Major changes in property levies planned, say lawmakers
who have met with administration

05/15/03

MONTGOMERY -- Alabama Gov. Bob Riley will push a billion-dollar-plus tax increase, built partly around major property tax changes, according to legislators who met with administration officials Wednesday.

Following the meeting, one leading lawmaker forecast an uphill battle for the first-term Republican governor's solution to a $600 million revenue shortfall, more than 10 percent of the state's two primary budgets.

"What they want to do with property taxes is just going to get that thing killed (in a statewide vote)," said Rep. Ken Guin, D-Carbon Hill, majority leader in the 105-member House of Representatives.

Guin said the plan would raise taxes on many Alabama property owners. The changes would include an increase in exemptions, however, leaving other residents with lower property taxes than they pay now.

Guin's comments followed a meeting between the House Democratic Caucus and state Finance Director Drayton Nabers, who briefed lawmakers on the plan.

Yet even with a special legislative session just days away, Riley and his aides continued to dodge questions from reporters Wednesday about the specifics of what would be the largest tax increase in Alabama history.

The governor promised only that legislators would receive at least some final proposals today, and he confirmed plans to address Alabamians on Monday at 6 p.m. in a live television broadcast.

Riley has asked the Legislature to convene a special session that day to consider his plan, which, he says, will address the existing shortfall and make fundamental government reforms to end the chronic cycle of underfunding state services.

Citing the state's public records law, the Mobile Register on Wednesday requested all draft copies of the plan. David Azbell, Riley's press secretary, said he would comply with the request but would not be able to do so until Monday.

The governor said he wants the plan to go before voters in early September for one up-or-down referendum. Then lawmakers would gather in another special session to pass budgets -- based on increased revenue if the plan passes or based on cuts if it fails -- before Oct. 1, the start of the next fiscal year.

The House of Representatives already has granted Riley's request to recess the regular session. The Senate has yet to act.

Riley told reporters Wednesday afternoon that he received assurances from Senate President Pro Tem Lowell Barron, D-Fyffe, that the Senate would vote today to recess the regular session.

Another powerful senator, however, Rules Committee Chairman Jim Preuitt, D-Talladega, said he was frustrated that certain lobbyists had previewed bills while lawmakers were still awaiting a peek.

"We, the legislative body, have not been shown that courtesy," said Preuitt, who has threatened to block the resolution to recess the regular session until Riley releases details.

Senate staffers said Wednesday that the chamber's rules would allow another member to introduce a voice motion calling for the recess, even over Preuitt's objections.

Guin expressed some of the same frustration, but added that Nabers' presentation to House Democrats Wednesday was the most detailed yet, giving legislators a look at what Guin described as "a complicated, major reform package."

Other lawmakers said the finance director also invited them to his office for question- and-answer sessions next week.

As described by Guin, Riley's property tax plan would increase rates for owners of the state's more expensive homes, while leaving owners of some lesser-valued homes with the same or lower property tax burden.

Currently, property is divided into four categories and taxed at a rate of 6.5 mills by the state. A mill is one-tenth of a cent, equivalent to $1 in taxes for every $1,000 of assessed property value.

Home and timber owners pay the 6.5-mill rate on 10 percent of their property's assessed value; automobile and boat owners pay on 15 percent; commercial property owners pay on 20 percent; utility companies pay on 30 percent.

Under Riley's plan, Guin said, all property would be taxed at 100 percent of the assessed value, but the millage rate would be lowered to 3 or 3.5 mills, and the homestead exemption, granted for a taxpayer's primary residence, would be increased to $50,000. Currently, the exemption varies from $2,000 to $4,000.

The changes would not apply to any local property tax rates and rules.

Those proposals would leave a homeowner with a house valued at $50,000 or less without any state property tax, as the homestead exemption would reduce the taxable value of the home to zero. Right now, the owner of a $50,000 home, assuming a $4,000 homestead exemption, pays $6.50.

Considering the $50,000 homestead exemption, each additional $1,000 in value above $50,000 would amount to $3.50 in state property tax.

For example, the owner of a $75,000 home would pay the 3.5-mill rate on $25,000 after the exemption. The total state property tax bill would be $87.50. Today, that homeowner pays $22.75.

A $100,000 home would command $175 in state taxes under the plan Guin de scribed. That homeowner now pays $39 to the state.

Riley said again Wednesday that his plan would include about 30 bills. A preliminary list of 20 topics distributed earlier this week in the State House featured seven tax measures, 12 accountability reforms and a college scholarship program.

The governor said Wednesday that he is considering establishing a state-funded pre-kindergarten program.

Guin said House leaders have told the administration in strategy meetings that they want half of the bills sponsored by Democrats and half sponsored by GOP members.

"This has to be bipartisan," he said. "If the Republicans start voting against this, we'll vote against it, too."

Among other proposals legislators and lobbyists have said could be in the plan:

Creating graduated income tax rates of 4, 5 and 6 percent. The current rate is essentially a flat 5 percent.

Increasing the threshold at which a family of four pays income tax. That threshold is now $4,600, the lowest in the nation. Guin said Nabers proposed raising that first to $17,000, then up to $19,000 over the next two years.

Asking teachers and state employees to pay higher premiums and usage fees for health insurance.

Increasing the minimum retirement ages and length of service for new teachers and state employees.

Requiring that all new revenue be pooled in one account for the Legislature to appropriate, as opposed to the existing system of "earmarking" or legally predetermining how most tax money is spent.

Requiring fired teachers to use binding arbitration rather than the court system for reinstatement proceedings.

Allowing local school systems greater budgeting flexibility and the freedom to offer incentive pay to teachers in understaffed subject areas.

(Capital Bureau Reporter Sallie Owen contributed to this report.)