An Analysis of the Proposed Statewide Amendment for the 2024 General Election

When Alabamians vote on November 5, they will be asked to vote on one statewide amendment.

“Proposing an amendment to the Constitution of Alabama of 2022, to grant certain sixteenth section and indemnity school lands that are owned in fee simple by the Franklin County School System, are located in Fayette County and Walker County, and are for the exclusive use of schools in the Franklin County School System to the Franklin County Board of Education; and to provide for the distribution of any proceeds and interest generated by this land.”

Proposed by Act No. 2024-301 (House Bill 302, 2024 Regular Legislative Session)
Bill Sponsor: Representative Kiel

This proposal seeks to amend the Constitution of Alabama of 2022 to address the management of a piece of land in Fayette and Walker Counties that is to benefit the Franklin County Board of Education.

Since this Amendment concerns land owned in two counties and a school board in a third county, it requires a statewide vote.

The land in question is designated to support public education and stems from an eighteenth-century practice where the federal government designated land in each county for the support of public education in that county. These designations predate Alabama’s statehood.

In the late nineteenth century, the Alabama Legislature gave some school boards, including Franklin County, additional land, sometimes outside their home county, to ensure each school board owned land of approximately equal value.

State law stipulates that such lands are held in trust by the Alabama State Department of Education and managed by the Alabama Department of Conservation and Natural Resources. The Department is empowered to lease or sell the land, with revenue provided to the school system the land is designed to support.

Amendment 1 concerns land located in Fayette and Walker Counties that is to benefit the Franklin County Board of Education. The Board cannot independently manage the land and cannot sell the land without the approval of the State Superintendent of Education and the Governor.

Amendment 1, if approved, enables the Franklin County Board of Education to manage and sell the land without prior approval and retain all revenue.

Continue reading the full analysis of Amendment 1 here.


Huntsville and Baldwin Continue Population Gains, Birmingham Remains in Top 50 of U.S. Metros

The Huntsville area and Baldwin County continue to add more new residents, while growth in Shelby County and St. Clair County helped the Birmingham Metro Area return to positive growth after two years of population loss. That’s according to new estimates of population change in U.S. counties and metro areas published by the U.S. Census Bureau. The new estimates identify population totals and components of population change as of July 1, 2023.

Printable PDF available here

In addition to the growth in Shelby and St. Clair, Birmingham’s metro population got a boost from an accounting change. In the 2022 estimates, the Birmingham-Hoover MSA ranked No. 50 in population among metropolitan areas and seemed destined to fall out of the top 50 metro areas.

However, in 2023, Walker County was re-added to the Birmingham metro, which boosted the Birmingham MSA population by almost 65,000 and allowed it to climb to the 47th most populous metropolitan area.

Metro areas are clusters of counties where a significant percentage of the population moves back and forth across county lines for work and commerce. According to the most recent data, about 26% of Walker County’s resident workforce commuted to work in Jefferson County or other counties in the MSA. That’s above the 25% threshold that triggers inclusion in the MSA. Walker was historically part of the MSA.

Consisting of 7 counties with a population of 1.2 million, Birmingham is the state’s largest metro area. Huntsville’s MSA, comprised of Limestone and Madison Counties, is second with 527,254.

Trends

As observed in the PARCA’s analysis of state-level estimates released earlier this year, the decline in deaths related to the Covid-19 pandemic improved baseline conditions for population growth. In the 2021 and 2022 estimates, deaths far outnumbered births. In 2023, the number of deaths in Alabama continued to drop, though, due to an aging population and lower birth rate, deaths still outnumbered births.

International immigration to Alabama remains low, but domestic immigration continues to accelerate, according to the estimates. Alabama netted 30,744 new residents through domestic in-migration in 2023, building on an upward trend.

Domestic in-migration is powering population growth in hot spots like Madison, Limestone County, and Baldwin, as well as in suburban counties around Birmingham and Montgomery. In the latter cases, the central county is losing population while suburban counties gain. Across Alabama, 38 of the 67 counties are seeing more people moving into the county than moving out.

Calhoun and Etowah counties, home to Anniston and Gadsden, respectively, are showing population growth after years of decline. Mobile County also grew, breaking a streak of decline. In fact, all of the state’s metro areas posted population gains except for the Columbus, GA—Metro Area, which includes Phenix City and Russell County.

Rural counties, particularly in Alabama’s Black Belt, continued to lose population. The biggest drop in percentage terms was Bullock County, where the population declined by 2.4%, or 246 residents, according to the estimates. Hale County was the exception to the Black Belt trend. Hale added 289 residents, which amounts to a 2% population increase in a year.

In numeric terms, Jefferson County lost the most people, with a decline of 2,186. That is less of a loss than in 2021 or 2022. Deaths were down, births were up, resulting in a positive natural change of 394. International migration added 818, a slight increase over the year before. However, domestic migration remained a drain, with 3,417 more people moving out of the county than moved in, according to estimates.

Montgomery County also continues to see significant domestic outmigration, but a slight rise in international migration and births and a drop in deaths helped offset the outmigration. Montgomery County’s population has decreased by 1,321. Autauga, Elmore, Chilton, and Lee counties grew.

Mobile County grew with a smaller net decline in domestic migration, a slight increase in international migration, and a return to positive natural change (more births than deaths). According to the estimates, Mobile County posted a net addition of 242 residents.

Next-door neighbor Baldwin County added 6,976 people, mostly because of people moving to the coastal county. In percentage terms, the Baldwin County metro area, officially the Daphne-Fairhope-Foley MSA, grew faster than any of the state’s other metro areas.

However, the Huntsville MSA netted the most new residents, with Madison County adding 8,995 and Limestone County adding 3,786. Adjacent North Alabama counties like Lauderdale, Morgan, Marshall, Jackson, Lawrence, and Cullman grew.

The Dothan-area Wiregrass counties also saw population growth, as did counties on the Alabama-Georgia Border like Cleburne, Randolph, and Cherokee.  

Most counties bordering Mississippi lost population. The median age in rural counties tends to be higher, which correlates with higher death rates.

Those counties also tend to experience more people moving out than moving in.

Use the tabs and menus to explore the estimates for counties and metros you are interested in. If you want to see how Alabama compares with the rest of the United States, visualizations of the population estimates and change are available for counties and metros across the country.

Similar stats are available for metro areas as well. Use the controls to zoom in on areas of interest.


Proposed Statewide Amendment to the Alabama Constitution of 2022


Statewide Amendment 1

Proposing an amendment to the Constitution of Alabama of 2022, to amend Section 71.01 authorizing the Legislature to sign and transmit local laws or constitutional amendments before the transmission of basic appropriations.

Proposed by Act 2023-562 (Senate Bill 3, 2023 Second Special Session)
Bill Sponsor: Senator Chambliss

When voters go to the polls on Tuesday, March 5, they won’t just be voting in the Democratic or Republican primaries; they’ll also vote on an amendment to the Alabama Constitution of 2022.

Amendment 1 proposes simplifying the process of moving resolutions and local legislation through the Legislature before the state budgets are passed.

Printable PDF available here

If the amendment passes, a 3/5 vote of the Legislature would no longer be required before considering the passage of a resolution, local legislation, or a local constitutional amendment.

Proposed Amendment 1 is actually a tweak of the amendment championed by Gov. Fob James, which was ratified back in 1984. The amendment was aimed at focusing the Legislature on its most important job: passing the education and general fund budgets. It was designed to make it hard to bring up other legislation before the budgets passed.

Currently, until the budgets pass, every piece of Legislation requires two votes: one for what’s called a Budget Isolation Resolution, which requires three-fifths support to allow consideration, and a second vote on the piece of legislation itself.

While Amendment 1 will ease the process for resolutions and local legislation, the higher vote threshold (required prior to the passage of the budgets) remains in place for general laws, laws that apply statewide. Local constitutional amendments will still require a three-fifths vote to pass. They just won’t require two votes, one for a BIR and a second vote on the measure.

The original purpose of the 1984 amendment was to avoid last-minute scrambles to pass budgets. That didn’t happen. Budgets still tend to be worked on until the waning days of the session. Budgets are complicated and involve a lot of give and take. They are the culmination of a process, but they also are not all-consuming. Legislative action on other matters doesn’t necessarily get in the way of making progress on the budget.

In some circumstances, the BIR procedure does provide a mechanism for blocking or delaying consideration of controversial legislation. If more than one-third of members of either the House or Senate oppose a bill, they can band together and prevent consideration.

That blocking mechanism was more in play when the Legislature was more evenly divided along party or interest group lines. It is less relevant now that the Republicans hold a super-majority in both houses. The BIR can still come into play on bills that cut across party lines, but, for the most part, nowadays, it is simply an extra step in the legislative process.

The proposed amendment’s focus on local legislation stems, in part, from a series of lawsuits that questioned the validity of some local laws based on BIR-related votes. The Constitution requires “three-fifths of a quorum present” to vote on the BIRs. But Alabama House of Representatives rules and practice allowed BIRs to pass if three-fifths of those voting voted yes. Even though the legislative and constitutional fixes have reaffirmed previously passed legislation, proponents want to avoid future challenges by exempting local legislation.

The amendment doesn’t address the more fundamental issue of whether the state Legislature should be voting on local legislation at all. In other states, local governments have more power to conduct their own affairs. In those state the Legislature focuses on statewide policy. In Alabama, in 2023, 30% of the bills passed by the State Legislature applied to a specific county or locality, according to a PARCA analysis of legislative records. Further, the bulk of the Alabama Constitution is made up of amendments that apply to specific counties and localities. That inclusion of local matters in the state constitution helps make Alabama’s Constitution by far the longest state constitution in the U.S.

Another state constitutional amendment is on the ballot March 5, but only in Dale County. Voters there will decide whether mayors in the county are allowed to participate in the state’s retirement system.


The Alabama Constitution Reformed: Is There Still Work to Do?

In 2022, Alabama adopted a “new” constitution, an improved and reorganized version of the Alabama Constitution of 1901. The vote was the culmination of decades of advocacy and was rightly celebrated.

The new Constitution removed the racist and unconstitutional provisions that were relics of the White Supremacist 1901 Constitution.

Printable PDF version available here

It reorganized the document, moving relevant statewide amendments into their proper place in the main body of the Constitution, removing duplicative and repealed provisions, and organizing local constitutional amendments by county to the end of the document.

But is the work finished?

Is Alabama free from the shackles of the anti-democratic and pre-modern Constitution of 1901? Or are fundamental flaws still embedded in our Constitutional DNA?

Despite the new Constitution, we remain governed by the basic operating system established by the 1901 Constitution. And that operating system was recognized as obsolete and an obstacle almost as soon as it was adopted.

Alabama Governor Emmet O’Neal, in a 1914 address, observed, “No real or permanent progress is possible in Alabama until the present fundamental law is thoroughly revised and adapted to meet present conditions.”

Have those revisions been made? In this election year, the Public Affairs Research Council of Alabama (PARCA) will examine that question.

PARCA was founded to provide objective, non-ideological research to citizens and leaders, supporting the improvement of state and local governments. PARCA research is intended to help governments function efficiently and effectively in hopes that those governments provide equal treatment and opportunity to the people of Alabama.

As the Constitution is fundamental to the functioning of state and local governments, it has been a central focus of PARCA’s work.

Over the next year, PARCA will issue a series of reports examining Alabama’s current constitutional framework, identifying remaining obstacles to a modern constitution and possible paths forward in areas such as education, economy, healthcare, democracy, liberty & justice, finances, and related areas.

The project is supported, in part, by the Alabama Citizens for Constitutional Reform (ACCR). Both ACCR and PARCA are nonpartisan organizations, and our members and supporters are Republicans, Democrats, and independents. Former Governor Albert Brewer and former Samford University President Thomas Corts, both deceased, were founding leaders in both organizations.

The mission of ACCR is to educate and advocate for an Alabama Constitution that protects and enhances life for all Alabama citizens. To that end, ACCR has two branches:

  1. A foundation that focuses on educating the public about the Alabama Constitution and underlying issues that affect our citizens.
  2. A nonprofit advocacy organization that works to improve the Constitution.

The foundation is providing support for PARCA’s re-examination of the Alabama Constitution. ACCR’s advocacy organization will use the research to recalibrate its ongoing work on Constitutional reform.

Alabama’s Constitution of 2022 is still, by far, the longest state constitution in the United States, three times as long as the next longest state constitution. Though now better organized, it is still complex and contradictory.

It is not a basic template and statement of principles, which should be the ideal. It more closely resembles a law code, with almost 500 pages worth of amendments that relate to localities rather than to the state as a whole.

Alabama voters have finally removed the most noxious provisions of the Constitution of 1901, which was explicitly formulated to strip the political rights of Black Alabamians, but which also disenfranchised poor whites. Gone are provisions that mandated segregated schools. Deleted are provisions allowing for involuntary servitude for those convicted of crimes. The Constitution now recognizes that females have a right to vote.

But other aspects of the Constitution remain unchanged. Power is still concentrated in the hands of the state Legislature in Montgomery. Should that power be more dispersed? Should citizens be able to initiate change and call for referendums, rights available to citizens in other states? Should more decisions be made by local communities rather than by legislators in Montgomery?

Alabama still collects less in state and local taxes than virtually any other state through a constitutionally-embedded tax system that falls disproportionately on poor Alabamians. At the same time, low taxes, particularly on property, reflect voters’ preferences. Are there changes voters would support that could increase adequacy and fairness?

Thanks to the Constitution, Alabama still earmarks more revenue than any other state. That limits legislators’ ability to shift revenue toward pressing priorities. On the other hand, voters like earmarks and don’t necessarily trust lawmakers. Is there a way to change the culture of distrust with changes that increase both flexibility and accountability? 

Does the Constitution inhibit economic development and mass transportation? Does it promote public safety and justice? Does it adequately promote the general welfare, health, and education?

Alabama’s Constitution should reflect our values. It should promote engagement in our democracy and free and fair elections. It should provide for equality of opportunity and equal treatment under the law. With the adoption of the Constitution of 2022, the people of the state took a step forward, removing obvious anti-democratic and discriminatory provisions left from a darker past.

But does the Constitution reflect the needs and aspirations of Alabamians today? Does it provide us with the outlines of a modern, efficient, effective, and responsive government? Is there still a need for Constitutional reform? We will explore those questions in the months to come. 


E-Commerce and Taxation: Questions of Efficiency and Equal Treatment

PARCA’s new report, titled E-Commerce and Taxation: Questions of Efficiency and Equal Treatment, questions whether changes are needed to the state’s Simplified Sellers Use Tax (SSUT).

Executive Summary

Alabama’s tax on online goods sold by out-of-state sellers, the Simplified Sellers Use Tax (SSUT), has been a boost to state budgets but a mixed blessing for local governments and schools. As online commerce continues to grow, the assessment and distribution of the tax is increasingly important and potentially problematic.  

At the state level, the SSUT is the equivalent of the state sales tax, a 4% levy on online sales, the same rate that is applied to sales in Alabama stores. In terms of state taxes, the SSUT creates a level playing field between online vendors and brick-and-mortar stores. But at the local level, the tax creates winners and losers.

  • Online retailers benefit from a simple system, paying a total of 8% on all purchases made by Alabamians. The proceeds are divided in half between the state and local governments.
  • Brick-and-mortar stores are put at a competitive price disadvantage. The weighted average sales tax is 9.25%[1] across the state, and thus, most in-person sales are subject to higher taxes than online purchases.
  • Communities with less commercial activity and lower wealth benefit from the distribution formula of the SSUT because the proceeds are distributed on the basis of population, not where the purchase occurs.
  • Big cities and counties, which tend to have higher sales volume and local sales tax rates higher than 4%, receive less from online purchases made by their residents than if those same purchases were made in person.
  • In 2021, 120 school systems received revenue from county sales tax (totaling $665 million), and 40 school systems received revenue from city sales taxes (totaling $176 million). Some systems receive both city and county sales taxes. In total, 131 school systems received sales taxes from a county, a city, or both.

Considering the divergent interests involved, no one policy solution satisfies all parties. Options include:

  • Raise SSUT’s rate to match the prevailing local sales tax rate.

  • Join the 24 other states participating in the streamlined sales tax, which would allow a unified system for applying and remitting sales taxes for online and in-person sales. The local tax rates could be applied, but only one entity would collect state and local taxes, eliminating local oversight.

  • Build our own system for online retailers to look up and submit sales taxes based on where the purchase is made.

Since state and local coffers are full at the moment, immediate action on the SSUT is not expected. However, the issue will become more central with the continued shift toward online sales.


[1] Janelle Fritts, “State and Local Sales Tax Rates,” Tax Foundation (blog), accessed March 22, 2023, https://taxfoundation.org/publications/state-and-local-sales-tax-rates/.

Introduction

The SSUT is Alabama’s tax on goods sold by online, out-of-state sellers. Since its adoption in 2015, more and more consumers have chosen online shopping carts over their metal counterparts.

According to the US Census Bureau’s Retail E-Commerce Sales Report, online sales accounted for less than 1% of sales in the fourth quarter of 1999 compared to 15% of all retail sales—more than $260 billion—in the fourth quarter of 2022.     

Figure 1. Total E-Commerce by Quarter and E-Commerce at a % of Overall Retail Sales, U.S. Census

The changes in the way we buy also affect the way we pay for state and local government. Shifts between traditional and online sales alter the flow of revenue with important consequences for the General Fund and Education Trust Fund, counties and municipalities, and schools across Alabama.

Although the SSUT was initially celebrated for capturing an elusive revenue stream, its distribution formula has led to debates about fairness. The SSUT’s rate is lower than the rate for in-person purchases in most large cities, creating an advantage for online retailers at the expense of brick-and-mortar stores. The growing volume of commerce the tax applies to has sparked fears that the traditional sales tax will diminish in favor of the online alternative. That, in turn, would diminish the revenue that cities and schools depend on.

Figure 2. Estimated Growth in E-Commerce Activity, based on collections of the Simplified Sellers Use Tax

This report aims to explain the SSUT’s origin, describe how it works, analyze its implications, and discuss alternative policies so that Alabamians are equipped for the conversation on the SSUT.

The Origin of the Simplified Sellers Use Tax

Traditionally, states were limited to applying sales tax only to transactions within their borders. That norm was challenged in the 1990s by Quill Company, which sold office equipment and stationery over the phone and through mail-order catalogs. A Delaware corporation, Quill shipped goods all over the country. Those sales went untaxed until the North Dakota State Tax Commissioner tried to force the company to collect and pay taxes on their sales in that state.

Supreme Court Decision Blocks Taxation on Certain Interstate Sales

The Supreme Court ruled in Quill’s favor and struck down the North Dakota tax. From 1992 to 2018, a company without a “physical nexus” (an existing retail outlet) in a state would not be subject to any taxation from that state. The decision, which revolved around mail-order catalogs, helped make way for the unforeseen boom in online retail sales.

In 2000, e-commerce retail sales made up less than 1% ($6 billion) of total sales in the U.S. By 2010, that percentage had climbed to nearly 5%, representing $45 billion in sales. That commerce went largely untaxed. Alabamians were expected to report their online spending when they filed their tax returns and to pay taxes on those items purchased. That is known as a consumer use tax, a companion to the sales tax, but it applies to purchases made in another state. The use tax is generally paid by the buyer rather than the seller.

But relying on consumers to self-report online purchases and pay taxes through the income tax system was ineffective. As states recognized they were missing out on an increasing share of revenue, they began to develop policies to capture it and lobbied for a national solution to the problem.

SSUT Initially Established as an Optional System for Online Sellers

Initially, states created voluntary tax schemes, like Alabama’s SSUT, for sellers to collect and remit online sales taxes. By 2018, 45 states had 45 policies with different qualifications, thresholds, and expectations for compliance. Alabama’s was called the Simplified Sellers Use Tax: “simple” because of its statewide flat rate of 8%, “sellers” because it put the burden of remitting on the out-of-state vendors.

Established by Act 2015-448, Alabama’s SSUT went into effect in January 2016. Its simple state-level rate of 8% made it easy for online vendors to collect a flat rate on sales statewide and submit the proceeds to the state rather than collecting and remitting sales taxes to each municipality and county where they sold items.

Meanwhile, pressure continued to build to allow states to tax online sales, particularly as it became increasingly clear that online retailers were benefiting from an advantage over brick-and-mortar stores located in local communities.

Supreme Court Reversal Allows States to Tax Online Sales

In 2018, the U.S. Supreme Court reversed the Quill decision, and in South Dakota v. Wayfair upheld a South Dakota law that required online sellers to collect and remit taxes on their sales in the state. The Wayfair decision led states, including Alabama, to amend and mandate their respective tax policies. The ruling stipulated, though, that state tax schemes should not put an undue burden on sellers.

Alabama’s SSUT Laws and Amendments

Since its establishment as a voluntary tax, the SSUT has been revised multiple times to conform to the changing environment. Highlights include:

Act 2015-448

Established SSUT. Allowed vendors with no physical nexus in the state to collect and remit an 8% tax on all online purchases destined from Alabama. The amount and its distribution proportions aim to mimic sales tax: a 4% tax levied by the state and 4% meant to represent local sales taxes. 

Act 2016-110

A business in the program may remain unless they establish a storefront or an affiliate business has a physical nexus.

Act 2018-539

Mandates marketplace facilitators with revenue of more than $250,000 to collect and remit. Additionally, a 2% discount (of the tax collected, not a reduction of the 8% SSUT rate) will be allowed on the first $400,000 remitted if remitted in a timely manner.

Updated the distribution formula to its current formation:

  • State of Alabama takes half (4 cents on every SSUT-eligible dollar spent)
    • General Fund = 75% of the state share
    • Education Trust Fund = 25% of the state share
  • Local Governments receive the other half of the revenue (4 cents on every SSUT-eligible dollar spent)
  • 40% to counties
    • Individual county share based on the county’s share of the state population
  • 60% to municipalities
    • Individual city share based on the city’s share of the total municipal population

Act 2019-382

Updates the amnesty and class action provisions for eligible sellers.

Figure 3. Growth in total collections of the Simplified Sellers Use Tax

How Has the SSUT Worked for State Government?

Alabama has an unusual approach when it comes to taxes and spending, an approach that has led to perpetual problems with budgeting. In most states, a mixture of taxes is levied, collected, and deposited into a General Fund. Then a budget reflecting the state’s priorities is created, and the funds flow out accordingly.

In Alabama, the bulk of taxes are earmarked by law, collected, and spent for a specific purpose. The largest sources of state revenue, the income tax and the state sales tax, are earmarked for education.  

That has been good for education in good economic times because those taxes grow with the economy. In bad economic times, that has been a problem because revenues contract and cuts have to be made. For the rest of the government, earmarking creates a problem. There is not enough money to pay for needs, and what revenue there is does not grow enough to keep up with inflation.

In recent years, the Legislature took steps on both the budgeting and the revenue side to improve the situation. On the budget side, they set up a system that keeps from overspending during periods of growth.

On the revenue side, the SSUT was one of a handful of enhancements that injected much-needed growth into the General Fund.

Historically, the General Fund, which pays for non-education functions of state government, has been slow growing. The addition of the SSUT has helped change that equation, adding a rapidly growing revenue source to the General Fund.

The General Fund receives 75% of the state share of the SSUT ($233 million in 2022), providing 8% of the fund’s total. The remaining 25% of the state share of the SSUT flows into the Education Trust Fund.

Figure 4. The SSUT’s Contribution to the Education Trust Fund and General Fund, 2015-2022

SSUT collections as a percentage of the funds have grown as well. In addition to the SSUT growth, the General Fund has benefited from adjustments to and growth in the traditional sales and use taxes.

In 2015, the General Fund (GF) received a total of $1.9 billion, and the Education Trust Fund (ETF) received a total of $6 billion. At the time, the SSUT contributed nothing to either. Meanwhile, sales and use taxes made up 9% ($168 million) of the GF and 32% ($1.9 billion) of the ETF.

In 2022, the GF received $2.8 billion, and the ETF received $10.4 billion. The SSUT contributed 8% ($233 million) and 1% ($78 million) of the GF and ETF, respectively. Meanwhile, traditional sales and use taxes made up 15% ($418 million) of the GF and 26% ($2.7 billion) of the ETF.

Figure 5. Change in Contribution of the SSUT and Sales and Use Tax to the Education Trust Fund and General Fund

While the SSUT arguably shifts revenue from the Education Trust Fund that would have been collected as sales tax, the rise of online sales has occurred at a time when the traditional sales tax and income tax have grown rapidly.

Thus, despite the change in flow, the ETF has seen healthy growth as well. Sales tax collections rose more than 40% from 2015 to 2022, but other revenue—principally the income tax—rose even more. Revenue from income taxes nearly doubled, from $3.9 billion to $7.4 billion in 2022.

Figure 6. Overall Growth in Alabama Education Trust Fund and General Fund, 2012-2022

How Has the SSUT Worked for Local Governments?

At the state level, the SSUT closely parallels the state’s general sales tax, except in its division of proceeds between the General Fund and the Education Trust Fund. At the local level, though, the revenue produced by SSUT and distributed to local governments does not match local sales tax rates or activity level.

Whether or not the SSUT should closely resemble local sales tax is a policy decision. Presumably, online sales compete with local brick-and-mortar sales. Those local brick-and-mortar stores must collect a higher sales tax rate than online retailers. Brick-and-mortar stores also pay property taxes and employ more local residents than are supported by delivery services linked to online retailers.  

At the same time, sales tax collections tend to be concentrated in larger communities. Those larger communities benefit from not only the sales taxes paid by residents but also from sales taxes paid by people from other towns and unincorporated areas who drive in to shop.

With the rise of online sales, should the taxes paid on goods purchased on the Internet and delivered to doorsteps reflect the existing shopping patterns? Or should the proceeds of online sales taxes be equally distributed according to where people live?

Currently, the SSUT reflects a simplified collection and distribution system with a flat rate and a distribution by population. Cities, counties, and school systems that benefit from taxes generated under the local sales tax system see the online option as a competitive threat, with a competitive advantage created by the SSUT.

At the same time, cities and counties without a strong commercial base may be benefiting from an online delivery system that decreases their residents’ need to travel to commercial centers while generating taxes that would otherwise have flowed to commercial centers.

Figure 7. Distribution of the Simplified Sellers Use Tax, as divided between state and local governments, 2022

Counties

Counties are now receiving 20% of total SSUT collections.

For those counties with little income from sales tax, the money from the SSUT represents new revenue. But counties that generate significant sales tax revenue might be missing out on revenue due to purchases moving online. That is because the tax rate for the SSUT is lower than the sales tax in most large jurisdictions. Additionally, the revenue from online transactions is being dispersed across the state on a per capita basis with no adjustment for where the order and delivery are occurring.  

The loss of revenue to a particular county can be estimated by first taking a county’s sales tax collections and estimating that county’s proportion of Alabama’s total sales tax collections.[1]

That proportion applied to an estimate for total online sales can be used to estimate that county’s portion of all SSUT-eligible spending. Finally, the county’s sales tax rate is applied to find the revenue the county would have received if the county’s tax rate was applied to online sales.

In fiscal year 2021 (FY 2021), Jefferson County received $14.2 million from the state from SSUT collections. That year, $6.4 billion was spent statewide on SSUT-eligible goods. According to PARCA calculations, in 2021, Jefferson County accounted for about 17% of the state’s total in-state sales tax collections. If Jefferson County accounted for 17% of SSUT-eligible spending as well, Jefferson County would have had more than $1 billion in taxable online sales. If Jefferson County’s countywide sales tax was applied to that total, the county would have collected $28 million in revenue from that online commerce.[2]

In FY 2021, Greene Country received $195,000 in remitted SSUT collections. Using the same approach applied to Jefferson, PARCA estimates that Greene County would have collected only $66,000 if it applied the county’s 3% rate to its estimated level of SSUT-eligible sales.

Another way to compare SSUT distributions and local sales tax is to take income into consideration. The current per capita distribution assumes that every person in every county spends similarly online. Since higher income is correlated with higher levels of spending, an income-weighted distribution might more closely approximate actual local spending patterns.

For instance, in FY 2021, Madison County received $7.2 million in SSUT remittance. If SSUT was distributed by income and population, PARCA estimates the county would have received $10 million in disbursements.

Figure 8. Top 5 Counties in SSUT Distributions

Cities

Questions about the SSUT’s distribution formula are most pressing for municipalities where brick-and-mortar stores tend to be concentrated. Higher sales tax rates and dependence on sales tax revenue make the issue especially contentious.

Since 2018, all municipalities have enjoyed this new revenue from online sales, with the amount received based on city population. However, municipalities with large populations and high sales tax contend they are losing out on revenue they would have received if the purchases had been subject to a local sales tax instead.

In FY 2021, Tuscaloosa received $4.8 million from the estimated $6.4 billion in SSUT-eligible statewide spending. PARCA estimates Tuscaloosa’s 3% tax on its portion of statewide sales would have yielded upward of $6.6 million.

In FY 2021, Hueytown received $860,000 from SSUT disbursements. That year, it accounted for roughly 0.33% of the state’s sales. If Hueytown had received their 4% tax on that proportion of the SSUT sales, it is estimated they would have received a slightly lower amount: $856,778.

Hueytown represents a middle ground of municipalities that receive similar collections in both methods. The smaller the sales tax collections, the greater the difference between what they would have collected and what they received.

Many municipalities have less sales tax revenue than Hueytown, and many are probably receiving twice what they would have collected from sales tax.

While this distribution method might seem inequitable, it is worth considering the flaws of traditional sales tax.

Sales taxes are paid at the point of sale. This means that the Alabamians flocking to cities with high sales tax for retail are not only paying above their dwelling municipality’s sales tax, but they are also paying into the budgets of a different municipality altogether.

Figure 9. Top 11 Cities for SSUT Distributions

School

The SSUT and its distribution system also have an impact on school budgets. School systems receive sales tax money, collected and distributed according to local law or flowing through the county or municipal government. Presumably, as sales shift online, that revenue is diminished. The taxes from those online transactions, collected through the SSUT, are distributed to cities and counties. Unlike sales taxes, local governments are not obligated to pass along a portion to the schools.    

In 2021, 120 school systems received revenue from county sales tax (totaling $665 million), and 40 school systems received revenue from city sales taxes (totaling $176 million). Some systems receive both city and county sales taxes. In total, 131 school systems received sales taxes from a county, a city, or both.

Some cities treat the SSUT as if it were sales tax and distribute it to the schools in the same proportion as the traditional sales tax. Some school systems have negotiated agreements to receive a portion of the SSUT. Many have not.

The Alabama Department of Education asks school systems to report local sources of revenue. This reporting may not completely capture whether or not SSUT funding is flowing to the systems, but far fewer systems report receiving SSUT funding than report receiving traditional sales taxes. As of December 2022, only eight school systems reported receiving funding from their county’s SSUT revenue, and only seven school systems reported receiving funding from their city’s SSUT revenue, according to Alabama Department of Education records.

SSUT’s Unintended Consequences in the Marketplace

SSUT decisions also impact brick-and-mortar businesses. The SSUT’s low rate of 8% allows out-of-state vendors to charge lower prices than their in-state competitors.

Brick-and-mortar businesses employ more people and contribute to the local economy in various ways, including through the payment of rent or property tax. And yet they are compelled to collect a higher combined sale and local sales tax rate than an online seller.

Small businesses in Alabama are obligated to collect and remit sales taxes, whatever their sales volume. Out-of-state online businesses that sell less than $250,000 to Alabama customers are not obligated to participate in SSUT.

There are also situations in which local businesses could find an advantage in selling through a third-party, online marketplace facilitator and thus avoid paying local taxes. The online transaction could be facilitated through an online marketplace, assessed the 8%. The customer can then pick up the item at the store or have it delivered to the home, circumventing local sales taxes.  

Alternatively, some Alabama residents are, at least in theory, overpaying sales taxes on online transactions—Alabama residents who live in jurisdictions where the sales tax is lower than the 8% SSUT.

The Alabama Department of Revenue does have a process in place to reimburse residents living in these jurisdictions. The process involves filing a claim with documentation of purchases. The Department does not report how much has been claimed through that process.  

Still, even if a rural resident pays the SSUT on a transaction, it is not necessarily true that they are suffering an injustice. If that rural individual were to instead purchase the same item in a physical store, that store would likely be located in a jurisdiction that collects 8 cents or more in local taxes, since most retail stores are located in cities with sales taxes.

If Alabama wanted the SSUT to match the local sales tax, it would need to make sure a replacement system doesn’t impose an “undue burden on interstate commerce.” The opinion of the court gave little detail about what is burdensome, but it expressed that what South Dakota had set up “appear(s) designed to prevent…undue burdens upon interstate commerce” and that it would be up to Congress to decide. Despite this, there are cases going on in Louisiana and Colorado that might force the courts to give more guidance.

It is currently unknown what constitutes an undue burden, but it gets even harder to anticipate what that will look like as new technology emerges. In the Quill era, finding local rates in different states and remitting the correct amount was a huge burden. Nowadays, it has been made much simpler by the creation of easy-to-use databases and automated processes.

Currently, Alabama’s SSUT is less burdensome than most other policies. This means that our policy will not likely conflict with a future ruling. The implication for Alabama is that we could probably afford a more complex and demanding policy that might fix some of the problems discussed in this report.

Policy Alternatives

Alabama Simplified Sellers Use Tax has plenty of fans, and, for the time being, it will likely remain as it is.

It is simple—one uniform rate statewide, collected by one entity, the State of Alabama. This simplicity decreases the cost of compliance for businesses and the cost of collection for the state. It also encourages participation in the system, which otherwise could be difficult to enforce.

For smaller jurisdictions that lack commercial activity, it has created a revenue stream where none existed. For counties, always cash-strapped and lacking independent authority to levy a tax, the SSUT has been a boon.

But if the concerns of brick-and-mortar retailers and larger cities and counties are to be addressed, there are policy options.

Option 1: Level the playing field between online sellers and brick-and-mortar stores

The current SSUT rate of 8% online purchases is lower than the state average sales tax of 9.24%.[3]

That gives online vendors an advantage over brick-and-mortar stores. The difference is even more significant in some of the larger municipalities, with sales tax rates on in-person purchases reaching 10% in Birmingham, Montgomery, Mobile, and Tuscaloosa.

Table 1. Sales tax rates for top 10 cities, sorted by combined sales tax rate

Argument for: This option would maintain the simplicity of the SSUT for online sellers while leveling the playing field. This approach is the simplest to achieve politically and would benefit all the recipients of the SSUT. It would lower the incentive for companies to remain out-of-state or migrate transactions to an online third party.

Argument against: Raising the rate does not address objections to the current distribution system, which does not align with the level of commercial activity or wealth in a community. As currently structured, the SSUT is more of a statewide revenue-sharing mechanism than a local tax. Additionally, for residents of low-tax jurisdictions, the tax on online goods would be much higher than in their home jurisdictions. Raising the rate also does not address the plight of school systems losing out on local sales tax.

Option 2: Equalize other terms between online and in-person sales   

Currently, a remote business that generates less than $250,000 in revenue annually does not have to collect and remit SSUT. Notably, this threshold is more than double the typical threshold of $100,000 in force in other states. More importantly, there is no similar threshold for brick-and-mortar stores subject to normal sales tax. This gives small online retailers a considerable advantage over their local competitors.

Argument for: An adjusted threshold would bring Alabama more in line with the majority of states in terms of capturing sales taxes from online transactions, and changes could level the playing field with Alabama-based sellers. The amount of SSUT collections would increase, and all the recipients of it would benefit.

Argument against: The adjustments would impose a burden on smaller Internet-based companies in terms of compliance. It would not address the disbursement method for those who want it changed. It doesn’t help local schools that lose out on local sales tax.

Option 3: Apply to all purchases, online or in-person, the appropriate state and local taxes for the jurisdiction

Alabama could require online sellers to calculate and pay the sales tax based on where the order is being delivered. That would require that Alabama provide a system for cataloging, geocoding, and communicating the appropriate rates. And it would likely require localities to give up control of the tax collection and administration process.    

Perhaps, the easiest route would be to join the 24 states, including Georgia, North Carolina, Kentucky, and Tennessee, in adopting the Streamlined Sales Tax, a multistate cooperative system for simplifying the assessment and payment of sales taxes. The participating states agree to a set of common rules and definitions and provide up-to-date information on sales tax rates and the precise geographic areas where those rates apply.

The simplification effort was launched after the original Quill decision, which prohibited taxation across state lines because of the overwhelming complexity of determining local sales tax rates and rules in the multitudes of jurisdictions across the country. Since then, cooperating states have been supported by businesses interested in simplifying compliance and payment. Like the SSUT, the Streamlined Sales Tax initially offered a simplified and voluntary way to pay taxes on online sales.  

The drive to simplify and the evolution of technology helped pave the way for the Wayfair decision, which allowed states to require online vendors to collect sales tax. In the Wayfair case, the Supreme Court reversed Quill, recognizing that South Dakota, a participant in the Streamlined Sales Tax effort, had created a system in which Wayfair was no longer facing an “undue burden” complying with the taxes state and local governments levied.

Remote companies who want to sell to participating states must register with the Streamlined Sales Tax Governing Board Companies and then can use the database (provided by the state to the Streamlined Sales Tax Governing Board) of locations and tax rates. The collections are sent directly to a single state entity and then distributed to the areas from which they were collected.

Alabama has traditionally been resistant to having one entity, presumably the State Department of Revenue, administer taxes on behalf of all local governments. In fact, Alabama, Alaska, Arizona, Colorado, and Louisiana are the only states that allow complete home rule over sales taxes.[4]

That resistance to state collection and distribution is one of the reasons why Alabama has not joined the Streamlined Sales Tax organization. If Alabama joined, municipalities could still set their own sales tax rates, but they would lose control of aspects of tax administration. A centralized system for filing and payment of sales taxes would be required. Cities require returns submitted to individual jurisdictions or audit businesses they suspect are not paying their fair share. Certain definitions and schedules would need to be uniform.

Alabama’s SSUT avoids the complexities that would have resulted if Alabama allowed municipalities to tax online sales. Louisiana and Colorado both have notoriously complex home rule local sales tax systems. Both states are facing lawsuits from companies that claim the complex system is too hard to comply with and places an undue burden on remote sellers. If Alabama were to adopt a system in which local sales tax rates were assessed on online transactions, the state would be wise to adopt a unified and simplified system for administering it.

Argument for: Bringing local sales tax rates and online sales tax rates into conformity would create a level playing field and would allow local communities to set rates and benefit from the economic activity within their borders. Local transactions would support local priorities.

Argument against: Alabama would need to have a sole entity collect sales taxes and oversee sales tax auditing. Local governments would lose some aspects of control. Alabama would need to create and maintain a centralized database of all the sales tax rates and their respective boundaries. Compliance would be more complex for online sellers. The equalized distribution of tax resources produced by the SSUT would be eliminated and replaced with a system that perpetuates the concentration of wealth and economic activity.

Conclusion

The Simplified Sellers Use Tax was a good step in a direction many states still have not attempted. Its simplicity and low-rate prioritized compliance did not require much coordination. It enticed online sellers to participate, providing advantages at a time when collection and payment of online taxes were voluntary.

Since the SSUT was adopted, remittance is now mandated. The amount of money spent online has exploded, and with it, the consequences of the SSUT’s setup.

Currently, many brick-and-mortar stores must charge higher prices to cover higher tax rates. Large municipalities and counties miss out on critical sales tax revenue, and schools lose out on local sales tax revenue. Meanwhile, smaller counties and municipalities are receiving a substantial amount of money from SSUT distributions. The effects of this policy are somewhat hidden behind our recent windfall of federal money and general economic surge, but they will become more pronounced when we are strapped for cash.

Whether a change to the Simplified Sellers Use Tax comes this session or in the next few years, it will likely come. It could come as a small rate change, an adjustment of distribution, or perhaps a major overhaul of sales tax as we know it. Even after such a step, the Wayfair decision set in motion a technological and political conundrum that will not soon be solved. Ongoing litigation will more clearly establish what constitutes an undue burden in the collection of Internet sales taxes. This will change how much governments can ask of businesses, but evolving technology will also make that mark a continually moving target.


[1] A certain portion of the sales tax is not attributable to a particular county. That pool of sales tax revenue is not considered in this calculation.

[2] Jefferson County’s traditional countywide sales taxes flow not just to the county commission but to multiple agencies as designated by law. As in other counties, the SSUT distributions in Jefferson are sent to the county commission.

[3] Fritts, “State and Local Sales Tax Rates,” accessed March 22, 2023, https://taxfoundation.org/publications/state-and-local-sales-tax-rates/.

[4] Gail Cole, “Economic Nexus, Home Rule, and Sales Tax: What Businesses Need to Know,” Avalara, Inc., accessed April 11, 2023, https://www.avalara.com/blog/en/north-america/2022/07/economic-nexus-home-rule-sales-tax-what-businesses-need-to-know.html.


How Alabama Taxes Compare, 2022 Edition

PARCA’s How Alabama Taxes Compare, 2022 Edition, uses data published by the U.S. Census Bureau’s Annual Survey of State and Local Finances to compare tax revenues across the state. This most recent set of revenue and expenditure data cover state and local fiscal years ending between July 1, 2019, to June 30, 2020, identified as the fiscal year 2020. That means the state of Alabama’s data is from the fiscal year that ended September 30, 2019.

Key Findings

• In 2020, Alabama had the nation’s second-lowest state and local tax collections per capita.

• Alabama has the lowest per capita property tax collections in the nation.

• Alabama has among the highest sales tax rates in the U.S.

• Alabama is now the only state that allows state individual and corporate income taxpayers to fully deduct federal income taxes paid. That provides a tax advantage for high earners.

• Despite a recent change that provides some relief, Alabama begins taxing income at the lowest threshold in the U.S.

Alabama state and local taxes collections are low due to two factors: lower rates and a smaller resource base to tax. Alabama’s Per Capita Gross Domestic Product, the total value of all goods and services produced, ranks in the bottom five of states, meaning we have a lower resource base to tax. However, these other states make a greater tax effort and, thus, generate more money to provide services.

This gap between Alabama and other states will not be so obvious when newly elected lawmakers convene in March to craft budgets for FY 2024. A strong inflationary economy, high employment levels, and a flood of federal relief have supplemented state spending and stimulated record levels of state and local tax collections in the most recent year.

But as proposals are floated to make changes to tax rates, it’s important to understand the tax system in context, including a history of underinvestment compared to other states. Any changes should ensure adequate revenue, promote fairness and opportunity, and increase ease of collection and compliance.

How Alabama’s Taxes Compare, 2022 Edition, explores Alabama’s tax system in more depth and context.

Printable PDF version available here

Below are interactive versions of the charts in the report.


A New Constitution Plus Additional Amendments on the Nov. 8 Ballot

Beyond the political contests on the November  8th ballot, Alabama voters will decide whether to adopt the Alabama Constitution of 2022, a recompiled version of the current constitution, as well as 10 statewide constitutional amendments. There will also be 19 other state constitutional amendments appearing on the ballots only in the county where those amendments apply.

Replacing the Alabama Constitution of 1901 has long been a goal of reformers. The current Constitution was adopted explicitly to guarantee White Supremacy in Alabama, by disenfranchising black and poor white voters, mandating segregated schools, and forbidding interracial marriage, among other provisions. 

Such unconstitutional and repealed provisions will be gone from the Alabama Constitution of 2022. The constitution would also incorporate and reorganize the 978 amendments that have been made to the current constitution.

At the same time, the new constitution would preserve current law and practices that centralize power in the Legislature and require amendments to the state constitution for even mundane local matters. If the Alabama Constitution of 2022 is adopted, Alabama will still have the world’s longest constitution: more than three times the length of the next closest state.     

PARCA’s new report, An Analysis of the Proposed Alabama Constitution of 2022 and the Statewide Amendments, details the proposal for the new constitution and the 10 amendments that will also be on ballots statewide.

As always, PARCA provides a high-level analysis of each statewide amendment. We study the ballot wording, but also the authorizing legislation behind the language. We do not make recommendations or endorsements, rather, we seek to understand the impact of the proposed changes and the rationales for them.

Voters can find sample ballots on the Secretary of State’s website, listed by county.  The ballot language for the statewide and local constitutional amendments is also available on the site. Background material on the proposed Constitution can be found on the website of the Legislative Services Agency.

PARCA, Leadership Alabama, and Samford hosted a discussion of the proposed constitution Oct. 18, and a video recording of that event is available online.

Read the full report here.



A Congressional Seat in Danger

The big count with major consequences for Alabama continues, and it looks like it will come down to a very tight margin.

The decennial census for 2020, the official count of people living in the United States, is expected to be released in February. But in the meantime, in December, the Census Bureau released its annual population estimates for the states. According to those estimates, as of July 1, 2020, Alabama’s population would be just high enough to keep its current seven representatives in the U.S. House. In that scenario, New York would lose a seat.

However, the estimates don’t count; the Census does. And it is the population as of April 1 that matters when calculating each state’s proportional representation in Congress.

How will the count and estimates differ, particularly considering that the count (and the estimates’ calculations) took place in the time of a pandemic, with all the disruptions, delays, and difficulties that accompanied it?

And not only that. This Census count took place in a fog of unprecedented controversy over who the Census is supposed to count and how it might be used to determine apportionment. Judging by the estimates, Alabama and New York are the two states closest to the line for losing or gaining a seat.

Alabama vs New York

Alabama added a net total of 13,567 residents between July 1, 2019, and July 1, 2020, bringing the state’s total population to 4,921,532, according to the estimates released in December.

Using those figures in an apportionment calculator created by the University of Michigan’s Institute for Social Research, Alabama would maintain its seventh Congressional seat, but only by a margin of 6,210 residents. Under that scenario, the state of New York, which is losing population, would lose 2 Congressional seats. According to the estimates, New York suffered a net loss of 126,355 residents between July 1, 2019, and July 1, 2020.

Where did the two states stand three months earlier, on April 1? And how closely will the count correspond to the estimates? The count is supposed to tally the population before a spike in deaths in New York caused by Covid-19 and before an exodus from the city due to the extreme outbreak there. If by April 1, Alabama had not achieved its needed net gain in population, or if New York’s population hadn’t seen its big drop, the tables might turn. New York might lose just one seat, and Alabama might lose one.

Looking Back Over the Decade

Looking back over a decade, the estimates had Alabama growing moderately throughout the decade, with stronger growth relative to other states in the most recent years. In percentage growth, Alabama’s growth ranked 26 among the 50 states in 2020.

In the middle part of the decade, Alabama’s annual growth rate lagged, ranging between 0.25% to 0.23%. Between 2018 and 2020, the annual growth rate bumped up, ranging between 0.28% and 0.33%.

Southeastern Comparison

According to the estimates, Alabama’s growth rate was 3% over the course of the decade, adding 141,414 residents. That’s a stronger rate of growth than Mississippi and Louisiana, tied with Kentucky, and just behind Arkansas. The gap with other Southern states is wider: Tennessee grew 9% over the course of the decade: Georgia, 11%; North Carolina, 11%; and South Carolina, 13%. In 2010, Alabama’s population exceeded South Carolina’s population by 150,000. By 2020, South Carolina’s population was estimated to have exceeded Alabama by almost 200,000.

In terms of numeric change, Mississippi was estimated to have lost a net total of 1,343 residents between 2010 and 2020, while Louisiana, Arkansas, Kentucky, and Alabama gained between 100 and 150,000. Meanwhile, South Carolina and Tennessee each added over 500,000 residents; Georgia and North Carolina over 1 million and Florida, almost 3 million.

The South Region, as the Census defines it, was the fastest-growing region in the U.S. Beyond the Southeastern states, the Census South Region includes growth hotspots Texas, Virginia, D.C., and Maryland. It also includes West Virginia, which lost population at a faster rate, 4%, than any other state. Illinois suffered the greatest net loss in population, 244,042, over the course of the decade.


Jefferson County Mayors Study Municipal Cooperation on Jails

Taking population into consideration, Jefferson County may have more jails than any other major county in the U.S., and the county’s mayors are investigating options for decreasing the liability, expense, and inefficiency that comes with operating so many separate facilities.

Note: Birmingham jail’s capacity is potential capacity not current operational capacity.

As part of ongoing regional cooperation efforts, the Jefferson County Mayors Association commissioned a new study jointly funded by the Association and the Community Foundation of Greater Birmingham. The resulting report, authored by the Public Affairs Research Association of Alabama, examines the capacity, occupancy, and age of Jefferson County’s 18 jails and identifies short-term and long-term options for decreasing the number of jails through cooperation between cities and the county.

The report finds that Jefferson County’s 18 municipal jails have a combined capacity that far exceeds the diminished number of municipal inmates typically held in them, a situation that predates the Coronavirus pandemic.

Several jail facilities including Bessemer, Birmingham, and Jefferson County’s downtown Birmingham jail, are aging and in need of serious repair or replacement.

Several factors are driving cities to reconsider operating jails. The cost of providing medical or mental health care to inmates can be high. Prisoner lawsuits and potential injuries to employees create a liability risk for cities. Municipal courts are now less likely to keep prisoners in jail, driving down occupancy and driving up per prisoner costs.

At both the national and state level, there is a trend toward shared jail facilities between cities and between cities and counties. Across the U.S., most jails are operated at the county level; 80 percent of jails are operated by county sheriffs. Most large cities in Alabama, including Huntsville, Mobile, Tuscaloosa, Auburn, Florence, and Decatur, now contract with the county sheriff for holding inmates. Several Jefferson County cities have closed their jails and contract with neighboring cities to hold prisoners. Other cities contract with Jefferson County Sheriff’s Office for both patrol and jail services.

The development of the report and discussions of the findings have launched conversations between mayors and county officials about the options, discussions that expected to continue in 2021.

As a long-term solution, Jefferson County Sheriff Mark Pettway has expressed interest in constructing and operating a metro jail capable of housing inmates from interested municipalities.

However, that proposal is years away from being considered. Jefferson County is still recovering from bankruptcy and will not be in a position to provide financial backing until 2024. Depending on the location, a new facility could necessitate the construction of both a new jail and courthouse. Such an expensive project would require a broad array of support from county commissioners, judges, law enforcement, the district attorney and the defense bar. And, for the project to provide substantial savings for the community at large, municipal participation, particularly from the city of Birmingham would be crucial.

In the shorter-term, cities can collaborate through contract. Police officials in Birmingham say they are willing to house prisoners from other jurisdictions, using the revenue to renovate operate the Birmingham jail. Police officials in Hueytown and Adamsville also have excess capacity and are have expressed willingness to provide jail space to neighboring jurisdictions. Trussville and Warrior already are hosting inmates from neighboring cities.

In the long-term, political leaders in Birmingham and other cities are interested in getting out of the jail business. But in order to do that, an agreement would need to be struck either with the sheriff and Jefferson County or with a coalition of cities coming together to form a regional authority to construct and operate a shared jail.

Read the full report here.


Cooperating for Growth in the Wiregrass

Before the Coronavirus pandemic, economic developers in Southeast Alabama recognized the advantages of pulling together as a region rather than each city and county trying to recruit new industry independently. Wanting to take cooperation to a new level, they asked PARCA to investigate how other regional economic development organizations across the state and across the nation work.

When the pandemic struck, cooperation shifted into overdrive, and more counties rallied to the cause.

“We really pulled together as a region. We shared information about challenges and opportunities in the face of the crisis, and we strengthened our relationships,” said Veronica Crock, president of the Ozark-Dale County Economic Development Corporation. “As we come out of the pandemic, we will all benefit from working together to retain our existing businesses in a time of such uncertainty, and we will benefit from working together as a team to bring new jobs and industry to our region.”

PARCA’s newly released report, Growing Cooperation in Southeast Alabama, describes the efforts of the 11 counties in the state’s Wiregrass region to turn their loose alliance into a sustainable regional organization. Together, the counties hope to broaden their appeal, extend their reach, and amplify their message, while decreasing duplication of effort and expense.

Grow Southeast Alabama consists of economic development entities in Houston, Henry, Butler, Crenshaw, Coffee, Covington, Dale, Barbour, Bullock, Geneva, and Pike counties. Most off the Interstate corridors that connect the state’s largest metros, the counties in the Southeast corner of Alabama sometimes feel overlooked and undervalued. While known for peanut farming and pine forests, the region’s strength as a hub of aerospace and defense contractors is under-appreciated. Dothan, the region’s center of gravity, is the state’s seventh-largest city and is ringed by smaller but still considerable population centers, Enterprise and Ozark. Dothan is growing and serves as a trade and healthcare hub for a wide radius of counties in Alabama, Georgia, and Florida.

Though the counties are united under the state’s regional workforce council system, they are spread and don’t have a long history of working together. While that’s not uncommon, some portions of the state have a head start on building economic coordination and regional identity across county lines. For instance, North Alabama counties have been working together for decades through the North Alabama Industrial Development Association and the Alabama Mountain Lakes Tourist Association. There is no set pattern for how the various roles in economic development and workforce development are organized and carried out at the regional level. Sometimes a regional chamber of commerce, like the Birmingham Business Alliance or the West Alabama Chamber of Commerce, may play an overarching role. And meanwhile, a locally-funded economic development organization engages in more targeted recruitment and support for existing industries.

The developers involved in Grow Southeast are sorting out which functions will be carried out by a regional organization and which will remain local. A central challenge will be sustainably financing the regional organization while preserving funding for the local economic development organizations and programs. Another will be setting up rules and expectations for working together for the region while, at times, competing on behalf of their local community.

“We greatly enjoyed working with the PARCA team and are grateful for the professional, thorough, and detailed report they provided,” Crock said. “Their research was not only instrumental in bringing to light the positive and negative aspects of working collaboratively in a competitive environment, but also confirmed our commitment to putting this competitiveness aside for the sake of the region.”

“We benefitted from the research into the framework of successful economic development in other regions in the United States,” she said. “We will certainly rely on this report as we position ourselves to move forward in our regional collaboration effort.”