‘Z-Plan’ would divert funds

Published 9:43 am Wednesday, January 30, 2019

Auditor wants to fund infrastructure without new tax

On Monday, State Auditor Jim Ziegler released a plan to better fund roads without a fuel tax increase and Covington County Commissioner Greg White said that any idea to increase the funding should be looked at.

Ziegler is calling for the legislature to stop diverting $63.5 million a year from the current highway fund to the courts and to state troopers. Zeigler would then use the $63.5 million a year to pay for a 20-year, $900 million bond issue for infrastructure.

“If Auditor Zeigler has found funds to support the state then I fully support him,” White said. “However, in the 20 years that I have been in and around public office, I have supported the increase of two taxes, one that was in place for 18 months and then more recently the sales tax for our schools. I do think we need to be realistic as to what’s available.”

Zeigler’s plan appears to be a reaction to Go. Kay Ivey’s call for a fuel tax for the state’s roads and bridges. 

Zeigler’s plan would direct all of the bond proceeds to actual road work and would also conduct a full management audit of the Alabama Department of Transportation. His plan does not address how the legislature would make up for the $63.5 million hole in the state general fund.

“Historically the General Fund has been underfunded,” White said. “The state continues to be unable to meet the needs of Medicare, prisons and other General Fund operations. I’m not sure how wise it would be to pull these funds over to the road and bridge activities.”

Zeigler said the $63.5 million being diverted can be made up from revenue growth.

“The state’s economy is growing and is expected to continue growing,” Zeigler said. “As a result, state revenues have grown and are expected to continue to grow. These additional revenues can partially offset the $63.5 million loss by blocking the diversion.”

He also proposed a new tax on unclaimed gift and cash cards and “breakage” of cards.

His theory is that when the cardholder does not redeem the card, the issuer receives an unearned windfall. The largest of the issuers are out-of-state corporations such as Wal-Mart and Target. Also, when the cardholder uses the card, it is almost always for a different and slightly lower amount than the full value. For instance, the holder can pay for an $18.23 purchase with a $20 gift card. The remaining amount is often never used. This is called “breakage.” Issuers make millions each year by simply profiting by a windfall from the breakage.

“The Legislature can pass a bill making the balance on unused cash cards and breakage go to the state General Fund,” Zeigler said. “This costs consumers nothing as they have already allowed the amounts to go unused. A consumer who does not want his card balance to go to the state can remedy this by fully using his card. The unused amounts could “escheat” to the state General Fund after the expiration date of the card, when the customer would have lost out anyway. If there is no expiration date, the amount escheats to the state General Fund after an established time, example, two years from issuance.”

He also suggested that if administrative costs of most state agencies were cut an average of about 1.5 percent, not across the board, but on average, it would generate the remainder of the $63.5 million. Certain agencies would be protected from this cut, such as Medicaid and others that receive substantial federal matching dollars.

White said that he fully joins in agreeing that there is a need for more funding for the road and bridge department.

“He did not dispute that there was a need for more money for infrastructure improvements and maintenance,” White said. “So I fully join with Jim Zeigler that there is a need for more funding for roads and bridges.”

He said that Covington County is very fortunate because the county has been able to maintain its paved roads at a relatively good level in recent years, primarily because it has benefited from a flow of Federal Emergency Management Agency dollars.

“As we finish the last of the FEMA projects, our budgets will tighten up,” White said. “I mean, we can continue to operate on our current level of funding, but that means we would be resurfacing at only one third of what we would get more money. We have a bare bone staff and we could continue to operate with that staffing for a while, but it means that we would not be able to resurface or new paving at anywhere near the levels that we did 25 years ago.”

White said that there are several ideas out there that could bring in more funding.

“I hope that the legislature listens to every option,” White said. “But in the end, wherever they find the funds, our county and others across the state need more money to maintain our roads and bridges.”