Morgan County Commission sued over not giving online sales tax revenues to schools

A new law that would give a majority of online sales tax revenues to schools is being called unconstitutional. Morgan County Commissioners say, for now, they won’t disperse the $1 million as the law requires.

Posted: Oct 2, 2019 4:14 PM
Updated: Oct 3, 2019 6:48 PM

Update: Morgan County Commission Chairman Ray Long provided this statement to WAAY 31 on Thursday:

Under Alabama General Law: Section 40-23-197 (Simplified Seller’s Use Tax Remittance Act), a portion of the tax proceeds from online sales are to be deposited into the general fund of each County Commission in the state. This law is applicable statewide and is followed by every County Commission in Alabama.

Instead of attempting to pass a statewide law that would apply to all counties, the decision was made to pass a local act that would only apply to the Morgan County Commission. This path was chosen due to the lack of support for a statewide bill.

While the Morgan County Commission is expected to follow the local act, all of the other County Commissions in the state are under the general law, which allows for online sales tax proceeds to go to their general funds. If the will of the people in this state is for the online tax proceeds to be distributed to schools, then the matter should be proposed statewide and not limited to one county.

Interestingly, the local bill is to govern Morgan County’s distribution of online sales tax, but the matter was not proposed in other counties where our local legislators have constituents. We believe that if the school officials and our legislative delegation had discussed this matter with us before getting the local bill passed, we could have worked out an amicable solution. Instead, the act was passed without consulting with us. We continue to believe that the manner in which this was done was wrong and we have been advised that the local legislation is unconstitutional, and it is now before a court for a decision. The commission will abide by whatever decision is made by the court(s).

The Morgan County Commission has long been and continues to be a supporter and advocate for all school systems in the county. Countless dollars and work hours have gone into helping and advancing the interests of all our schools. We will continue to be an ally and supporter of schools in the future.

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Original story:

The Alabama Education Association announced on Wednesday it filed a lawsuit, along with a temporary restraining order, to prevent the Morgan County Commission from withholding portions of online sales tax revenues from local school districts.

A new law that would give a majority of online sales tax revenues to schools is being called unconstitutional. Morgan County Commissioners say, for now, they won’t disperse the $1 million as the law requires.

The law, initially a bill sponsored by Senator Arthur Orr from Decatur, went into effect in Morgan County on October 1st, with more than 90 percent of online sales tax funds allotted to the school districts. The Morgan County Commission is allotted 5 percent. Read the original story here.

The Alabama Education Association issued this statement on Wednesday:

The Alabama Education Association has filed suit, along with a temporary restraining order (TRO), to prevent the Morgan County Commission from withholding portions of the online sales tax revenues from local school systems. The TRO hearing in the case, Dr. Danna Jones vs. Barnett, was scheduled for 1:15 pm today in Montgomery County Circuit Court Judge James Anderson’s courtroom. Prior to the hearing, both parties met and agreed to have the funds in question transferred each month from Morgan County to a financial institution in Montgomery to be held for the protection of all parties involved until there is a resolution to the case.

On Tuesday, September 24, 2019, the Morgan County Commission failed to approve an agenda item honoring the law passed by Senator Arthur Orr in the 2019 Legislative Session which altered the distribution of the state’s online sales tax in Morgan County. Orr’s local bill took effect August 1 of this year. Morgan County school systems including Morgan County Schools, Hartselle City Schools, and Decatur City Schools all prepared their 2019-2020 school system budgets using allocations expected after the passage of the local bill. Now, with the Morgan County Commission refusing to comply with the law, there are gaping holes in those budgets, causing serious issues within each system.

Alabama public schools are heavily funded by sales tax revenue. In brick and mortar sales tax revenue, 100% of the state’s portion goes into the Education Trust Fund (ETF) – the fund responsible for supporting all Alabama public schools and classrooms – and the local portion is shared between local public schools, volunteer fire departments, and other local services. This funding mechanism has been in place for decades and school systems are dependent on these local tax revenues to fund additional teaching units, programs, and other projects not provided for through the state’s Foundation Program. As the online sales tax and its base grows, the traditional brick and mortar sales tax growth will slow until it eventually begins to decline causing potential significant future harm to the ETF.

Dr. Danna Jones, Superintendent of Hartselle City Schools, said, “My team and I have been putting together our budget for the new fiscal year for months. The money that Senator Orr secured for us in the local legislation was key to making sure our students have the best opportunity for success. The cuts that would be necessary due to this loss of funds would be devastating, as would us only learning about it now, after our fiscal year has started and after all of our plans for those funds are in place.”

Amy Marlowe, AEA Executive Director, added, “AEA prides itself on being the guardian of education funding in Alabama. While we often have differences of opinion with superintendents on certain matters, our mutual commitment to ensuring that funds designated for Alabama classrooms get there is a long-standing one. We are proud to partner with local superintendents to defend Senator Orr’s legislation and will continue our effort to make sure our children have the resources necessary for an education that will prepare them for a 21st Century economy.”

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