Jefferson County Commission President Bettye Fine Collins has asked county department heads to prepare cuts of 33 percent for the remaining three months in the 2009 fiscal year. These cuts are in addition to a 10 percent budget cut the county made last month.

Jefferson County Commission President Bettye Fine Collins

In a memo to department heads, Collins said the county is required by law to keep a balanced budget. A legal ruling regarding the county’s occupational tax has created a $75 million annual hole in the county’s budget, which the county must now fix.

Last week, the Alabama Legislature failed to reenact Jefferson County’s occupational tax. That tax, which has been subject to legal wrangling for years, accounted for as much as a third of the county’s general fund budget.

The story of the occupational tax is a long and twisted one, which keeps returning to Montgomery. In 1999, the Alabama Legislature repealed the occupational tax, but the county argued that the Legislature had not done so legally. The Legislature passed the repeal using what’s sometimes called an “implied quorum,” in which an actual quorum does not participate in a vote.

The county argued in court that the implied quorum is not legal under the Alabama Constitution of 1901. The state constitution requires a majority vote from a quorum (more than half) of the legislators. Frequently, however, the legislators allow only local delegations to vote on local bills. Initially the courts ruled in the county’s favor. Jefferson County Circuit Judge David Rains ruled that the implied quorum vote to repeal the tax had been illegal.

Meanwhile, an unrelated, parallel case between the City of Birmingham and the BJCC involved the same issue of the implied quorum. That case went all the way to the Alabama Supreme Court. In that case, the court ruled that the Legislature sets its own rules and could vote by an implied quorum if it chose to do so.

After that decision, the plaintiffs in the occupational tax case asked Judge Rains to revisit his decision. Judge Rains reversed his previous decision, invalidating the tax. Occupational taxes have been kept in escrow as the case has been on appeal.

If the Alabama Legislature had reinstated the tax, the problem for the county probably would have gone away. Despite lobbying from all the Jefferson County commissioners and county employees, the Legislature did not reinstate the tax.

The Alabama Senate passed a bill that would have reinstated the tax, but it would have included an exemption for licensed professionals, such as lawyers and doctors. The Alabama House passed a version which would have instated a lower tax but without the exemption for licensed professionals.

Rather than letting the bills go to a Legislative conference committee to work out a compromise bill, Rep. John Rogers let the House bill “die in the basket.”

The occupational tax problem is a separate issue from Jefferson County’s sewer debt. The sewer debt had been contained and quarantined from the county’s general fund, which funds other county services such as indigent care and public safety. Now, however, those services are at risk.

The county could face massive layoffs and even bankruptcy as a result of the tax debacle. Department heads must determine which contracts can be severed, Collins said in the memo.

The new cuts affect only the 2009 fiscal year. Department heads will receive instructions later for making their 2010 budgets, Collins said.