficult, he said, indicating the state will see the most savings.
Ward said the bill also offers relief for employees or retirees who are struggling fiscally.
Based on family income as a percentage of the Federal Poverty Level, health insurance recipients will be required to pay only a percentage of the planned increases.
Another portion of the health insurance bill changes the contribution of retirees with fewer than 25 years of service.
Currently, employees who work for the state or the school system who are eligible to retire after 10 years with full retirement benefits.
One such teacher in the Shelby County system worked for many years as an engineer. A decision to go back to college for a master’s degree made this teacher eligible to impart actual working wisdom to his students.
The plan for this older teacher was to work for as long as he chose, then to retire with full benefits.
However, passage of Gov. Riley’s package will make the plan impossible.
Those who retire after Jan. 1, 2005, with fewer than 25 years of service will be required to pay a greater portion of their health insurance costs, thus reducing their benefits.
For this teacher and others like him, this reduction of benefits may be the deciding factor for their vote on Sept. 9.
At the polls
When voters go to the polls Sept. 9, the amendment they will be faced with will read (according to the Alabama Secretary of State’s office): &uot;Proposing an amendment to the Constitution of Alabama of 1901, establishing the Alabama Excellence Initiative Fund which may be used to fund programs including, but not limited to, the furtherance of excellence in public education, college scholarships, healthcare benefits for senior citizens and job training programs to attract new high-paying jobs and otherwise provide for distributing state tax revenues; to adjust income and property taxes; to establish the General Fund Rainy Day Account; to provide for the replenishment of the General Fund Rainy Day Account and the Education Trust Fund Rainy Day Account.&uot;
‘Yes’ will mean a voter chooses to accept the reforms put forth by the governor; a ‘no’ vote will mean a voter chooses not to accept the reforms.
Next week’s installment of this series will deal with the actual tax changes which are associated with the plan