The Morgan County Commission will not comply with a local law requiring it to distribute online sales tax money to schools and volunteer fire departments, county officials said Tuesday.
The Commission failed to pass a one-page resolution that would have allowed distribution of the revenue as required in a local law Sen. Arthur Orr, R-Decatur, sponsored in the last legislative session.
“We’ve been told that the local bill is unconstitutional, and we’re going to follow this legal advice,” Commission Chairman Ray Long said.
He said the county will not spend the online sales tax money as it has since 2016, but will not comply with the local law that authorizes the commission to keep 5% of online sales tax revenue for administrative purposes, but requires the commission beginning Oct. 1 to send 85% of the remaining funds to the three public school systems, to be distributed proportionally based on enrollment. Instead, the commission will retain the funds in a bank account.
The local law, which applies solely to Morgan County, also requires the commission to distribute 1.5% of the remaining funds to certified volunteer fire departments and 13.5% to Morgan County Schools. The law’s formula mimics how the county divides sales tax collections from brick-and-mortar stores.
Online sales taxes have generated about $1 million for Morgan County since Oct. 1.
“We’re going to keep the money in a separate account until the courts decide about Arthur’s bill,” Long said. “Right now, our attorney has told us it’s unconstitutional, and we took an oath to uphold the constitution.”
Orr was not at the meeting, but was critical of the commissioners' action.
“Though I have supported and voted for each of the current Morgan County Commissioners and believe they generally do a good job, I am extremely disappointed that they would violate their oaths office by taking the law into their own hands and ignoring a law on the books,” he said in an email.
Orr said the state’s governing system does not allow individuals or entities to pick and choose which laws they will follow. If commissioners believe the law is invalid, he said, they should challenge it in court.
“Unfortunately, the commission’s action to unilaterally deprive the schoolchildren of additional resources hits directly at the least of these who cannot vote or represent themselves,” Orr said.
Long and the commissioners rejected Orr’s assertion that they are violating their oaths.
“The law is unconstitutional,” the commission chairman said. “We’re upholding our oaths by not complying with something that is unconstitutional. We support public education, and all of us should sit down and find a resolution. The commission did not have a seat at the table when the legislation passed.”
Orr said he hopes the three school systems affected by the commission's action “do the right thing” and take the matter to court for a quick resolution.
“Regrettably, the lawyers (including ones from Shelby County) will be the winners all along the way,” he said, referring to the Columbiana law firm that told commissioners the local law violates the state constitution.
Morgan County’s three public superintendents said they have not decided what course of action to take.
“I’m disappointed, very disappointed,” Morgan County Superintendent Bill Hopkins Jr. said.
Hartselle City Superintendent Dee Dee Jones said she, too, is disappointed and that school leaders will meet and decide what direction to take.
“We’re going to work together and do what’s best for the students of Morgan County,” she said.
Decatur City Superintendent Michael Douglas was not available for comment, but he said last week that DCS might seek an attorney general’s opinion. The Attorney General’s Office generally does not issue opinions about the constitutionality of legislation. Even if it does, county officials said the opinion would not resolve the issue of whether Orr’s law is constitutional.
“It would be an opinion,” Long said.
Long, who has questioned the legality of the local law since it passed, called twice on Tuesday for a motion to pass the resolution to distribute the funds, but the item died for lack of a motion.
After the meeting, commissioners Jeff Clark, Randy Vest, Don Stisher and Greg Abercrombie said they did not make a motion to pass the resolution because attorney Bill Justice of Ellis, Wallace, Owens & Justice law firm in Columbiana said the law violates the state Constitution.
Justice advised the commissioners to withhold payments until a “more definitive resolution” is made about the legality of the local law. The attorney cited Section 105 of the state constitution, which deals with conflicts between state and local laws.
Orr said he sought and received a legal opinion from Legislative Services Agency’s legal division assuring him the local law he sponsored at the request of the county’s three public superintendents was legal.
In his four-page opinion to Orr on Aug. 7, John Treadwell, deputy director of the legislative legal division, said Section 105 of the state Constitution creates a general rule that a local law is unconstitutional if it creates "a variance from provisions of general law. ... Generally, a local law may not conflict with the provisions of a general law."
Treadwell, however, concluded that Orr's local law is not at odds with the statewide Simplified Sellers Use Tax Remittance Act, which generally imposes an 8% tax on online sales delivered in Alabama. The statewide law specifies that half of the online revenue is retained by the state and the other half is split between counties and cities.
Because the statewide law does not specify or limit how money received by a county should be allocated, Treadwell wrote, Orr’s bill supplements the state law, rather than conflicting with it.
Even if a court determined there was a conflict, Treadwell wrote, several court rulings create exceptions to Section 105. One of those is that local laws can make material changes to a statewide law "to satisfy local conditions of which the Legislature is the sole judge.”
“There are numerous instances in existing law in which a tax is provided for by general law with a distribution to a local government and that distribution being further provided for by local law to satisfy certain local needs,” Treadwell wrote.
Long said Orr repeatedly voted for the statewide 2015 Simplified Sellers Use Tax Remittance Act, which allows online sellers who ship to Alabama to collect sales taxes that state and local governments otherwise would not get. Mandatory provisions of the amended act follow a U.S. Supreme Court ruling last year allowing states to collect taxes on online sales, regardless of where the seller is located.
Long said the revenue generated by the statewide law is new money the Morgan County Commission is entitled to keep just like the state’s 66 other county commissions.
Hopkins said arguing that the taxes are new money is disingenuous.
“Anybody can say anything they like, but this is not a new source of revenue,” he said. “These are sales tax dollars intended to educate the children of Morgan County. I guess if this local law is unconstitutional, all other local laws are as well. This money belongs to the kids of the county.”
Rex Cheatham, legislative chair for Morgan County Education Retirees, and Alabama Education Association UniServ Director Wendy Lang, spoke at Tuesday’s meeting and encouraged the county to divide the money as required in Orr’s law.
“This money is invaluable to children,” Lang said, adding that several schools included it in their budgets and were counting on receiving it.
Cheatham encouraged the commissioners to “vote your conviction” and find a way to resolve the issues without wasting a lot of money on legal fees.
School systems submitted their fiscal 2020 budgets to the state last week. DCS Chief Financial Officer Melanie Maples projected Decatur would receive $325,000 and the district planned to use the funding for classroom teachers, classroom supplies and to lower class sizes.
“Our kindergarten enrollment is up this year, so these funds would allow us to maintain an average class size of 18 students instead of 21-24,” Maples said.
Hartselle City CFO Bradley Colburn said Hartselle included $150,000 in its budget and planned to use the money to help fund school resource officers and to address growing special education needs.
“We added 10 special education units including teachers, instructional aides and bus aides,” he said.
During a special work session last week, the Morgan County Schools board discussed pledging some of the online sales tax revenue to pay back money it wants to borrow to construct a new West Morgan High School and athletic complex at Danville High.
“I’m not sure, but we may have to delay these projects,” Hopkins said Tuesday.