Despite a flurry of last-minute activity, Alabama lawmakers failed to pass a $404 million package of tax reforms on the last day of the state's legislative session Monday.
The Legislature did, however, approve a $2.68 billion education budget and an $804 million general funds budget for fiscal 1993.
The reform plan would have raised the state's sales, income, property, and corporate taxes, mostly to provide schools with funds not included in the regular education budget.
A product of two years of effort, the tax overhaul idea was abandoned by lawmakers after the state Senate failed to vote before the session's midnight Monday deadline on a plan the House passed earlier in the day.
Gov. Guy Hunt said at a press conference Tuesday that he was "disappointed" by the Legislature's failure to pass a tax reform package.
"For this thing to ever be accomplished, people are going to have to agree that there needs to be more funds in some areas," he added. "And when it gets to the Legislature, they are going to have to quit trying to erode it."
The governor said he would still like to see a tax reform initiative brought before the people, but that he would not seek a special session later this year to reconsider the issue. The Legislature's tax reform package would have required voter approval to become law.
"If tax reform had made it out to a vote of the people, we would have had to give [the legislators] an A at least," he said.
With the exception of the rejected tax reform package, Gov. Hunt said he was pleased with the 1992 legislative session and would sign the two budgets.
Alabama lawmakers have passed three other pieces of major legislation this session: a road-building program, a new state Medicaid plan, and changes in workers' compensation. Gov. Hunt signed the highway and Medicaid bills earlier this month and plans to sign the workers' compensation bill soon.
The highway legislation, which raises gasoline taxes by five cents, will generate $128 million a year for road construction. The Medicaid bill, which increases taxes on medical care facilities, produces $183 million in new annual revenue, allowing the state to receive $456 million in federal matching funds. The worker compensation insurance bill places limits on doctor's fees for treating job injuries.
The 1993 general fund budget approved Monday compares with an $815 million 1992 budget approved last September that was later cut by 5%. The $2.65 billion 1992 education budget, approved last July, was also later cut by 5%. In Alabama, unlike most states, the education and general fund budgets are separate.
Mike Murphy, the Senate's public information officer, attributed the defeat of the tax reform program to senators' disenchantment with changes to the original plan. The first plan was introduced in February and called for $550 million in new taxes.
"At the end, what we got was not reform at all, with everybody starting to take a little piece out, and this doomed the whole process," Mr. Murphy said. "I'm convinced the only way tax reform would have survived would have been to lock the 35 Senators in a closet and keep the lobbyists away."
Reformers have been working since 1990 to revamp Alabama's tax base, which puts an unusually heavy burden on the state to fund education.
The effort began with the formation of the Tax Reform Study Commission, which urged a major over-haul of the state's tax system. A 30-member task force subsequently appointed by Gov. Hunt recommended a plan to raise $550 million in new revenues to fund education reform.
After months of negotiation in the state Legislature, a joint House-Senate conference report on Monday agreed to a $404 million tax reform package, but not until numerous concessions were granted to politically influential groups such as banks, utilities, and apartment owners.
In its final form passed by the House, the proposed tax package would have eliminated the 4% sales tax on groceries and increased the state's sales tax on non-grocery items to 5% from 4%, generating $52 million. It would also have raised the state's personal income tax rates, producing $135 million, and increased corporate taxes, adding $36 million.
The package would have raised state property taxes to 14 mills from 6.5 mills, generating $130 million, and required local governments to raise the first 20 mills of local property taxes, producing $51 million.