Arise legislative recap: Feb. 16, 2021

Arise executive director Robyn Hyden breaks down the first two weeks in the Alabama Legislature’s 2021 regular session and outlines Arise’s goals for this session. Legislators have prioritized protecting corporations over workers so far this month, even as hundreds of thousands of Alabamians continue to struggle with hunger and hardship during the COVID-19 recession.

How Alabama Arise is working to build a brighter future after the pandemic

After a year of darkness, the light at the end of the tunnel is finally in sight. Promising vaccine news offers hope that public health officials can rein in COVID-19 in the coming months. And as our state and nation seek policy solutions to rebuild from the pandemic’s health and economic devastation, Alabama Arise will seek to advance equity and shared prosperity for Alabamians who are marginalized and excluded.

That vital work won’t be fast or easy. In the meantime, the pandemic’s harrowing toll continues to grow. COVID-19 has killed more than 1.5 million people worldwide, including more than 3,900 Alabamians, and sickened tens of millions. It has fueled a deep recession, caused millions of layoffs and left more than 40% of U.S. children living in households struggling to make ends meet. It has stretched hospitals to the breaking point and disrupted education, commerce and social interactions in every community.

The Alabama Legislature will begin its 2021 regular session Feb. 2. As the health and economic tolls of the COVID-19 pandemic continue to mount, Alabama Arise will keep working hard to empower people who live in poverty and to lift up their voices in state policy debates.

COVID-19 has created suffering on a staggering scale. It also has highlighted long-standing economic and racial disparities and underscored the urgency of ending them. A new legislative session and a new presidency will offer new opportunities to right those wrongs in 2021 and beyond.

The federal and state work ahead

The most immediate needs will require federal action. Congress must extend state aid and additional unemployment insurance (UI) benefits before they expire this month. But those extensions should be just a down payment on a more comprehensive response.

Arise will urge further UI benefit increases and more federal relief to help states avoid layoffs and damaging cuts. We also will advocate for emergency rental and mortgage assistance and a 15% boost to food assistance under the Supplemental Nutrition Assistance Program (SNAP). And we’ll support regulatory efforts to lift harmful Medicaid and SNAP barriers created in recent years.

Flyer on Alabama Arise's 2021 issue priorities. For more information, visit https://www.alarise.org/news-releases/alabama-arise-unveils-members-2021-roadmap-for-change.

We’ll also keep working for better state policies when the Legislature returns in February. Our top focus will be Medicaid expansion, which we’ll pursue along with partners in the Cover Alabama Coalition. Expansion would cover more than 340,000 Alabamians with low incomes and ease the financial strain on rural hospitals. It also would attack structural health care disparities that led COVID-19 to take a disproportionate toll on Black Alabamians.

Arise’s work won’t stop there. We’ll support legislation to expand voting rights and ensure broadband internet access for all Alabamians. We’ll seek to increase consumer protections and overhaul the state’s criminal justice system. And we’ll fight to untax groceries once and for all.

Breakthroughs on many of these issues won’t be fast or easy. But together, we’ll emerge from dark times into the light of a brighter, more inclusive future for Alabama.

Alabama Arise unveils members’ 2021 roadmap for change

Sentencing reform and universal broadband access are two new goals on Alabama Arise’s 2021 legislative agenda. Members voted for Arise’s issue priorities this week after nearly 300 people attended the organization’s online annual meeting Saturday. The seven issues chosen were:

  • Tax reform, including untaxing groceries and ending the state’s upside-down deduction for federal income taxes, which overwhelmingly benefits rich households.
  • Adequate budgets for human services like education, health care and child care, including Medicaid expansion and extension of pre-K to serve all eligible Alabama children.
  • Criminal justice reform, including repeal of the Habitual Felony Offender Act and changes to civil asset forfeiture policies.
  • Voting rights, including automatic universal voter registration and removal of barriers to voting rights restoration for disenfranchised Alabamians.
  • Payday and title lending reform to protect consumers from getting trapped in debt.
  • Death penalty reform, including a law to require juries to be unanimous in any decision to impose a death sentence.
  • Universal broadband access to help Alabamians who have low incomes or live in rural areas stay connected to work, school and health care.

“Arise believes in dignity, equity and justice for all Alabamians,” Alabama Arise executive director Robyn Hyden said. “And our 2021 issue priorities would break down many of the policy barriers that keep people in poverty. We can and will build a more inclusive future for our state.”

Graphic naming Alabama Arise's 2021 issue priorities

The urgent need for criminal justice reform

Alabama’s criminal justice system is broken and in desperate need of repair. The state’s prisons are violent and dangerously overcrowded. Exorbitant court fines and fees impose heavy burdens on thousands of families every year, taking a disproportionate toll on communities of color and families who are already struggling to make ends meet. And Alabama’s civil asset forfeiture policies let law enforcement seize people’s property even if they aren’t charged with a crime.

Arise will continue to seek needed reforms in those areas in the coming year. The organization also will work for repeal of the Habitual Felony Offender Act (HFOA), the state’s “three-strikes” law. The HFOA is an unjust driver of sentencing disparities and prison overcrowding in Alabama. The law lengthens sentences for a felony conviction after a prior felony conviction, even when the prior offense was nonviolent. Hundreds of people in Alabama are serving life sentences for non-homicide crimes because of the HFOA. Thousands more have had their sentences increased as a result. Repealing the law would reduce prison overcrowding and end some of Alabama’s most abusive sentencing practices.

Universal broadband access would help struggling Alabamians stay connected

The COVID-19 pandemic has illustrated the essential role that the internet plays in modern life. Remote work, education, health care and shopping are a reality for millions in our state today. But far too many Alabamians, especially in rural areas, can’t access the high-speed broadband that these services require. These access challenges also reveal a racial disparity: About 10% each of Black and Latino households have no internet subscription, compared to 6% of white households.

Policy solutions can facilitate the investments needed to ensure all Alabamians can stay connected. Lawmakers can help by guaranteeing that all communities have the right to own, operate or deploy their own broadband services. The Legislature also can enact targeted and transparent tax credits to promote broadband for underserved populations.

Town Hall Tuesdays: What we heard from Arise supporters

Listening is often an underdeveloped skill, yet it is critical for mutual understanding and working together for meaningful change. That’s why Arise is committed to listening to our members, to our allies and most importantly, to those directly affected by the work we do together. We depend on what we hear from you to guide our issue work and our strategies.

This year’s COVID-19 pandemic challenged us to be creative in finding ways to listen. Instead of our usual face-to-face meetings around the state, we hosted a series of six statewide online Town Hall Tuesdays. We held events every two weeks, starting in June and ending Sept. 1. We averaged 65 attendees at each session. Here’s some of what we heard from members and supporters:

  • Affirmation for Medicaid expansion, untaxing groceries and other current Arise issues as important for achieving shared prosperity.
  • Empathy for those who were already living in vulnerable circumstances further strained by the pandemic.
  • Concern about ongoing, intentional barriers to voting, especially during the pandemic.
  • Desire to see more resources to meet the needs of our immigrant neighbors.
  • Alarm about payday and title lending and its impact on people’s lives and our communities.
  • Passion and concern about many other issues, including housing; living wages and pay equity; prison and sentencing reform; gun safety; juvenile justice reform; defunding the police; the Census; environmental justice; quality and funding of public education; and food insecurity and nutrition.
  • Willingness to take informed actions to make a difference in the policies that impact people’s lives.
  • Hope that Alabama can be a better place for all our neighbors to live despite systemic issues and ongoing challenges.

Notes from each town hall

Overviews of the town halls are below. Click the title for a PDF of the notes from the breakout sessions at each town hall.

June 23 – Money talks
We examined how to strengthen education, health care, child care and other services that help Alabamians make ends meet. And we explored ways to fund those services more equitably.

July 7 – Justice for all
We discussed Alabama’s unjust criminal justice system and how to fix it.

July 21 – Getting civic
Discussion focused on protecting voting rights and boosting Census responses during a pandemic.

Aug. 4 – Shared prosperity
We looked at policy solutions to boost opportunity and protect families from economic exploitation.

Aug. 18 – Feeding our families
We explored ways to increase household food security during and after the recession.

Sept. 1 – Closing the coverage gap
Discussion focused on how everyone can help expand Medicaid to ensure coverage for hundreds of thousands of struggling Alabamians. We also heard about the expansion campaign strategies of the Cover Alabama Coalition, headed by Arise campaign director Jane Adams.

Get in touch and stay in touch with Arise

Remember, we didn’t stop listening because the town halls ended. We want to hear from you, and we encourage you to contact the Arise organizer in your area:

We hope to see you at Arise’s online annual meeting Oct. 3!

Alabama should ensure all eligible residents receive federal stimulus payments

Alabama and the nation are facing an economic crisis like nothing we’ve ever seen. More than 13% of Alabama households don’t have enough money to feed their families, the Census Bureau reports. Nearly half of Alabama’s renters may face eviction in the near future.

Meanwhile, an estimated 267,000 eligible Alabamians have not received their federal stimulus payments of $1,200 per eligible adult and $500 per eligible child. Altogether, the IRS still owes Alabama families more than $260 million in stimulus money. The application deadline is Oct. 15, 2020, so outreach efforts are crucial to ensure hundreds of thousands of Alabamians don’t miss out.

Many eligible people have not yet applied for payments

Congress created the payments (called Economic Impact Payments) in March as part of the CARES Act, a COVID-19 relief package. Income-eligible people who filed income taxes for 2018 or who receive Social Security, SSI, veterans’ benefits or other direct federal benefits automatically received stimulus payments.

But other eligible people must apply to the IRS to receive the payments. About 12 million Americans are eligible for a stimulus payment but not eligible for automatic payments, the Center on Budget and Policy Priorities estimates.

The range of people who are ineligible for automatic payments is wide. They can include people who face long-term unemployment or don’t earn enough to have to file taxes. They also may include people who have chronic health problems but who do not draw disability benefits. And they can include young people aging out of foster care or low-income students lacking their family’s financial support.

These eligible Americans are disproportionately people of color due to higher poverty rates resulting from long-standing employment discrimination. They’re more likely to have less education and struggle with homelessness or housing insecurity. And they’re more likely to be hit the hardest during the COVID-19 recession.

Stimulus payments help families and the economy

Stimulus payments help Alabama families get caught up on rent, utilities and grocery bills. They’re also an important economic boost for the state. Every $1 in stimulus payments to struggling households can yield 1.5 times as much in economic activity because the money gets spent almost immediately. Drawing down the missing $260 million in stimulus payments would ease suffering and help Alabama’s economy endure the recession.

How to apply for a stimulus payment

Eligible people who didn’t receive an automatic payment can apply directly to the IRS using the “Non-Filer” tool. For a household to receive a payment, every person in the household must have a Social Security number. Only U.S. citizens and authorized permanent residents are eligible for payments. Click here to find out more about how to apply for a stimulus payment.

Alabama needs to get the word out

State agencies have an important role to play in outreach to people who have not yet claimed their stimulus payment. Of the 12 million Americans who didn’t automatically qualify, three-fourths participate in Medicaid or the Supplemental Nutrition Assistance Program (SNAP).

If our state’s numbers follow the national trend, that would mean about 200,000 Alabamians who participate in Medicaid or SNAP are eligible for stimulus payments but haven’t received them yet. More than a third of them are children, and therefore probably receiving Medicaid. Another third are older adults without children.

Alabama’s Medicaid and SNAP officials can help enrollees by encouraging them to apply for stimulus payments and explaining how. Nonprofit agencies, especially those offering assistance with housing and utilities, likewise can help their clients apply for payments. And elected officials can use traditional and social media to encourage Alabamians to apply for the help available to them.

These are challenging times. But if we all pull together and take care of each other, we can get through them. One good step would be to ensure all eligible Alabamians get the federal help they need to make ends meet.

As education revenues fall, it’s time to strengthen Alabama’s tax system

It’s a truism often heard during budget hearings at the Alabama State House: “All the growth taxes go to education.” Legislators commonly say this to bemoan relatively flat revenue for the General Fund (GF), even when the economy is booming. Meanwhile, the Education Trust Fund (ETF) budget grows by comparative leaps and bounds.

There is a downside, however, to how quickly the ETF responds to economic conditions. Education revenue can decline quickly and sharply during hard economic times. And that’s the situation we’re in now, thanks to the COVID-19 recession.

The ETF gets nearly all its money from two major sources. One is income taxes, which are constitutionally earmarked for teacher salaries. The other is sales and use taxes. (Use taxes apply to online and mail-order purchases.) Income taxes account for 63% of state money going to Alabama schools, and sales and use taxes contribute another 30%.

Pie chart of 2019 ETF revenue sources. Income tax 63%, sales tax 27.9%, utility tax 5.6%, use tax 2.6%, other 0.9%.
Source: Alabama Legislative Services Agency

During a strong economy, this is a very good thing for education. Income taxes can grow quickly when more people are working, and sales taxes grow quickly when they spend those earnings. During bad economic times and high unemployment, however, both income and sales taxes suffer. And right now the economic times are some of the worst that Alabamians have ever seen.

ETF revenues plummet as the pandemic hits Alabama

Because of the pandemic and the recession that resulted, Alabama’s unemployment rate shot up from a near-record low of 3% in March to a near-record high of 12.9% in April. Income taxes responded in kind, dropping more than 50% between March and April 2020. May and June’s revenues recovered somewhat but were still more than 12% lower than income tax revenues for the same period in 2019. Altogether, income tax collections from March through June were down more than 20% compared to 2019.

Sales taxes went down, too, though not as dramatically as income taxes. Sales tax collections from March through June were down slightly more than 7% compared to 2019. Overall, income and sales tax revenues during those months were down 16.3% compared to the same period last year.

Bar graphs showing the decrease in Alabama's income and sales tax revenues between March-June 2019 and March-June 2020.
Alabama’s income tax revenues between March and June 2020 were $400 million lower than during the same period in 2019. Sales tax collections were down by more than $60 million.

Despite those declines, the Alabama Legislature passed a 2021 education budget that is larger than this year’s. Both legislators and the governor have expressed confidence that reserve and Rainy Day accounts will be enough to avoid automatic spending cuts known as proration this year and next, even if the economy is slow to recover.

Warning signs on the horizon for the ETF

But ETF revenue trends in recent months have been troubling. Education revenue increased by 8% between October and February, according to a budget presentation that Kirk Fulford, deputy director of the Legislative Services Agency (LSA) Fiscal Division, gave before a Senate budget committee on July 9. When the recession hit between March and June, however, revenues fell 17% compared to the same period in 2019. That reduced total ETF revenue growth fiscal year (FY) 2020 to barely 1%. (Alabama’s fiscal years run from Oct. 1 to Sept. 30.)

By contrast, the news was better for the GF, which funds Medicaid, corrections and other non-education services. Revenue growth remained at a relatively healthy 7% compared to last year. The GF benefited in large part from an earmarked internet sales tax (called the “simplified sellers use tax”) that increased by $16 million from March to June. That growth came on top of a $34 million increase earlier in the fiscal year.

Fulford remained optimistic that neither budget would face proration in 2020, despite worrisome ETF revenue projections. He reassured legislators that healthy beginning balances, debt reduction and savings accounts created under the Rolling Reserve Act would protect the ETF at least through FY 2020.

Alabama Arise trusts the LSA’s expertise but remains concerned, especially about 2021. Our state’s tax system simply may not bring in enough money to fund our schools if the pandemic recession is long or deeper than anticipated.

Better tax policies for a brighter future

Alabama’s experience during the Great Recession a decade ago proves the need for caution. More than a dozen years later, Alabama’s education funding still hasn’t returned to its pre-recession level. And if revenues decline at the same rate as in 2009, the ETF could lose $841 million in state money next year. That would be the equivalent of one-fifth of all state K-12 funding.

It’s not enough to cross our fingers and just hope the economy and revenues recover quickly. Arise encourages state lawmakers to modernize and strengthen Alabama’s tax system to ensure it is both fair and adequate. One good step would be to eliminate the state deduction for federal income tax payments. Another would be to impose a temporary income surtax on millionaires.

These changes and others would generate the revenue needed to help struggling families and protect our schools during tough times. And they would be a needed investment in a brighter, more inclusive future for Alabama. Read our full list of recommendations here.

Risk of education, General Fund cuts remains after shortened Alabama legislative session

Funding for education, health care and other vital services is deeply uncertain as Alabama’s revenues plummet during the COVID-19 recession. In May, lawmakers enacted 2021 Education Trust Fund (ETF) and General Fund (GF) budgets that are larger than this year’s. But as consumer spending falls and massive unemployment persists, the Legislature will reevaluate those plans at hearings in early July.

Alabama’s bleak financial picture likely will force lawmakers to return for a special session later this summer or fall. And that’s far from the only subject they should address.

The pandemic has brought new urgency to the need to reduce overcrowding in state prisons, where social distancing is impossible. It has shown why legislators should undo harmful limits they imposed on unemployment insurance (UI) eligibility last year. And it has put unprecedented strain on our state’s health care infrastructure, particularly hospitals and clinics serving rural Alabamians. Medicaid expansion would provide financial stability for many of these facilities, helping them stay open during the pandemic and beyond.

A lost session

COVID-19 tore out the heart of the regular session, forcing lawmakers to stop meeting for more than a month. When they returned, they had just two weeks to finalize ETF and GF budgets. With most House Democrats staying home due to coronavirus concerns, legislative leaders limited the agenda to budgets and local bills.

Alabama Arise legislative affairs coordinator David Stout talks to a small group of Legislative Day attendees Feb. 25, 2020, during one of the day’s informal breakout sessions.

That decision temporarily slowed momentum for Arise’s push to untax groceries. Before the session paused, about 200 people came to Montgomery for Arise Legislative Day on Feb. 25. Our members urged legislators to end the state sales tax on groceries while protecting education funding. The proposal would replace grocery tax revenue by limiting Alabama’s income tax deduction for federal income tax payments. Our supporters also advocated for Medicaid expansion and public transportation funding.

Whenever the Legislature returns, Arise will be there promoting policies to make life better for struggling Alabamians. Check our website and follow us on Facebook and Twitter for updates.

You’re invited to Arise’s Town Hall Tuesdays!

Arise’s statewide online summer listening sessions are a chance to hear what’s happening on key state policy issues and share your vision for our 2021 policy agenda. Register now to help identify emerging issues and inform our work to build a better Alabama.

We’d love to see you at any or all of these sessions! Registration is required, so please register at the link under each description.

June 23rd, 6 p.m. Money talks

How can we strengthen education, health care, child care and other services that help Alabamians make ends meet? And how can we fund those services more equitably? Click here to register for this session.

July 7th, 6 p.m. Justice for all

We’ll discuss Alabama’s unjust criminal justice system – and how to fix it. Click here to register for this session.

July 21st, 6 p.m. Getting civic

How can we protect voting rights and boost Census responses during a pandemic? Click here to register for this session.

August 4th, 6 p.m. Shared prosperity

Policy solutions can boost opportunity and protect families from economic exploitation. Click here to register for this session.

August 18th, 6 p.m. Feeding our families

How can we increase household food security during and after the recession? Click here to register for this session.

September 1st, 6 p.m. Closing the coverage gap

Join the Cover Alabama Coalition to discuss how you can help expand Medicaid. Click here to register for this session.

Progressive tax changes would allow Alabama’s budgets to endure and rebuild after COVID-19

Alabamians are living through hard times right now. Thousands of people are sick. Many more are scared or out of work. Uncertainty is everywhere amid a pandemic with no clear timetable or end game.

As more businesses close or cut back, as more people lose income, and as fewer of us go to the stores where we normally shop, state tax revenues are falling. That endangers funding for education, public health and other core services at a time when we need them most.

A state Senate committee Tuesday approved a smaller General Fund (GF) budget than the one Gov. Kay Ivey initially proposed. But that budget’s revenue assumptions may be too optimistic, and many lawmakers acknowledge they may need to revisit it this summer or fall as the pandemic’s financial toll becomes clearer. In the meantime, the ongoing public health emergency is compounding structural problems that have plagued Alabama for decades.

How Alabama should strengthen its tax system

The COVID-19 pandemic and its associated economic freefall are not the root cause of Alabama’s chronic underfunding of public services or the fundamental failures of its tax system. But this crisis is exposing and exacerbating those shortcomings. And it is illustrating the need for progressive tax changes that would equip our state to endure both this downturn and future recessions.

Alabama should enact these changes to raise revenue for vital services and make life better for struggling families:

  • Eliminate the regressive, and expensive, state income tax deduction for federal income taxes. About 80% of the $782 million deduction’s benefit flows to the top 20% of households.
  • Increase income tax brackets so the highest-paid 25% of taxpayers have a higher tax rate than people in the lower and middle brackets do. Alabama’s top income tax rate kicks in at just $3,000 of taxable income.
  • Impose a temporary income surtax on millionaires during the financial crisis.
  • Adopt combined reporting to prevent corporate tax avoidance while rejecting proposals, such as moving to a single sales factor formula, that would reduce taxes for large corporations.
  • Eliminate the state sales tax on groceries and replace that revenue by making progressive improvements to our income tax system. Alabama is one of only three states with no tax break on groceries.
  • Apply sales and use taxes to more professional services and digital goods and services like music downloads and video streaming services.
  • Institute or increase sales and excise taxes on unhealthy items like tobacco, vaping products or sugary soft drinks. The state could dedicate this money to Medicaid and other health care services.

Lessons from the past: How the last recession devastated Alabama’s finances

Alabama has two major revenue sources for public services that rise and fall with the economy. One is the income tax, which is earmarked (or dedicated) solely for K-12 teacher salaries. Sales and use taxes, which largely go toward education but also fund some other services, are the other. (Use taxes apply to online and mail-order purchases.) Most GF revenue sources grow slowly even in good times.

To understand this downturn’s potential impact, we should look back to the last recession, which struck Alabama in 2009. Both the Education Trust Fund (ETF) and GF were prorated as revenues plummeted during the Great Recession. Proration is an across-the-board funding cut when revenues fall short of expectations.

COVID-19 downturn could reduce Alabama's state funding for public services by more than $3 billion next year. Potential decrease in available state tax revenues between 2020 and 2021. General Fund: -$305 million. Education Trust Fund: -$841 million. Other dedicated funds for GF agencies: -$2 billion. Total revenue loss: -$3.1 billion. Source: Alabama Arise calculations based on state tax revenue decreases between 2008 and 2009. These figures show the losses that Alabama could expect if revenues fall at the same rate they did during the Great Recession's first year. Actual revenue declines between 2020 and 2021 may be larger or smaller than these amounts. This graph shows annual General Fund appropriations separately from other earmarked revenue that GF agencies receive each year.

ETF revenues went down 11.8%, or $702 million, between 2008 and 2009. GF revenues for services like courts, Medicaid, public safety and veterans’ assistance fell by 13.9%, or $250 million.

The ETF could lose $841 million in state money next year if revenues decline at the same rate as in 2009. This would be equivalent to $1,160 per student in public K-12 schools, or 20% of all state K-12 funding. It’s also more than this year’s state allocations to the University of Alabama and Auburn University systems combined.

Meanwhile, the GF could lose $305 million if this downturn matches the Great Recession. That would be equivalent to 2020 GF funding for the Department of Human Resources (DHR), mental health, public health and senior services combined.

This loss also doesn’t include other dedicated funds for GF agencies like child welfare, mental health and veterans’ services. If these earmarked funds dropped by 13.9%, as the GF did in 2009, Alabama would need another $2 billion to avoid cuts. Altogether, the total funding loss to education, health care and other services would exceed $3 billion.

Rainy day funds and federal relief will help, but they aren’t a lasting solution

Thankfully, Alabama has three revenue sources to help avoid or reduce service cuts, at least temporarily. Lawmakers have established two rainy day funds – essentially lines of credit – within the Alabama Trust Fund that the governor can tap to address major budget shortfalls. The ETF also has a reserve fund called the Budget Stabilization Fund, which can be tapped if revenues aren’t enough to cover budgeted expenses.

The governor can authorize withdrawal of no more than 14% total of the prior year’s education spending from a combination of the Budget Stabilization Fund and the ETF Rainy Day Fund. That amounts to around $997.6 million. And the state can withdraw 10% of prior-year spending for other services from the GF Rainy Day Fund, which comes to $219.2 million.

Between the two budgets, the governor could withdraw $1.2 billion from rainy day accounts. But to maintain current funding levels, Alabama still would need another $1.8 billion if this downturn matches the Great Recession.

Alabama expects about $1.8 billion in federal relief as a result of the Coronavirus Aid, Relief and Economic Security (CARES) Act. This one-time relief could get the state through 2021 by a hair – if federal officials allow it. The U.S. Treasury is restricting the extent to which states can use these funds to plug budget shortfalls. Cumulative shortfalls in Alabama and other states from 2020-22 could top $650 billion, the Center on Budget and Policy Priorities estimates.

COVID-19 state budget shortfalls could be largest on record. Total shortfall in each fiscal year, in billions of 2020 dollars. 2001 recession. '02: -$60. '03: -$105. '04: -$110. '05: -$60. Great Recession. '09: -$130. '10: -$230. '11: -$150. '12: -$120. '13: -$60. COVID-19. '20: -$110. '21: -$350. '22: -$190. COVID-19 estimates based on CBPP calculations using Congressional Budget Office and Goldman Sachs unemployment estimates. Does not reflect use of rainy day funds or federal aid already enacted. Source: CBPP survey of state budget offices (through 2013); CBPP calculations (2020-2022). Center on Budget and Policy Priorities, cbpp.org.

COVID-19’s budgetary threats don’t end there. Local governments also will need relief, and this fiscal crisis may be even worse than 2009. If a 2020 recession spirals into a depression, we will be facing some very dark days without new tax revenue to make them brighter.

The path to stronger, more inclusive budget and tax policies for Alabama

Alabama could respond to these steep revenue losses with harmful cuts to education, mental health care, public health and other critical needs. Or the state could make the wiser choice of raising sustainable new revenue to invest in the common good.

Our partners at the Institute on Taxation and Economic Policy said it best: “For states facing catastrophic revenue declines, asking more of taxpayers with a clear ability to pay is far preferable to cutting state budgets, which would lead to mass layoffs, steep cuts in public services, and a downward spiral in the economy.”

Year after year, Alabama legislators have built a series of bare-bones budgets on one-time funds and temporary federal aid. They’ve refused to modernize our state’s upside-down tax system by making it more progressive and more fair for struggling families. And they’ve refused to ask large corporations and wealthy people who can afford to pay more to contribute their fair share to support the common good.

There’s a better way. The progressive tax changes we propose would protect education, health care and other services from devastating cuts during the COVID-19 recession. They also would allow our state to expand Medicaid and ensure all Alabamians can get the health care they need to survive and thrive, both during this pandemic and in the long recovery ahead. If we want a brighter future for Alabama, we need to invest in it now.

Unemployment insurance improvements, recovery rebates will help Alabamians hurt by COVID-19 pandemic

The coronavirus pandemic has caused an unprecedented increase in unemployment insurance claims nationally. And the story is the same in Alabama, where 74,056 UI claims were filed in the week ending Saturday, March 28. That’s easily a record high since 1987, the earliest year for which weekly data is available for Alabama. The number of claims likely will continue to increase quickly in the coming weeks.

The pandemic has highlighted the need for Alabama to lift harmful UI cuts and barriers that lawmakers erected last year. In the meantime, three types of state and federal payments can help Alabamians who have lost their jobs or have working hours reduced because of the pandemic. They are traditional unemployment insurance (UI), Pandemic Unemployment Assistance and recovery rebates.

Unemployment insurance (UI)

This program provides financial support for qualifying Alabamians who lose their jobs or suffer a reduction in hours through no fault of their own. The weekly payments range from $45 to $275, based on earnings in roughly the past year and a half. That’s well below the nationwide median of $366 per week.

Alabama’s UI system is stressed by new claims because of recent massive layoffs. Many applicants have experienced long delays in accessing the website and phone lines to apply for benefits. As in other states, Alabama’s UI system wasn’t ready for a rapid, unprecedented flood of new applicants. But that’s no reason to delay a UI application if you’ve lost your job. You can click here to apply for UI benefits in Alabama.

To file unemployment compensation claims, visit www.labor.alabama.gov or call 1-866-234-5382.

The Alabama Department of Labor (DOL) has taken some important steps to ease UI access during the pandemic. The DOL has waived its usual requirements for job searches and a one-week waiting period before benefits begin. Employers also will not be penalized with an increased UI tax rate based on high amounts of paid benefits for now. This removes a motivation for employers to dispute an employee’s claim for benefits.

Even Alabama’s maximum UI benefit amount is insufficient to secure the basic needs of many people. Fortunately, new federal legislation enacted Friday will help jobless workers fill that gap for the next few months. The Coronavirus Aid, Relief and Economic Security (CARES) Act will allow Alabama to provide an additional 13 weeks of federally funded UI benefits. The CARES Act also will supplement state benefits by providing a federally funded $600 weekly benefit increase through July 31.

Pandemic Unemployment Assistance (PUA)

This new federal program provides benefits to many people who lost their jobs amid the pandemic but don’t qualify for traditional UI benefits. Participants can receive up to 39 weeks of PUA benefits. Eligible people include:

  • Self-employed people
  • People who haven’t been working long enough to qualify for UI
  • Contract workers and gig workers
  • People who have exhausted regular UI benefits
  • People whose workplaces closed because of COVID-19
  • Caretakers of people sick with COVID-19

PUA participants will receive half of the average weekly regular UI benefit in Alabama. They are also eligible for the federally funded $600 weekly benefit increase available to beneficiaries of regular UI. Federal and state agencies are still working to implement guidelines for the new program.

Recovery rebates

These benefits are refundable, one-time federal payments. The money will not count as federal taxable income. Here are some key facts:

    • The full rebate amounts are $1,200 for single adults and married couples who file taxes separately, and $2,400 for married couples filing jointly.
    • Families also will receive an additional $500 per dependent child under age 17. The $500 payment is unavailable for older dependents like college students, seniors or adults with disabilities.
    • Rebates will be paid in full to individuals making up to $75,000 per year and couples making up to $150,000 per year. These rebates are available to individuals or households who filed a tax return in either 2018 or 2019. Millions of Americans with extremely low incomes likely will have to file a return to receive the rebate.
    • The rebate phases down gradually for individuals who reported more than $75,000 in annual income and for couples who reported more than $150,000 in annual income. Payments will be unavailable to individuals with annual incomes of more than $99,000 and couples with annual incomes of more than $198,000.
    • Payments will arrive via direct deposit for those who have given the IRS their deposit information. Others will receive a check.

State changes to unemployment insurance still needed

UI benefit increases and removal of barriers are good first steps toward ensuring state and federal governments mitigate the economic consequences of COVID-19 as much as possible. The Alabama DOL’s response to the CARES Act has been quick and thorough. But the state still needs to take bold action in other areas to blunt the damage the pandemic will do to the economic health of the people of Alabama.

State lawmakers should build on the federal UI improvements in the CARES Act by undoing recent harmful policy changes. Alabama’s UI system offers fewer weeks of coverage than most other states because of a 2019 law sponsored by Sen. Arthur Orr, R-Decatur.

Orr’s measure reduced the maximum number of weeks an Alabamian could claim UI benefits from 26 – the standard in most states – to somewhere between 14 and 20, depending on the unemployment rate. It conditioned five additional weeks of benefits on participation in job training programs, some of which are now shut down because of COVID-19.

The 2019 law tied the maximum number of benefit weeks to the unemployment rate. Because Alabama’s published unemployment rates were unusually low recently, the number of benefit weeks is set at the lowest level, 14 weeks. The COVID-19 pandemic shows that published unemployment rates lag behind the reality that tens of thousands of Alabamians experience during crises.

The coronavirus pandemic threatens to trigger economic suffering unlike anything most of us have seen in our lifetimes. Alabama should help jobless workers endure this downturn by boosting weekly UI benefits and removing harmful barriers to unemployment assistance. Repealing the 2019 UI limits and restoring the full 26 weeks of state-funded benefits would be a great start.