Legislators compromise on funding

Published 12:00 am Thursday, December 13, 2001

Staff Writer

Legislators have agreed to a compromise on a proposal to raise corporate taxes as a way to help fill a void in the education budget.

Wednesday afternoon, state leaders, as well as representatives from education and business, walked away from the negotiation table with a plan to close the $160 million hole in the budget for schools.

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The compromise includes a proposed constitutional amendment that will take $171 million from oil and gas royalties and set up a "rainy day" fund for education.

Local legislators said they are glad something has been accomplished during the special session of the Alabama Legislature.

"We’re going to come to a resolution to this thing," State Rep. Alan Boothe, D-Troy.

"I think we’ll get something accomplished, although it may not be what the governor wants."The special session came to somewhat of a standstill regarding a plan presented by Gov. Don Siegelman, which would have charged corporations a minimum privilege tax of up to $2 million, based on their worth. Under the compromise, those businesses that lose money will not have to pay the additional tax.

The cap on the minimum would be $1 million on large corporations doing business in Alabama and prevent businesses from deducting net operating losses from taxes for the next couple of years.

Boothe said it’s his understanding the governor is not exactly pleased with the plan, nor are those representing the businesses’ interests. However, it is apparently something they can all "live with," in the name of compromise.

State Sen. Wendell Mitchell, D-Luverne, said late Wednesday he did not know all the details of the compromise.

The Senate is scheduled to meet at 3 p.m. and the House of Representatives is supposed to return to the House Chamber around 4 p.m.

Anything passed by representatives will go to the Senate since all education fund matters begin in the House.

Mitchell said legislation should be "probably ready for passage on Monday."

Siegelman called the current special legislative session to find answers to the $160 million shortfall expected in the Education Trust Fund 2001-2002 budget.

In a letter to legislators, Siegelman said "further cuts will occur in FY03 if we do not act decisively before January 1, 2002."

While the governor has acknowledged the need to define long-term solutions, the session was called to prevent cuts at this time.

"If changes are not made immediately, then multi-million dollar out-of-state businesses will have unfairly profited by pocketing more than $300 million, which should have been paid into the ETF," Siegelman stated in the letter.

He estimates in the current fiscal year, alone, businesses will pay more than $200 million less in education taxes than was paid in the 1998-99 fiscal year.

"A 67 percent tax cut for big business is wrong when funding for our school children and for colleges and universities is being cut," Siegelman wrote.

According to the governor, there are 619 corporations doing business in Alabama that made more than $850 million last year, but paid not corporate income tax. One company worth $1.2 billion that had sales of between $430 million and $490 million during the past few years, paid $25 million in federal income tax in FY 99-00, but paid no state income tax.