Franchise tax dollars affect Pike Co.
Published 12:00 am Sunday, November 21, 1999
Pike County would see a reduction in more than 40 slots for working mothers who have children in subsidized child care programs as a result of the loss of state funds from the franchise tax.
According to the Alabama Department of Human Resources, 17 percent of the franchise tax funds are earmarked for DHR, meaning the department initially was facing a $20 million loss in funds annually.
Since the U.S. Supreme Court declared the tax on out-of-state owned businesses unconstitutional, the Alabama State Legislature has enacted a bill that cuts the total loss that DHR would face to $16 million.
"We were initially looking at a $20 million shortfall," said John Bradford, public information officer with the Alabama DHR.
"That has been cun to a shortfall of $4 million thanks to what the Legislature has done, but that money accounts for as much as $9 million in additional funds from the federal government in grants and other programs. We could still lose as much as $13 million annually unless the problem is resolved."
That kind of cash contributes greatly to programs throughout the state, and even here in Pike County.
The most immediate effect the loss of the funds would have on the Pike County DHR would be in child care for working families.
"There are 5,500 slots for childcare throughout the state," Bradford said. "That means that about 46 slots in Pike County would close due to the loss of the revenue."
The Department of Human Resources operates under an $800 million budget, including food stamp benefits and other programs. Some of the money is directly sent to those programs, leaving the state to operate with about a $400 million budget.
To help DHR curb its loss of the 17 percent of the franchise tax, the Alabama State Legislature allocated more money from the state’s general fund to DHR in its last session. This increase in general fund revenue took some of the teeth out of what was expected to be a devastating blow to DHR.
Experts are still worried about what the future holds for the poor families of the state.
"Cuts in these programs would affect a lot of people," Bradford said. "We are over the hump, meaning we don’t have to wonder about where we will find ways to trim $20 million in cost, but we still need something to be done so that those receiving public assistance don’t see an interruption in service."
Seventy-seven percent of the money that comes in through the out-of-state franchise tax goes directly into the state’s general fund, and an additional 17 percent goes to DHR.
The remainder goes to various community agencies and branches of government, including county commissions and school systems.
The Pike County Commission averages about $11,000 annually from the tax, said County Administrator Steve Hicks. This year, however, Pike County did not budget the funds.
"This decision was pending, so we knew we couldn’t count on the funds," Hicks said. "That’s not to say that it’s not money we look forward to getting to work on the county, but it’s not an incredible sum compared to our budget."
Hicks said the county did not budget in the expenses or the revenue, so there should be no interruption in services from the county.
"It’s unfortunate that we lost the money, but we will get by," Hicks said.