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As prison lease plan fizzles, Ivey, lawmakers considering options

By MARY SELL, Alabama Daily News

As the clock ran out on Gov. Kay Ivey’s plan to lease new prisons, several lawmakers said they want to consider using some of the more than $2 billion in new federal Coronavirus relief money on improved prison infrastructure.

Earlier this year, Ivey signed lease agreements with Tennessee-based CoreCivic to build two large men’s prisons. Tuesday was the deadline for those agreements to be final and Ivey confirmed to reporters Wednesday that the lease-only route is no longer an option as support from potential underwriters has fallen away.

“To that end, my team and I will meet with legislative leaders again in the coming days to review all that we have learned through this process thus far, including the complexity and depth of the multi-faceted challenge at-hand,” Ivey said in a statement. “Anyone who is serious about these issues understands that replacing our failing prison infrastructure with safer, more secure facilities that accommodate the rehabilitation of incarcerated people is essential. It is not a question of if this will happen, but how.”

Meanwhile, lawmakers have signaled to Ivey they want another crack at a state-funded prison plan.

Alabama budget makers and leaders are continuing to lay the groundwork for the distribution and spending of Rescue Plan funds. The state this summer will start seeing some of the more than $4 billion allocated to it and local governments in the Biden administration’s American Rescue Plan Act. Separately, there is nearly $2 billion going to K-12 schools in the Rescue Plan.

State government’s Rescue Plan funding includes $2.1 billion earmarked for state relief and $192 million for state capital projects fund.

“We need to consider what we could do with some of these funds for prison construction,” Sen. Arthur Orr, R-Decatur, told Alabama Daily News.

Using Rescue Plan money would mean less funds the state would have to borrow.

“The issue of the prisons, I think it needs to be explored,” Rep. Steve Clouse, R-Ozark, said about the Relief Plan funds. He’s chairman of the House General Fund budget committee. Clouse this spring said it was time for lawmakers to pass a bond issue for new prisons in the state. On Friday, he told ADN that at least some of the Rescue Plan money can be used for improved state infrastructure. That could include prisons, he said.

“The argument (could be made) that you could mitigate the spread of Covid among prisoners, improve mental health issues and suicide rates,” Clouse said. “I think the case could be made that some of those funds could be used there. It’s not going to pay the whole tab, but I think it could pay a little chunk of it.”

Some of the Rescue money will be considered revenue replacement funds that could flow to the state’s General Fund, Sen. Greg Albritton, R-Range, the Senate General Fund committee chairman, said. He was on a recent call among some lawmakers and State House finance leaders.

“If we are able to have that, plus the capital monies, we’ll be able to do quite a chunk of change to start doing something with prisons, whether that be renovations, construction or both,” he said.

He said there could be “hundreds of millions of dollars” for prisons in the Rescue allocations.

Ivey’s plan is for three new men’s prisons. But Albritton said he’d like “to start conservative” on a state plan, including possible renovations or expansions of existing prisons.

“If we can do that with (Rescue money), let’s take a breather and see what else is really needed,” he said.

Clouse said he’s waiting until today for a signal from Ivey’s office that the CoreCivic plan is officially dead. The potential of a special session on a prison bond issue has been discussed by some lawmakers, but only Ivey can call specials.

“I think we need to move pretty quickly,” Clouse said. He said lawmakers have had multiple conversations in recent months about the possibility of the state borrowing money for prison improvement.

“I think a bond is the route we need to take and we need to take it sooner rather than later,” Clouse said.

Last month, the U.S. Department of Justice said Alabama prisons remain deadly and dangerous two years after federal officials warned the state of unconstitutional conditions, The Associated Press reported.

Other possible uses for some of the federal funds include broadband expansion and the state’s Unemployment Insurance Trust Fund. Lawmakers last year dedicated a portion of the CARES relief money to the fund that pays unemployment benefits, but it wasn’t enough to stop a tax increase on businesses that pay into it.

Despite fund transfers, unemployment tax to increase

Albritton said he’s not sure he wants to spend more on unemployment unless it would bring down employers’ premiums.

“We have to show some gain when we use this (Rescue Plan asset),” he said.

Orr said using the money for unemployment will stabilize the fund and prevent future increases.

He said hundreds of millions of Rescue Plan dollars could be spent on broadband. Lawmakers this session passed legislation to set up a broadband expansion plan, but there wasn’t a dedicated funding source for it.

Orr said he expects lawmakers and Ivey to have a rough outline for Rescue Plan spending prior to a potential special session on the issue.

Distribution planning

For the state’s share, the money will be allocated in much the same process as the state’s General Fund budget, requiring approval from the Legislature and Ivey.

But even before the money gets here, there’s a lot of work to do. Within the Rescue Plan are multiple funds and their distribution processes differ. Some have an application process and some are automatic payments, said Kirk Fulford, deputy director of the Legislative Services Agency’s Fiscal Division.

For one of the bigger pots, the Fiscal Recovery Fund, Finance has to apply to the U.S. Department of Treasury through an online portal, Fulford said. Counties and metro cities make their own applications. For nearly 400 smaller municipalities, their Fiscal Recovery Funds will flow through the Finance Department.

Finance spokeswoman Jana Ingels told IAP that the department last week received guidance on that distribution process.

“The Department of Finance is working closely with the Alabama League of Municipalities to ensure the distribution happens as quickly and as smoothly as possible,” Ingels said in an email. “We appreciate the League’s assistance and the patience of our local governments.  We expect to open the applications for these funds in the very near future.

“Both state and local fiscal recovery funds must be applied for in a single application to the U.S. Treasury.  As the local funds must be distributed within 30 days of receipt, we plan to request Alabama’s allocation once the local distribution process is fully set up.”

“No city can receive more than 75% of their prior year budget,” Fulford said.

“When the state applies for its funds, the Treasury will consider it to be applying for those local funds as well and will start the 30-day countdown,” Fulford said. “Any funds not distributed to the cities within the 30 days will revert to Treasury. So, the Department of Finance is trying to make sure they have all of the city budget information before requesting the funds.”

The Rescue Plan money will come in two tranches, Fulford said. Half this year within 60 days of applying and the other half in May 2022.

“We will definitely have multiple supplemental appropriation bills dealing with these funds,” Fulford said.

If Ivey doesn’t call a special session for the Rescue Plan money distribution, it will likely be a dominant issue in the 2022 regular session that starts in January.

Fulford notes that there’s no rush to spend the money, unlike last year’s CARES Act funding which had a spending deadline of less than a year.

The state will have until December 2024 to obligate the funds and until December 2026 to have the funds spent, Fulford said.

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