Two House-passed bills to give tax incentives to employers who assist employees with child care and developers who build affordable housing for low- and mid-income workers passed a Senate committee without changes on Wednesday.
Both bills are part of leadership’s workforce development legislation package and are now one vote away from final passage.
The Senate education budget committee also approved bills to remove the state sales tax on hearing aids, some baby care items and feminine hygiene items.
Committee chairman Sen. Arthur Orr, R-Decatur, tried to substitute or amend both tax credit bills to lessen the amount of tax dollars they would divert from the Education Trust Fund, but the committee voted to keep them as they passed the House.
“I wouldn’t be doing my job if I didn’t give you alternatives,” Orr said.
House Bill 358, the child care credit bill sponsored by Rep. Anthony Daniels, D-Huntsville, and Sen. Garlan Gudger, R-Cullman, was scaled back some in the House to reduce its fiscal impact and the incentives for employers. Large employers could qualify for up to $600,000 per year in credits if they build in-house child care or help pay for off-site care. The original bill was up to $1 million per employer.
As passed by the House, the fiscal impact of the bill when fully implemented would be $82.5 million over the next three years. Less than what Daniels and Gudger originally proposed and more than what Orr wanted to pass. Orr’s substitute would have cut that to $60 million.
A lack of good, affordable child care around the state is one of the identified barriers to work for Alabamians and state leaders are trying to raise the workforce participation rate of about 57%.
Gudger Wednesday told Alabama Daily News the bill as passed by the House and Senate committee is a good start.
“It’s time to invest in an industry that will get women back to the workforce and with their salary produce sales and income to return to the ETF budget,” he said.
House Bill 346 by Rep. Cynthia Almond, R-Tuscaloosa, and Sen. Chris Elliott, R-Josephine, allows up to $5 million per year in tax credits to developers of affordable housing units in high-demand areas.
“The education budget grows when our economy grows, our economy grows when we have more people in the workforce, we have more people in the workforce when we have more people that have affordable housing,” Elliott told the committee.
Sen. Sam Givhan, R-Huntsville, said the lack of affordable housing is becoming an issue in the Rocket City.
“No one in my community is building homes for less than a quarter of a million dollars,” he said.
Orr previously told ADN he is concerned about the flattening of growth in the Education Trust Fund and other looming hits.
Out Wednesday, the latest state revenue report shows ETF revenues grew by 2.4% in April, but are still down about 2.8%, or $163.7 million, in the fiscal year that began in October. Most of that loss has been in income and sales tax collections.
Orr shared with the committee a spreadsheet of passed and proposed legislation that pulls money from the education budget. It was created by the Council for Leaders in Alabama Schools. In 2023, lawmakers enacted bills that by fiscal 2026 are expected to reduce funds in the ETF by nearly $560 million. This session, proposed bills reducing funds in the ETF would have a total impact of $414.7 million by fiscal 2026, according to CLAS.
“There are wonderful entities out there that ask for, deserve and receive tax credits,” CLAS Executive Director Vic Wilson later told ADN. “However, the problem is every tax credit comes at the expense of the two budgets, the education budget and General Fund.”
Wilson said he appreciates efforts to mitigate those funding decreases.
“This is all the more reason to revisit how we fund education,” Wilson said.
Last week, Orr and Rep. Danny Garrett, R-Trussville, introduced resolutions to study this year funding public schools based on student population needs in each district.
Both tax credit bills could be on the Senate floor Thursday and if not amended there, they will go to the governor.
The committee also Wednesday:
Approved House Bill 151 by Rep. Margie Wilcox, R-Mobile, to take the state sales tax off of hearing aids. The bill will save Alabamians about $3.1 million per year, according to a fiscal note on the bill.
“This tax disproportionately hurts the elderly and disabled in our state,” Wilcox told the committee.
Orr did amend that bill to end the exemption in 2029.
Approved House Bill 236 to remove the sales tax on several baby items, including diapers and formula, maternity clothes and feminine hygiene products. That bill is sponsored by Rep. Neil Rafferty, D-Birmingham, and Orr. Its fiscal impact is expected to be about $11.2 million per year. Orr also sunset that exemption in 2029.
Approved Senate Bill 339 to give 2% cost of living increases to some retired teachers and employees. The proposal by Sen. Josh Carnley, R-Ino, applies to retirees receiving an annual retirement benefit of $25,000 or less and who retired before Oct. 1, 2015 would qualify for the increase.
Similarly, Sen. Kirk Hatcher, D-Montgomery, recently filed Senate Bill 301 to give a COLA to retired teachers.
Both bills were filed late in the session and only have four legislative days to get the needed votes for Senate and House passage. And their potential costs haven’t been factored into the 2025 education and General Fund budgets that are nearing final passage.