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Alabama allocates $1 billion in American Rescue Plan funds

In contrast to its first allocation last year steering $400 million to prison construction, the latest round of funding primarily benefits hospitals, nursing homes and infrastructure projects.

(CN) — Concluding a special session called last week by Republican Governor Kay Ivey, the Alabama Legislature passed a bill Thursday allocating the state’s remaining $1.06 billion balance from the American Rescue Plan Act.

A year ago, state leaders approved a somewhat controversial plan for its first tranche of $1.04 billion in ARPA funds, which included a $400 million earmark to build new prisons. Additional appropriations steered $500 million toward broadband expansion and water and sewer infrastructure projects, $80 million to hospitals and nursing homes, $80 million to Covid-19 related healthcare costs and $80 million to replenish the state’s depleted unemployment compensation trust fund. 

In a near unanimous vote Tuesday, the state House of Representatives passed the bulk of the bill for the second tranche, with $660 million for eligible water and sewer projects and $339 million for the delivery of health care at hospitals and nursing homes and related services. Appropriations of $40 million or less will shore up funding for state health insurance, mental health programs and veterans hospitals, while $55 million was set aside to counter negative economic impacts of the Covid-19 pandemic. 

But on Wednesday, the Alabama Senate Finance and Taxation General Fund Committee added an amendment to steer at least $100 million to stormwater projects, requiring 35% local matching grants for municipalities and utilities applying for a portion of those grants in an undefined process which will be decided by the Alabama Department of Environmental Management, or ADEM. Republican state Senator Chris Elliott, who represents one of Alabama’s fastest growing areas in coastal Baldwin County, explained the amendment would serve to “stretch the money out.” 

On Thursday, the Senate also adopted a second amendment, proposed by Democratic state Senator Rodger Smitherman, requiring that no application should be dismissed on a technicality without first attempting to rectify its errors.

“I believe what we have is a very flexible plan that allows … every county to have projects from these funds,” said Republican committee chairman Greg Albritton, before the Senate passed the bill Thursday by a vote of 29-3. 

Back in the House of Representatives, Democrats expressed unease with the matching amendment, arguing it will prevent smaller utilities and municipalities from participating. 

“If they can do 35% they probably don’t need the grant,” said State Representative Sam Jones, the former mayor of Mobile, where the water utility in the neighboring city of Prichard recently warned it was in danger of defaulting on a $55 million bond issue. 

Republican Representative Rex Reynolds, who sponsored the bill, explained the intent of the amendment was to preserve a portion of the funding for the state’s fastest growing areas, placing an emphasis on utilities “that might be able to afford a 35% match rather than those that can’t … it makes the money go further.” 

Democrat Representative A.J. McCampbell argued stormwater projects would be more appropriate for funding through other federal programs, suggesting there was great need in rural areas for clean, reliable drinking water and functional sewer systems. 

“There is already money out there for stormwater mitigation,” he said, adding the intent of ARPA was geared toward “clean” water projects aimed at improvements to human health and safety. McCampbell also expressed reservations about how ADEM will evaluate the applications to ensure rural communities get a fair shake. 

“I don’t want this to get lost in bureaucracy where we are allowing state agencies to make wholesale decisions when we have an intent for this funding,” he said.

Reynolds countered that stormwater projects are “clean” water projects and said he has faith in ADEM and the legislative oversight committee to verify the funding is appropriately allocated and spent.

“The process works,” he said, noting only four of the state’s 67 counties did not receive funding from the first tranche of ARPA funds and the latest bill gives those four counties — Winston, Lamar, Autauga and Elmore — priority applications for the second round.

The amended bill passed the House by a vote of 96-0, with three abstentions. The bill advances to the governor’s office for Ivey’s signature. Ivey did not immediately provide a statement on the bill Thursday. 

In its December quarterly update, ADEM reported approximately $500 million in ARPA applications had been funded, while roughly $2.5 billion remained unfunded. Regarding the state’s two new prisons, which are the consequence of a 2020 civil rights lawsuit filed against the Alabama Department of Corrections by the U.S. Department of Justice, a finance authority on Wednesday approved a 56% increase in the budget for one prison in Elmore County, up from $623 million to $975 million with inflation cited as the reason.

The regular session of the Alabama Legislature is expected to begin March 21. 

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