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GUIDE TO THE ISSUES

Full Funding for Alabama’s Universal School Choice Program

Introduction

Alabama’s Creating Hope and Opportunity for Our Students’ Education (CHOOSE) Act was enacted in March 2024 to give families more options over how their K 12 students are educated so that individual needs can be better met The law creates education savings accounts (ESAs) through refundable income tax credits that families can use for private‑school tuition, fees, educational therapies, curriculum or to help fund home education programs, among other purposes[i].

The Alabama Policy Institute (API) believes the program can transform education by promoting parental choice and fostering competition among schools.

Strong demand in the first year and experience from other states demonstrate that additional funding will be needed for the program to reach all eligible students when income caps lift in 2027. Lawmakers should take steps during the 2026 regular session to ensure that those demands are fully met by the FY 2027 Education Trust Fund budget.

Background

When the application window opened in early 2025, 36,873 students applied for ESAs across all 67 Alabama counties. The Alabama Department of Revenue ultimately approved more than 23,000 applications and deposited over $124 million in ESAs for use during the 2025-2026 school year. Families who enrolled their children in participating schools received $7,000 per student, while those opting to homeschool their children were eligible for $2,000 per student, capped at $4,000 per family[ii].

The volume of applications far exceeded the state’s original estimate of 14,000 to 15,000 students, so during the 2025 regular session, lawmakers shifted $80 million from the Educational Opportunities Reserve Fund and ultimately set aside $180 million for the 20252026 school year, approximately 1.8% of the total FY 2026 ETF budget. By May 2025, the state had awarded 22,857 ESAs totaling about $125 million[iii]. Seventy-five percent of Alabama students are currently eligible for the program and due to overwhelming interest, legislators created an automatic transfer from income-tax receipts to the CHOOSE Act fund, setting a minimum annual commitment of $150 million beginning in 2027 [iv].

Eligibility and Priorities

Eligibility for the CHOOSE Act is phased in over three years. During the first two years, only students from families earning less than 300 % of the federal poverty level may receive an ESA. Starting in 2027-2028, the program becomes universal and income limits disappear, though awards continue to prioritize lower-income families and those already participating[v]. Within each award cycle, the first 500 ESAs are reserved for students with special needs, followed by dependents of active-duty service members and siblings of current participants Remaining awards are allocated to new applicants based on income.

To qualify, students must reside in Alabama, be between five and nineteen years old (or up to twenty-one if they have a disability), and be lawfully present in the United States. Participants cannot receive funding from other state scholarship programs at the same time[vi].

Demand Exceeds Funding

High interest in the first year of the CHOOSE Act program underscores significant demand for education choice. More than 37,000 students applied for ESAs demonstrating that many families desire to seek alternatives to traditional public schools. A large share of applications came from private-school and homeschool families. Among public-school awardees, roughly 58% used the $7,000 credit to switch to private schools, while about 13% used a $2,000 credit to begin homeschooling.

Current Law

The CHOOSE Act is codified at Ala. Code § 16-6D-1 et seq. It authorizes the Department of Revenue to create ESAs funded through refundable income-tax credits and specifies award amounts of $7,000 per student enrolled in a participating school and $2,000 per homeschool student, capped at $4,000 per family [vi].

Beginning in 2027, a portion of income tax receipts will flow directly into the CHOOSE Act fund, ensuring that funds are available when the academic and fiscal years do not align. Funding is drawn from these income tax receipts and deposited into a dedicated "CHOOSE Act Fund" within the State Treasury before it is appropriated to the general ETF budget

During the 2025 legislative session, lawmakers increased the state’s baseline commitment to $150 million annually starting in 2027 and authorized supplemental funding if awards exceed 90 % of the fund balance[iv]. Eligibility for the program is phased in.

During the 2025-26 school year, families earning up to 300% of the federal poverty level could apply with first priority given to special-needs students, students with an active duty military parent and remaining awards distributed according to income[v] The same income cap applies in 2026-2027, but renewing students, siblings or renewing students, and special-needs students/military families are prioritized before new applicants [vi]. From 2027-2028 forward, income limits for application are removed[vii].

Funding In Other States

Alabama is not alone in adopting universal or near‑universal school‑choice programs. Examining other states provides perspective on the funding needed to serve all eligible students. Data below are from 2024–2025 or 2025–2026 budgets, depending on the state.

State/Program Estimated Funding /Participation

Arizona, Empowerment Scholarship Account

Iowa, Students First ESA

West Virginia, Hope Scholarship

Notes

Estimated cost of $723 5M for 74,000 students in FY 2025. The median award is $7,000–$8,000 per student. Universal eligibility since 2022.

The ESA budget will rise from $218M in FY 2025 to $314 6M in FY 2026, with about 39,415 participants projected in FY 2026 equal the public school per pupil amount (about $7,988).

About $110M spent in 2024–2025 for 19,000 students; universal eligibility begins in 2026–27. If all eligible students participate, the program could cost $315M.

Beginning in the 2025 2026 school year, all K 12 students are eligible regardless of income.

Program started in 2022 with 2,333 students and grew to 10,000 by 2024–2025

Florida, Family Empowerment Scholarship & Florida Tax Credit

S h l hi

North Carolina, Opportunity Scholarship

The Florida Policy Institute estimated $3.9B in funding for the 2024–2025 school year, with more than 500,000 scholarships awarded

A 2023 law removed income and enrollment caps, making virtually all students eligible

The legislature appropriated $541.5M for 2024–2025, capping participation at about 95,000 students. Scholarship amounts range from $3,458 to $7,686 depending on family income.

Alabama’s Current Commitment Falls Short

The program removed income caps in 2024–2025 Award size is based on income tiers.

With a $150 million statutory commitment starting in 2027, Alabama could fund roughly 21,400 private-school students at $7,000 each or 75,000 homeschool students at $2,000 each, but not both. Based on year one data and internal calculations, API believes that the current level of funding will not meet year three demand. Based on those projections, API estimates that demand could reach around 44,000 brick & mortar students and 25,000 homeschool students by the 2027-2028 school year. If public school students continue to participate at a similar rate as the 2025-2026 school year, the total cost of the program would be an estimated $330 million for the 2027 school year, $150 million more than what is currently set aside for the program in 2026.

For context, $330 million represents less than 3.4% of the more than $9.9 billion FY 2026 enacted ETF budget, and an increase $150 million above the FY 2026 enacted CHOOSE Act funding level. Absent additional appropriations, many eligible families expecting to participate would be turned away in year three.

Recommendations

The FY 2027 appropriation should be increased from the $180 million level provided in FY 2026 to $330 million, an increase of $150 million. A $330 million appropriation would position Alabama alongside states like Iowa and Arkansas without negatively impacting the overall ETF budget. To be clear, API is not proposing $330 million in new/additional CHOOSE Act funding.

The Education Trust Fund ended FY 2025 with a projected balance of more than $1.6 billion. Of the nearly $1.6 billion ETF budget surplus, approximately $100 million will be transferred to the ETF Budget Stabilization Fund, around $750 million is to be transferred to the Advancement and Technology Fund, and an estimated $300 million available for transfer to the Educational Opportunities Reserve Fund, leaving approximately $450 million available for ETF supplemental appropriations. Taking less than half of the $450 million available for supplemental appropriations would fully fund the CHOOSE Act. Additionally, between the three reserve funds, the total balance was nearly $3 billion entering FY 2026. In addition to funds available for supplemental appropriation, the Educational Opportunities Reserve Fund specifically has a balance of $1.04 billion, a portion of which could also be used to increase CHOOSE Act funding.

A $330 million total commitment for universal funding is less than 3.4% of the FY 2026 total ETF budget. Failing to provide adequate funding for the program risks disenfranchising families, losing the trust of the voters, and undermining the state’s statutory commitment to the CHOOSE Act program. Alabama families and Alabama schoolchildren are counting on the eligibility and funding that was promised to them with the passage of the program.

Alabama is tied for third best state in the nation for Educational Freedom according to the 2025 EdChoice Friedman Index.[viii] Alabama’s score reflects that all children in the state are eligible to participate in and may receive funding from a choice program. “What Florida, Arkansas, Alabama, Arizona, and several other states have achieved in permitting families to have more educational choice opportunities is truly remarkable! Advocates in those states and their legislative and gubernatorial allies should feel very good about their tremendous accomplishments.” [ix] Alabama could possibly drop out of the top ten in the nation if legislators fail to complete their financial promise to Alabama’s families.

Now is the time for legislators to prepare to fulfill the obligations they promised with the passage of the CHOOSE Act. By increasing dedicated appropriations to meet the demand of the program they created, Alabama can fulfill the promise of the CHOOSE Act and continue to be amongst the nation’s leaders in empowering families with truly universal educational freedom

Conclusion

The CHOOSE Act has given almost 30,000 Alabama students new educational options, and early demand signals that the program is popular. Alabama’s current funding commitment, $180 million in FY 2026 and $150 million annually thereafter, was intended for a limited, income-restricted program. However, the CHOOSE Act was written and passed by Alabama lawmakers to be a universal school choice program. The Governor, Lt. Governor, and a majority of Alabama legislators made a promise to Alabama families when the CHOOSE Act was debated, passed, and signed. When income caps lift in 2027, participation will necessarily rise, and existing appropriations will be insufficient without further action by those who created and promised universal school choice eligibility for every single Alabama family and every single school aged child in Alabama.

GUIDE TO THE ISSUES

Decrease

Barriers to Affordable Healthcare Through Certificate of Need Reform

Overview

Certificate-of-need (CON) laws are regulations that require any new or expanded healthcare service or facility to be approved by Alabama’s state government. In essence, a healthcare provider must prove to the Alabama Certificate of Need Review Board that a new or expanded service is needed. This is often a costly and time-consuming process that increases the healthcare costs for all patients and can delay access to essential care[i]. Alabama is currently one of 35 states operating a CON program[ii]. The maximum Certificate of Need filing fee is currently $25,706, though costs can quickly increase depending on whether an application is approved or denied[iii].

Because existing hospitals and healthcare providers have the power to oppose attempts to provide additional medical services, CON laws serve to limit competition and promote an antifree-market environment in the healthcare space[iv].

The assumption with CON regulation is that excess capacity (in the form of overbuilding) directly results in health care price inflation. When a hospital cannot fill its beds, fixed costs must be met through higher charges for the beds that are used. Larger institutions have greater costs, so CON supporters claim it makes sense to limit facilities to keep existing facilities at capacity to meet actual needs[v]. In reality, CON regulations restrict the supply of medical facilities and equipment, making them more expensive. To increase competition and lower the overall costs of healthcare for Alabamians, CON regulations should be repealed[vi].

History

The origins of CON laws date back to 1974 when Congress passed the National Health Planning and Resource Development Act.

As a way to control rising healthcare costs, the act required that in order to receive federal healthcare funding, construction of new healthcare facilities and the expansion of existing facilities had to be approved by a state agency established to issue certificates of need All 50 states had established such agencies by 1980, with Alabama’s beginning in 1979. The expansion of services would only be allowed if providers could demonstrate that the costs would be offset by actual demand. The federal government initially subsidized state governments for CON related expenses[vii].

During the 1980s, the federal government stopped its Medicare cost-based reimbursement system and instead began paying a predetermined fixed cost based on the type of treatment. At that point states were no longer federally required to have CON regulations[viii]. Since 1987, 15 states have dropped CON requirements[ix].

The Case for Legislative Reform

CON regulations have failed to slow the growth of healthcare costs[x]. By repealing CON requirements, Alabama’s state government could reduce the costs of healthcare for all patients as well as improve access to care, without spending more taxpayer dollars. Alabama has one of the most restrictive CON requirements in the nation, with 17 services falling under the CON umbrella as of January 2020. The Mercatus Center at George Mason University found that states with four or more CON laws “have systematically lower-quality hospitals than non-CON states[xi].”

According to research from the Mercatus Center, per capita patient spending in Alabama could be reduced by $203 annually if CON requirements were repealed. Mercatus also found that removing CON requirements could improve overall access to healthcare, increasing the total number of hospitals by 53 and adding 6 additional ambulatory surgical centers. Rural Alabamians specifically, would gain access to an estimated 18 new hospitals and an additional ambulatory service center[xii]. While this level of expansion may be unrealistic in Alabama, comparing CON states to non-CON states has consistently illustrated that repealing CON laws substantially increases the number of healthcare providers, particularly in rural areas.

Aside from access to care, the quality of care received by patients could also improve if CON regulations were repealed. The Mercatus Center found that post-surgery complications and mortality rates for heart attacks, heart failure, and pneumonia would all be reduced in Alabama if healthcare providers were not regulated by CON. It is also estimated that readmission rates will decrease while overall patient satisfaction of the healthcare they receive will increase[xiii].

Removing CON regulations and encouraging a free-market healthcare system is the key to lowering costs and improving outcomes for Alabamians. Economists widely recognize that competition in the healthcare sphere is the most effective tool for driving down overall costs[xiv].

Alabama’s current CON structure allows the state government to choose winners and losers and favors long-established healthcare providers over new companies and innovations looking to enter the state’s market. Competitiveness provides incentives to discover new technologies and new efficiencies to delivering those technologies to patients in an ever-changing healthcare environment. There is no evidence that free-market competition cannot work to control rising healthcare costs. CON laws have had the opposite effect of this intent. In areas where providers have been allowed to flourish, customers have been rewarded with an increase in healthcare options and more competitive pricing[xv]. It is time for the Alabama Legislature to reform the states CON regulations and allow a free market healthcare system to flourish.

Reforms in Other States

Mississippi

In April 2025, Mississippi passed House Bill 569, a CON reform bill that raises the capital expenditure thresholds triggering CON review. Legislators noted this change will allow hospitals to upgrade facilities and add services more quickly and cost-effectively without navigating a lengthy CON approval. Earlier versions of the bill had proposed broader exemptions (for psychiatric, dialysis, and MRI services), but those were removed during debate. The final law also mandates a state study on CON impacts to guide further reforms, signaling that Mississippi may pursue additional CON rollbacks in the next session. State leaders, including the Governor, have indicated support for more substantial changes aimed at improving medical access in underserved areas[xvi].

North Carolina

North Carolina moved toward a potential full repeal of its CON program in 2025. In April, the NC Senate advanced Senate Bill 370, which would abolish the state’s certificate-of-need requirements for new healthcare facilities and services. The proposal gained committee approvals amid arguments that CON laws are “anti-competitive” and drive up costs for patients, particularly by impeding new providers in needed areas. Notably, North Carolina’s rural hospitals have struggled, and supporters of repeal contend that freeing up new entrants could bring clinics or birthing centers to rural communities currently lacking care[xvii]. While the bill was approved by the Senate, it was not considered in the North Carolina House of Representatives. 11

Wyoming

In 2025, Wyoming became the latest state to fully eliminate its certificate-of-need regulations. The legislature enacted House Bill 289, repealing Wyoming’s last remaining CON law. This repeal (effective July 2026) removes state restrictions on adding nursing home beds or facilities, allowing providers to expand long-term care services and serve more patients without state approval.

Proponents applauded the move, suggesting it will improve patient access and choices in care, including in rural communities, by opening the market to new facilities[xviii].

Florida

In 2019, Florida enacted a law eliminating a portion of CON laws for hospitals. The elimination occurred in two phases. First, the state repealed CON regulation for general hospitals, including most surgical centers. The second phase of the elimination, implemented in 2021, exempted regional hospitals with 101-500 beds, specialty hospitals offering a restricted range of services, and specialty hospitals offering Intensive Residential Treatment Facility Services for Children and Adolescents. Nursing homes, hospice care, and facilities that treat the developmentally disabled remain subject to the states CON regulations[xix].

In the wake of Florida’s partial CON repeal, healthcare providers announced plans to build a minimum of 65 new hospitals between 2020 and 2022. This is more than three times the amount approved from 2016 to 2018[xx] The repeal has expanded the availability of healthcare into areas that had previously been limited because of the CON veto power of existing providers[xxi].

South Carolina

South Carolina signed Senate Bill 164 into law in May 2023. The law repeals CON requirements for all of the state’s providers, with the exception of long-term care facilities. In support of the bill, the Institute for Justice said that “repealing CON will help all South Carolinians by decreasing healthcare costs and increasing access to needed care[xxii].”

While it is too early to analyze the overall impact of South Carolina’s CON repeal, Palmetto Promise Institute, a non-partisan think tank, said that it was a “step towards a more affordable, accessible, and effective healthcare system” and that it will lower healthcare costs, promote competition, and increase healthcare innovation[xxiii].

West Virginia

In 2023, the West Virginia Legislature enacted a law to repeal CON regulations for all hospital services and the state’s birthing centers Hospitals are no longer required to receive state approval for the expansion of procedures such as inpatient services, out-patient services, emergency room services, surgical services, diagnostic and imaging services, and laboratory services. According to the Cardinal Institute, CON regulations had blocked at least 2,424 additional hospital beds, 25 hospitals and ambulatory surgery centers, up to seven MRIs, and 16 additional CT scan machines from being established in the state.” They expect the partial CON repeal to expand access to high quality healthcare for West Virginia residents[xxiv].

Proposed Alabama Reforms

In 2025, Alabama legislators renewed efforts to loosen CON restrictions, especially to improve rural maternity care. Senator Larry Stutts introduced Senate Bill 285 to exclude new or expanded obstetric and neonatal facilities (as well as psychiatric facilities) from the state’s CON requirement[xxv].

Senator Stutts noted that in prior sessions he had pushed broader rollbacks (initially aiming to waive CON in rural counties with poor access) before narrowing the focus to obstetric and psychiatric services in 2025[xxvi]. These proposals came amid alarming shortages of maternal health services in rural Alabama, with 25 of Alabama’s 67 counties are classified as “maternity care deserts” with no obstetric providers or units[xxvii].

Although Senate Bill 285 did not advance out of committee in 2025, it underscored growing concern that CON laws hinder expansion of birthing centers and labor & delivery units, contributing to Alabama’s high maternal and infant mortality. The focus remains on expanding rural obstetric capacity and improving maternal health outcomes by reducing regulatory barriers.

In the 2024 session, Senator Stutts sponsored Senate Bill 236, a targeted reform addressing Alabama’s rural health crisis. The bill proposed to exempt health care facilities and services in rural counties from the state’s CON approval requirement. Under this bill, any new or expanded hospital, clinic, or service located outside a metropolitan statistical area (about 47 of Alabama’s 67 counties) would have no longer needed a certificate of need[xxviii].

Senator Stutts and others had also previously introduced legislation to fully repeal the state’s certificate of need process.

Impact on Rural Hospitals

Evidence shows that CON regulations negatively impact rural communities the most. A study conducted by the Mercatus Center at George Washington University found that CON states have 30% fewer rural hospitals per 100,000 residents than non-CON regulated states and 14% fewer ambulatory surgical centers. CON states also spend more Medicaid dollars per patient in rural areas and have higher emergency room utilization levels[xxix].

Rural hospitals in CON states are also at a much greater risk of closure than in non-CON states. Data compiled by the University of North Carolina found that 191 rural hospitals have closed since 2005. None of those closures occurred in non-CON regulated states[xxx].

The Mercatus Center study concluded that “CON programs do not promote access to rural care in the form of rural hospitals. CON laws are associated with a decrease, not an increase, in the number of hospitals, rural or otherwise. Policymakers seeking to protect access to rural care should not use CON programs to achieve their goals[xxxi].”

Conclusion

CON laws have never had their intended effect of reducing the rising costs of healthcare and increasing access to care. In most examples they have done the opposite, increasing costs and making it more difficult for Alabamians to find quality healthcare providers, particularly in rural and underserved communities. Alabama lawmakers should enact reforms that increase competition and innovation in the healthcare industry, not continue to give preferential treatment to long-standing providers.

GUIDE TO

THE ISSUES

Reduce Restrictions on Home-Based Businesses and Youth Entrepreneurship

Overview

Over the course of the past five years, more Alabamians are working from home than ever before. Specifically, home-based entrepreneurship has increased significantly. The federal Small Business Administration estimates that 86.3 percent of America’s 34.8 million small businesses are sole proprietorships, with about half of those being home-based[i].

Home-based businesses provide several benefits. First, they can be used as a source of primary income and supplemental income They also provide flexibility to Alabamians caring for dependents (both children and the elderly), and citizens with disabilities and other health care limitations.

A 2022 report by the CATO Institute also found that home-based businesses can “bring goods and services into areas whose needs are not being met because they are far from commercial centers” and are an important outlet for low-risk entrepreneurship[ii].

Historically, home-based businesses have played an important role in American innovation. Some of the country’s best known companies, such as Amazon, Apple, Microsoft, and Facebook, were born from their owner’s home (or dorm room)[iii]. Though very few homebased startups will ever come near the success of those companies, they still provide the opportunity for Alabamians to improve their financial well-being and find a fulfilling career path. All citizens should have the opportunity to own their own business if they want to.

Despite the benefits of home-based businesses, potential owners often face several legal and regulatory barriers in starting them.

Local governments impose onerous and in many cases costly zoning and licensing requirements on home-based businesses. There are also industry specific barriers used to prevent business owners from serving their clients from home[iv].

While some of the requirements and restrictions placed upon home-based businesses are in the interest of the public’s health, safety, and well-being, they are often applied across the board to all businesses. Alabama businesses that have no impact on the health and safety of their local communities and do not pose the risk of creating a public nuisance should be allowed to operate as freely as possible without unnecessary government interference. Doing so could create a more prosperous business climate for individuals and provide needed goods and services to underserved communities.

A separate but somewhat similar issue relates to so-called “Lemonade Stand” businesses, which are essentially small businesses owned by minors that are run infrequently. Allowing children to run lemonade stands or similar occasional businesses teaches practical skills that schools often ignore such as basic economics, customer service, and the satisfaction of earning money. Parents encourage these activities as a way to build self esteem, responsibility, and financial literacy.

Unfortunately, some states and local governments treat these micro enterprises like commercial food vendors by requiring business licenses, food handler permits or even imposing taxes. The Libertas Institute argues that this red tape discourages young people from trying entrepreneurship. Utah’s 2017 lemonade stand law emerged after cities across the country shut down lemonade stands for lacking permits.

The Colorado legislature followed with similar reforms. Libertas notes that these laws cover many minor‑run enterprises, such as lemonade stands, lawn mowing, babysitting and other low risk businesses, and they prevent government from “turning childhood lessons into crimes”[v]

Current Law

There are few specific state laws relating to home-based businesses in Alabama, though as a “disregarded entity”, i.e. a sole proprietorship that is not a corporation and is not taxed as a separate entity for federal tax purposes, home-based businesses are liable for the state’s business privilege tax, depending on the amount of revenue they generate each year. State business licenses are not required for sole proprietorships[vi].

Beyond the business privilege tax, there is also an Alabama Cottage Food Law, which was last amended in 2021. The law allows certain non-hazardous foods to be sold by home-based businesses without inspection by local county health departments

The law requires that eligible foods be labeled to include the common name of the food, address that it was produced at, a statement that it has not been inspected by the health department, a list of ingredients, and a notation that it may contain allergens. While health department inspection is not required, the law does require cottage food operators to maintain a food safety certification[vii].

Aside from the limited state requirements, other regulations are left to county and municipal governments. These requirements, from licenses, fees, zoning, safety, etc., can vary widely from one jurisdiction to another.

In terms of lemonade stand laws, Alabama does not have a statewide lemonade stand exemption. The state’s child labor statute bars the employment of children younger than 14 and requires work permits for minors between 14 and 15; it explicitly states that children working in a parent’s business are not exempt[viii].

These rules are designed to prevent exploitation, but they were written for traditional employment relationships rather than occasional enterprises. Health codes and peddler ordinances vary by municipality and generally require vendors who sell food to obtain permits. There is no clear statewide guidance distinguishing a child’s lemonade stand from a commercial food vendor.

The lack of statutory clarity has led to confusion. In 2023 an eight year old boy in Hueytown, Alabama, advertised a one day hiring event for his lemonade stand, offering $20 to local children for two hour shifts. Someone reported the post to the Alabama Department of Labor for alleged child labor violations. The boy’s mother explained that the stand was meant to teach “self‑esteem, math skills, following directions, and some good old fun,” but she received a call from the department[ix].

The department later clarified that it “does not stop lemonade stands, and we never have”, yet the incident shows how existing laws can be misinterpreted when no explicit exemption exists.

Reforms in Other States and Model Legislation

Home-Based Businesses

Arizona

During its 2018 regular session the Arizona Legislature approved a sweeping home-based business reform bill, Senate Bill 1387. Ultimately the Legislature failed to reach agreement on the bill in conference committee[x].

Under the provisions of the Arizona law, a municipality would not have been allowed to prohibit the operation of a “no-impact” home business or require a no-impact home-based business to obtain any type of permit, license, variance, or any other type of pre-approval from the municipality to operate.

In order to qualify as a no-impact business, the law specified that there could only be two nonfamily members employed by the business, businesses were limited to the sale of lawful goods and services, no more than three customers could be on the property at one time, it could not substantially increase on-street parking or traffic, business had to take place within the residential dwelling, and activities could not be visible from the street[xi].

Model Legislation

The American Legislative Exchange Council (ALEC) has created model legislation relating to so called “no-impact home-based” businesses. A no-impact home-based business is defined as one whose total number of employees does not exceed the occupancy limit for a residential property.

Business activities are limited to the lawful sale of goods and services, they do not generate onstreet parking or cause significant increases in traffic through a residential area, all activities occur inside the residential dwelling, and no activities are visible from the street. Fenced yards that cannot be viewed from the street can also be used for business purposes under the provisions of the ALEC model legislation[xiii].

The ALEC bill bars municipalities from prohibiting no-impact home-based business activities and does not allow local governments to require any type of permit, license, variance, or other prior approval from a municipality to operate. It also protects these businesses from rezoning and fire safety requirements in detached dwellings. It does not prohibit a municipality from establishing health and safety requirements for home-based businesses[xiv].

In 2023, the Arizona-based Goldwater Institute produced similar model legislation called the Home-Based Business Fairness Act. It requires that no-impact home-based businesses (i.e., those that do not cause a disruption to the residential area they are located in) comply with health and safety regulations, building codes, pay all applicable taxes, abide by local traffic, parking, and noise ordinances, and adhere to occupational licensing standards. They are not required to obtain any other home occupational licenses or permits. All businesses that do have an impact on neighborhoods would be regulated through existing, state, county, and municipal laws[xv].

Lemonade Stand Laws

Utah

Utah’s lemonade stand law prohibits cities and counties from requiring business licenses, permits, or fees for occasional businesses operated by minors. Child entrepreneurs do not need permits until they turn 19, thanks to Senate Bill 47 from the 2024 legislative session. The law covers lemonade stands, car washing, babysitting and similar enterprises and was enacted after municipalities shut down stands for lacking permits. Utah positions the law as a way to foster real world learning without bureaucratic hurdles[xvi].

Colorado

Colorado enacted a law modeled on Utah’s, barring local governments from requiring minors to obtain permits or licenses for occasional businesses. The law was a direct response to stories of children’s lemonade stands being shut down[xvii].

Georgia

The Georgia Lemonade Stand Act prohibits counties and municipalities from requiring a license, permit or registration for a business operated solely by individuals under 18 on private property, as long as they are in school (or have a high school equivalency), have permission from the property owner, earn $5,000 or less in gross receipts per year, and sell non consumable goods or prepackaged foods or lemonade[xviii]. The law took effect July 1, 2023 and was amended in 2024; it explicitly defines such micro enterprises as outside local licensing power.

Create a

“No-Impact”

Designation for Certain Home-Based Businesses

Not only do many home-based businesses present no health and safety risk to the general public, but they can also serve as a catalyst for entrepreneurship and provide needed goods and services in underserved communities.

The Alabama Legislature should enact policy reforms that reduce the county and municipal regulatory burdens on these small business owners by specifying that no-impact home-based businesses do not require licenses, permits, zoning variances, etc., if they pose no risk to the public.

Tie Home-Based Business Performance Standards to Measurable Health and Public Safety Impacts

Too often, home-based business ordinances are “varying degrees of too vague, too strict, or unenforceable.” Ultimately decisions about whether a home-based business is allowed to continue operating are left to the whims of enforcement officials. Investigations of home-based businesses often come as the result of a complaint by neighbors, leading to the potential that current laws are only applied in response to those complaints, and not evenly across the board.

The state, county, and municipal governments should put clear and uniform performance standards in place, which are tied to measurable impacts on health and public safety. If there is no measurable impact, then those businesses should be allowed to operate without government interference[xix].

Set Profession Specific Regulations for Home-Based Businesses

The potential wide variety of home-based businesses means that they are unique and should not be lumped into the same broad categories as large, incorporated businesses. While many home-based businesses pose no public health and safety risk, there are those such as childcare that inherently come with health and safety concerns.

For these types of small businesses, the Legislature should adopt specific home-based business regulations that address those health and safety risks while making regulatory requirements the least burdensome as possible[xx].

Enact an Alabama Lemonade Stand Act

Alabama should adopt a statute like Utah’s and Georgia’s that explicitly exempts minors from state and local business license requirements when operating occasional businesses. The law should: apply to individuals under 18, or to 18 year old high school students until they turn 19; allow the sale of non‑potentially hazardous foods (lemonade, prepackaged snacks) on private property or on public property with permission from the property owner or appropriate authority; cap annual gross receipts (e.g., $5,000) to distinguish occasional activities from commercial enterprises, as Georgia’s law does; prohibit municipalities, counties and homeowners associations from imposing permits, licenses or fees on such activities; and clarify that minors operating these stands are not employees under child‑labor statutes. The law should also state that occasional youth businesses are exempt from Alabama’s work permit requirements and hour restrictions

Conclusion

Alabamians should have the ability to create and operate no-impact home-based businesses with minimal interference from state and local governments. By enacting an Alabama Lemonade Stand Act and educating local officials, Alabama can empower young entrepreneurs, provide clarity for parents and regulators, and ensure that a simple childhood venture does not become a regulatory minefield. All citizens of the state can benefit from allowing entrepreneurship to flourish in Alabama.

GUIDE TO THE ISSUES

Reform Alabama’s Burdensome Occupational Licensing Infrastructure

Overview

As of August 2025, Alabama had a labor participation rate of 57.3%, one of the lowest in the nation[i]. In practical terms, that means that nearly 43% of Alabama’s working-age population has chosen to leave the workforce and have not actively sought a job in at least 30 days One of the biggest barriers to entering the state’s workforce is occupational licensing. According to a 2018 report from the Alabama Policy Institute (API), Alabama ranked 47th in the country in terms of having the most burdensome occupational licensing laws[ii].

Alabama licenses 151 occupations, covering nearly half a million workers. Sixty-three of the licensing requirements fall on low-income workers. This includes occupations such as barbers, shampoo assistants in salons, manicurists and security alarm installer helpers. There are 12 occupations that require a state license just to serve as an apprentice, intern or trainee[iii].

Besides the sheer number of occupational licenses required by the state, the costs of obtaining those licenses are burdensome for many individuals, particularly low-wage earners. Initial licensing fees can exceed $1,000 and numerous state licensing boards require annual renewals. API’s 2018 report found that combined license and renewal fees totaled an estimated $167 million annually.

Continuing education requirements added an additional $243 million to the annual costs for licensees.[iv] Aside from the costs to individuals, Alabama’s strict occupational licensing requirements come at a large economic cost. According to a study conducted by the Institute for Justice, Alabama loses almost 21,000 jobs per year due to occupational licensing requirements, and the economic impact of those job losses is $1.88 billion annually[v].

What Reforms Should Lawmakers Pursue in 2026?

Prohibit State Agencies and Occupational Licensing Boards from Silencing Whistleblowers

When an employee sees conduct that is inappropriate or illegal occurring at their workplace, they should have the ability to disclose that information publicly, without being silenced by their employer or having the fear of retaliation.

Section 25-8-7 of the Code of Alabama offers some protections for whistleblowers, stating that they cannot be discriminated against for refusing to take part in or exposing illegal activities. It further says that no employer, agent of an employer, or any other person can fire, discipline, threaten, harass, blacklist, or in any other way discriminate against current and former employees for disclosing nonprohibited information or refusing to obey illegal orders[vi]

What current law does not do is prohibit agencies and licensing boards from entering into Non-Disclosure Agreements with employees or paying them to remain silent about questionable activities and practices.

The Legislature should ensure that this right is statutorily protected.

Conduct a Thorough Assessment of Current Occupational Licenses

The legislature should conduct a thorough review of current occupational licenses. Lawmakers should ensure that unnecessary requirements or excessive costs are not a prerequisite for licensing. They should determine if removing a currently required license would create a threat to public safety.

Alabama should delicense an occupation with no demonstrable consumer safety or health concerns. In determining what professions should be eligible for delicensing, Alabama lawmakers could look to other states in the Southeast and determine what professions Alabama currently licenses that those states do not[vii].

Part of any review of occupational licensing should include a thorough examination of the costs of licensure for existing licensees. Lawmakers should ensure that licensing costs are not unreasonable or unnecessary, particularly when compared to neighboring states[viii].

Consolidate State Occupational Licensing Boards

During the 2023 Regular Legislative Session, Senator Chris Elliott introduced Senate Bill 156, which would have created the Occupation Licensing Board Division within the Alabama Secretary of State’s Office Among other provisions, the bill would have established standardized rules for the examination and licensure of applicants, standards for determining licensure fees, and provided uniformity in the collection of fees, fines, and other money dure to the licensing division[ix]. A similar bill, Senate Bill 193, was introduced by Senator Elliott during the 2025 regular session, as was Senate Bill 224 in 2024, but they were not considered by the full Senate[x].

There’s also the issue of the cost to the state of paying private management groups to administer state licensing boards Many of Alabama’s occupational boards are administered by professional management companies, several of which manage as many as 15 boards and commissions at a cost to the state of more than $1.5 million per company. Numerous questions have been raised by lawmakers as to how well these management companies are doing their job and the high costs to the state for their services[xi].

According to the Legislative Services Agency’s fiscal note of Senate Bill 156, consolidating all of Alabama’s licensing boards under the Secretary of State’s Office would costs taxpayers approximately $2.6 million per year, all, or part of which would be offset by licensing fees[xii].

Adopt Universal Occupational License Recognition

Occupational licensing regulation can be particularly burdensome for new or temporary residents of Alabama. Universal license recognition would make it easier for those people to contribute to Alabama’s workforce.

As of late 2025, 28 states, including Mississippi and North Carolina, had adopted some form of universal license recognition. Universal recognition states waive licensing requirements if an applicant already holds a license that is in good standing in another state. Applicants are barred from having any pending disciplinary action before their home licensure boards nor can they have a criminal record that would prohibit them from obtaining a license in the recognizing state[xiii].

During its 2025 regular session, the North Carolina General Assembly expanded upon previously enacted occupational licensing reforms by providing universal licensure recognition for all but 11 specified occupations. The law states that occupational licensing boards and state agency licensing boards shall issue a license, certification, or registration to any applicant that establishes residency in North Carolina if they are already licensed for the same occupation in Georgia, South Carolina, Tennessee, Virginia, or West Virginia. The law also requires that applicants have passed any required originating-state exam, have their license be in good standing, demonstrate competency, and have no disqualifying criminal history, among other provisions[xiv].

While universal licensing recognition does not address the issue of whether all of Alabama’s current occupational licensing requirements should exist, it does make it easier and, in some cases, less costly for people moving from another state to find employment.

Conclusion

Occupational licensing imposes substantial costs on Alabamians in terms of reduced occupational mobility, reduced entrepreneurship, higher unemployment, and higher consumer prices. The negative effects of occupational licensing on employment and entrepreneurial opportunities suggest that licensure may also be, in part, responsible for the low labor participation rate and relatively low rate of entrepreneurship in Alabama.

GUIDE TO THE ISSUES

Strengthen Competitive Bidding and Public Works Laws

Overview

In Alabama, most state, county, and municipal government purchases and construction projects are governed by either the state’s competitive bid law or the public works law. These laws provide sets of requirements that must be fulfilled in order for government bodies to expend public funds for projects, goods, and services. When entities do not abide by these statutory requirements, contracts can be declared null and void and are not enforceable[i].

Alabama’s government has practiced some form of competitive bidding since at least 1919, when the Legislature established a State Board of Economy and Control to oversee all state purchases, which included a “formalized bidding process.” In 1939 the Legislature gave broad authority to the Division of Purchases and Stores to administer the state’s competitive bid law until those duties were transferred to the Division of Purchasing in the late 1980’s[ii].

The goal of these sets of laws is to ensure that taxpayer dollars are being spent in a responsible manner. It also brings accountability to the process by laying out clear guidelines that government bodies as well as those bidding for contracts must follow.Under the competitive bid and public works laws, the process is generally out in the open. Requests for bids must be advertised and/or posted, proposals must be submitted and reviewed with clear timelines, and the Alabama Legislature plays a role in reviewing state contracts

While competitive bidding and/or the public works law are followed in most circumstances, the laws do provide specific exemptions. This includes things such as purchases from sole-source vendors, purchases of regulated projects, specified professional services contracts, and purchases from approved statewide contracts, among others.

However, no bid contracts sometimes extend beyond these exemptions. Most recently, the Alabama Legislature bypassed the competitive bidding process for the construction of a new prison in Elmore County, choosing to go with a “design-build” process instead, where a single entity handles both the design and construction phases of the project. The original cost of the Elmore County prison was projected to be $623 million. Since then, the costs have ballooned to more than $1.2 billion, almost as high as the original estimate to construct two new prisons[iii].

Despite Alabama’s sordid history with no bid contracts, there is likely to be a push in the 2026 Regular Legislative Session to expand the state’s ability to use them. This is likely to come in the form of legislation that will allow for alternative construction delivery methods such as designbuild, public-private partnerships, the Construction Manager at Risk (CMAR) model, or the expansion of unsolicited bids.

Alabama’s Competitive Bid and Public Works laws are designed to protect taxpayers and public servants from scenarios where an awarding authority has sole discretion to choose who performs public works projects, which often leads to higher costs for taxpayers and opens the door for political corruption. The Alabama Legislature should reject any effort to weaken the state’s competitive bid and public works laws.

Current Law

Competitive Bid Law

Alabama’s competitive bid law for public contracts is governed by sections 41-16-1 through 4116-144 of the Code of Alabama. It provides that for any government contract involving $30,000 or more for labor services, work, the purchase or lease of materials, equipment, supplies, and other personal property must be entered into by free and open competitive bidding, using sealed bids, to the lowest responsible bidder.[iv] It governs all contracts except for public works, with are governed by Title 39 of the code.

The law further provides the splitting of contracts into smaller parts to avoid meeting the $30,000 threshold is prohibited. It also provides that joint purchases made by two or more governmental entities must be done so in accordance with the Competitive Bid Law.

In 2023, the Legislature passed a law that could automatically increase the threshold for competitive bidding in the future. Under the provisions of the act, beginning in fiscal year 2028 and every three years thereafter the threshold will be increased to account for changes in the Consumer Price Index, based on a recommendation from the Chief Examiner of the Department of Examiners of Public Accounts. The recommendation will be subject to approval from the Legislative Council.[v]

In terms of advertising a public contract, the competitive bid law does not require advertising in a newspaper, rather a notice must be posted on a bulletin board maintained outside of the purchasing office. Bid solicitations must also be sent by mail to all entities who have previously requested that they be listed in solicitation for bids for particular goods and services Bidders may be required to post a faithful performance bond which may be required under some circumstances to protect the awarding agency from “damages, loss, or detriment”. The amount of the bond must be specified in the advertisement for bids. Contract awards will be made to the lowest responsible bidder taking into consideration factors such as the quality of the commodities proposed to be supplied, their conformity with specifications, the purpose for which they are required, the terms of delivery, transportation charges, and the dates of delivery. It is at the discretion of the government entity to determine which bidder is the lowest responsible bidder[vi]

Exemptions

(a) Competitive bids for entities subject to this article shall not be required for utility services, the rates for which are fixed by law, regulation, or ordinance, and the competitive bidding requirements of this article shall not apply to any of the following:

(1) The purchase of insurance.

(2) The purchase of ballots and supplies for conducting any primary, general, special, or municipal election.

(3) Contracts for securing services of attorneys, physicians, architects, teachers, superintendents of construction, artists, appraisers, engineers, consultants, certified public accountants, public accountants, or other individuals possessing a high degree of professional skill where the personality of the individual plays a decisive part.

(4) Contracts of employment in the regular civil service.

(5) Contracts for fiscal or financial advice or services.

6) Purchases of products made or manufactured by blind or visually impaired individuals under the direction or supervision of the Alabama Institute for Deaf and Blind in accordance with Chapter 2 of Title 21.

(7) Purchases of maps or photographs from any federal agency.

(8) Purchases of computer programs, software applications, manuscripts, books, maps, pamphlets, periodicals, and library or research electronic databases of manuscripts, books, maps, pamphlets, or periodicals

(9) The selection of paying agents and trustees for any security issued by a public body.

(10) Existing contracts up for renewal for sanitation or solid waste collection, recycling, and disposal between municipalities or counties, or both, and those providing the service.

(11) Purchases of computer and word processing hardware when the hardware is the only type that is compatible with hardware already owned by the entity taking bids and custom software

(12) Professional services contracts for codification and publication of the laws and ordinances of municipalities and counties.

(13) Contractual services and purchases of commodities for which there is only one vendor or supplier and contractual services and purchases of personal property which by their very nature are impossible to award by competitive bidding.

(14) Purchases of dirt, sand, or gravel by a county governing body from in-county property owners in order to supply a county project in which the materials will be used. The material shall be delivered to the project site by county employees and equipment used only on project components conducted exclusively by county employees.

15) Contractual services and purchases of products related to, or having an impact upon, security plans, procedures, assessments, measures, or systems, or the security or safety of individuals, structures, facilities, or infrastructures.

(16) Subject to the limitations in this subdivision, purchases, leases, or lease/purchases of goods or services, other than voice or data wireless communication services, made as a part of the purchasing cooperative sponsored by the National Association of Counties, its successor organization, or any other national or regional governmental cooperative purchasing program.

The purchases, leases, or lease/purchases may only be made if all of the following occur:

a. The goods or services being purchased, including those purchased through a lease/purchase agreement, or leased are available as a result of a competitive bid process conducted by a governmental entity and approved by the Department of Examiners of Public Accounts for each bid.

b. The goods or services are either not at the time available to counties on the state purchasing program or are available at a price equal to or less than that on the state purchasing program.

c. The purchase, lease, or lease/purchase is made through a participating Alabama vendor holding an Alabama business license if such a vendor exists.

d. The entity purchasing, leasing, or lease/purchasing goods or services under this subdivision has been notified by the Department of Examiners of Public Accounts that the competitive bid process utilized by the cooperative program offering the goods complies with this subdivision.

In addition, upon request, a vendor shall provide the entity purchasing, leasing, or lease/purchasing goods or services equaling thirty thousand dollars ($30,000) or more which are made under this subdivision during the previous 12 months a report of the sales, leases, and lease/purchases.

The report shall include a general description of the goods or services; the number of units sold, leased, and leased/purchased per entity; and the price of units purchased, leased, or leased/purchased.

17) Purchases of goods or services, other than wireless communication services, whether voice or data, from vendors that have been awarded a current and valid Government Services Administration contract. Any purchase made pursuant to this subdivision shall be under the same terms and conditions as provided in the Government Services Administration contract. Prices paid for the goods and services, other than wireless communication services, whether voice or data, may not exceed the amount provided in the Government Services Administration contract.

(18) Purchases of goods or services from vendors that have been awarded a current and valid statewide contract listed on the Alabama Buys e-procurement system. Any purchase made pursuant to this subdivision shall be under the same terms and conditions as provided in the statewide contract.

Prices paid for the goods and services may not exceed the amount provided in the statewide contract.

(19) Purchases of goods or services between governmental entities of the state, as authorized by Section 11-1-10.

20) Purchases of goods or services between a municipality and a governmental entity, as defined in Section 8-38-2.

(b) This article shall not apply to:

(1) Any purchases of products where the price of the products is already regulated and established by state law.

(2) Purchases made by individual schools of the county or municipal public school systems from monies other than those raised by taxation or received through appropriations from state or county sources.

(3) The purchase, lease, sale, construction, installation, acquisition, improvement, enlargement, or expansion of any building or structure or other facility designed or intended for lease or sale by a medical clinic board organized under Chapter 58 of Title 11.

(4) The purchase, lease, or other acquisition of machinery, equipment, supplies, and other personal property or services by a medical clinic board organized under Chapter 58 of Title 11.

(5) Purchases for public hospitals and nursing homes operated by the governing boards of instrumentalities of the state, counties, and municipalities.

(6) Contracts for the purchase, lease, sale, construction, installation, acquisition, improvement, enlargement, or extension of any plant, building, structure, or other facility or any machinery, equipment, furniture, or furnishings therefor designed or intended for lease or sale for industrial development, other than public utilities, under Division 1 of Article 4 of Chapter 54 of Title 11, or Article 2 of Chapter 54 of Title 11, or any other law or amendment to the Constitution of Alabama of 2022, authorizing the construction of plants or other facilities for industrial development or for the construction and equipment of buildings for public building authorities under Chapter 15 of Title 11 or Chapter 56 of Title 11.

(7) The purchase of equipment, supplies, or materials needed, used, and consumed in the normal and routine operation of any waterworks system, sanitary sewer system, gas system, or electric system, or any two or more thereof, that are owned by municipalities, counties, or public corporations, boards, or authorities that are agencies, departments, or instrumentalities of municipalities or counties and no part of the operating expenses of which system or systems, during the then current fiscal year, have been paid from revenues derived from taxes or from appropriations of the state, a county, or a municipality.

(8) Purchases made by local housing authorities, organized and existing under Chapter 1 of Title 24, from monies other than those raised by state, county, or city taxation or received through appropriations from state, county, or city sources.

(9) The purchase of services to aid in the prevention and detection of criminal activity by law enforcement agencies and community-oriented policing programs.

c) The state trade schools, state junior colleges, state colleges, and universities under the supervision and control of the State Board of Education, the district boards of education of independent school districts, the county commissions, and the governing bodies of the municipalities of the state shall establish and maintain purchasing facilities and procedures as may be necessary to carry out the intent and purpose of this article by complying with the requirements for competitive bidding in the operation and management of each state trade school, state junior college, state college, or university under the supervision and control of the State Board of Education, the district boards of education of independent school districts, the county commissions, and the governing bodies of the municipalities of the state and the governing boards of instrumentalities of counties and municipalities, including waterworks boards, sewer boards, gas boards, and other like utility boards and commissions[vii].

Public Works Law

Alabama’s public works law is contained in Title 39 of the Code of Alabama. It applies to all public works contracts undertaken by the state as well as county and municipal governments.

Section 39-2-1 of the Code defines public works as “the construction, installation, repair, renovation, or maintenance of public buildings, structures, sewers, waterworks, roads, curbs, gutters, side walls, bridges, docks, underpasses, and viaducts as well as any other improvement to be constructed, installed, repaired, renovated, or maintained on public property and to be paid, in whole or in part, with public funds or with financing to be retired with public funds in the form of lease payments or otherwise.”

Prior to 2023, the minimum threshold for requiring competitive bids for public works contracts was $50,000, however, Act 2023-497 raised the threshold to $100,000 as well as making other modifications to the law[viii]. Public works contracts valued at $100,000 or less may be awarded without advertising or through sealed bidding. Contracts for $100,000 or more must be advertised at least once per week for three consecutive weeks in a newspaper of general circulation in the county or counties in which the project is to take place.

Bid bonds totaling at least 5% of the bid or a maximum of $10,000 must be filed. In addition to the bid bond, if a contract is awarded then a performance bond in an amount equal to 100% of the contract price as well as a payment bond equal to 50% of the contract price must be obtained within 15 days of the contract being presented.

Under Alabama’s public works law, contracts are awarded to the lowest responsible and responsive bidder. A responsible bidder is defined as, “one who, among other qualities determined necessary for performance, is competent, experienced, and financially able to perform the contract”, while a responsive bidder is defined as “one who submits a bid that complies with the terms and conditions of the invitation for bids[ix].” If a selected bidder fails to sign the contract or withdraws, the contract can then be awarded to the next lowest responsible and responsive bidder.

Under state law, a contract award must be made within 30 days of the bid opening, unless a potentially successful bidder agrees to a time extension in writing. If this does not happen, then all bids are rejected.

Exemptions

Various types of contracts are exempt from Alabama’s public works law, including professional services contracts for architectural and engineering work, construction management, program management, or project management. Additionally, heating and air conditioning units and systems are exempt from the public works law so long as they are purchased from an Alabama vendor with approved vendor status. Emergencies affecting public health, safety, or convenience (when declared in writing by the awarding authority) are exempt from the provisions of the public works law and competitive bidding law[x].

Why Weakening Alabama’s Public Works Law Would be a Mistake

As discussed previously, most government contacts in Alabama are governed either by the state’s competitive bid laws or public works laws. However, as noted there are exceptions to those laws. It is also within the Legislature’s power to exclude specific projects from the provisions of the competitive bid and public works law.

Such is the case with ongoing prison construction projects in Alabama. To briefly recap, Alabama’s prison system began being scrutinized by the U.S. Department of Justice nearly a decade ago amidst allegations of overcrowding, excessive violence at the hands of other prisoners as well as correctional officers, and questions regarding the sanitation and living conditions at state prisons. In the following years there were several failed attempts to build new prisons in Alabama.

With pressure from the Department of Justice continuing to mount, in 2021 the Legislature approved legislation that would construct two new mega prisons and allow the state to circumvent the competitive bidding requirements of the public works law, instead negotiating directly with Montgomery-based Caddell Construction to oversee the project. The original cost of constructing the two new prisons was projected to be $1.3 billion with $785 million of that coming from a state bond issuance, $400 million coming from federal COVID-19 recovery funds, and the remainder coming from other state funds.

In part because of the timing and COVID related increases to construction materials as well as the fact that the project was not subject to competitive bidding requirements, construction costs have swelled. The original cost of a new prison located in Elmore County was expected to be $623 million. As of November 2024, those costs had ballooned to approximately $1.25 billion, nearly exceeding the original cost estimates to build two new prisons[xi].

No major construction progress has been made on the second prison in Escambia County. With much of the budget for both prisons already consumed, taxpayers will be burdened with paying additional costs. At this point it is not even clear how much the second facility is expected to cost. Lawmakers have already provided some additional funding through supplemental General Fund appropriations. Senate Bill 60, which was passed during the 2025 Regular Legislative Session, increases the maximum amount of bonds that can be issued by the Alabama Corrections Finance Authority by $500 million, increasing the state’s debt service obligation by an estimated $30.5 million annually for the next 30 years. That is on top of the debt service payments for the initial $785 million in bonds that were previously issued[xii].

Senator Greg Albritton, Chairman of the Senate Finance and Taxation General Fund Committee indicated that the state would go back to the traditional (and competitive bidding controlled) design-bid-build process for the second prison. Albritton said that “the other system” meaning design-build was “not conducive for our opportunities.” He went so far as to say that he did not think some of the contractors on the Elmore County project knew what they were doing[xiii]. The key takeaway from the prison construction debacle of the last decade is that efforts to circumvent the competitive bidding process led to delays and increased construction costs for Alabama’s prison system.

Nearly a decade later, not one prison has been completed and the costs to taxpayers have risen exponentially, with it still unclear how much the final bill will be. Many of these problems could have been avoided if lawmakers had insisted on using the existing public works law to complete the projects instead of going around the law.

Given the lessons learned from prison construction, why would lawmakers consider expanding what public works projects are exempt from current law?

Beyond being in place to ensure that taxpayer dollars are being spent in a responsible manner, the state’s competitive bid and public works laws also serve to ensure that cronyism and corruption are not part of the awarding of government contracts. There are several high profile examples over the past 20 years that illustrate this need, both in terms of no-bid contracts as well as contract requirements being written so that they favor one specific vendor over another. Most notably, former Governor Don Siegelman and several co-conspirators were convicted on federal charges relating to bribery, conspiracy, honest services mail fraud, and obstruction of justice.

Another noteworthy example of corruption in the government contracting process involved a bribery scheme relating to sewer projects in Jefferson County. In 2010 former Birmingham Mayor and President of the Jefferson County Commission Larry Langford was sentenced to 15 years in prison for a bribery scheme. Several other county officials were caught up in scandals relating to sewer projects as well. As both the Siegelman and Langford cases show, government contracts need more scrutiny if anything, not less transparency and accountability. Allowing more no-bid contracts for state purchases and public works projects will only increase the likelihood of creating corruption within the process, ultimately increasing costs for all taxpayers.

Beyond the potential to increase costs to taxpayers and increase corruption in the process, moving away from the competitive bidding process would also hit small and minority owned businesses the hardest, giving preferential treatment to large vendors, general contractors, and subcontractors. Minority contractors and subcontractors may find it difficult or be unable to meet pre-qualification contracts for state contracts. Smaller general contractors and subcontractors would be at a disadvantage because they do not have large budgets or personnel to solicit awarding entities.

Essentially, large contractors would have a monopoly on government business through no-bid contracts On the cost side, there would be no incentive for self-performing large contractors to keep costs down and be good stewards of taxpayer dollars. Rather it could promote inflation of project budgets to ensure that the final project is completed at or under budget.

Conclusion

Current Alabama laws regarding state purchases and public works projects already allow a limited number of exceptions to competitive bidding requirements. In some cases, there may only be one vendor capable of providing a specific good or service. In other cases, there are true emergencies where infrastructure repairs need to be addressed immediately, without going through a prolonged competitive bid process.

However, these cases are an exception, not the rule.

Alabama’s competitive bidding requirements have been in statute (in some form) for more than 100 years. They are intended to protect taxpayers’ dollars and ensure that cronyism and corruption are not a part of the awarding of government contracts. As illustrated in this paper, when competitive bidding laws are ignored or circumvented, the results negatively impact the state and its taxpayers. These laws are in place for good reasons. The Legislature should reject any effort to weaken Alabama’s competitive bid and public works laws.

36

GUIDE TO THE ISSUES

Increase Requirements to Receive Public Welfare

Overview

Workforce development has been a key issue for Alabama lawmakers over the past several legislative sessions. During the 2024 Regular Legislative Session, lawmakers enacted a package of five bills (the Working for Alabama package) aimed at incentivizing Alabamians to return to the state’s workforce. Amongst bills included in the proposal were the creation of a new childcare tax credit, a workforce housing tax credit, and the creation of a workforce pathways diploma, which created an alternative route to earning a high school diploma that will focus heavily on career training[i].

One of the major goals of the workforce development package is improving the state’s continually lagging labor participation rate, which sat at 57 3% as of August 2025[ii] Alabama has consistently had one of the lowest labor participation rates in the nation over the past two decades. By implementing the Working for Alabama agenda, lawmakers hope to remove barriers that some Alabamians face when trying to enter the workforce, including the costs of childcare and housing and providing better career training to potential/future employees.

While these initiatives will not discourage state citizens from working, only time will tell how far they will go towards improving the state’s labor participation rate There are other things that lawmakers can do to achieve that goal, such as reforming welfare program eligibility and unemployment insurance compensation requirements. The state's three main social safety-net programs are unemployment insurance (UI), Medicaid, and the Supplemental Nutritional Assistance Program (SNAP). Collectively, thousands of Alabamians are enrolled in these programs. Alabama continues to have one of the lowest labor force participation rates in the country, 57.3% , and one way to combat this underperformance is through strengthening these programs’ work requirements. [iii]

While in some case these programs provide necessary assistance to Alabamians who truly need them, they can also potentially discourage citizens from meaningful participation in the labor force. Through strengthening the requirements to access certain benefits, the citizens who need assistance will still receive it, and those able to work will be incentivized to rejoin the labor force.

Alabama has traditionally pursued policies that seek to tighten the eligibility requirements for these programs. Previously, some lawmakers attempted to strengthen work requirements but those efforts stalled due to federal opposition. Recent shifts in Washington, such as the Big Beautiful Bill Act, suggest that the political environment for strengthening these requirements is more favorable for policymakers

Current Law and Proposed Alabama Reforms

As of July 2025, Alabama’s seasonally adjusted unemployment rate of 3.0% represented 72,506 unemployed able-bodied Alabamians. This is approximately 3,000 more unemployed citizens than at this point in July 2024 and is approximately 8,000 more unemployed Alabamians than at this point in July 2023 . [iv]

Unemployment compensation is provided to workers who are unemployed or working reduced hours through no fault of their own. The program is funded by qualified employers on the first $8,000 of each employees’ gross earnings, which are then deposited into the state’s Unemployment Compensation Trust Fund[v]. In order to draw unemployment compensation benefits, there are certain conditions that a claimant must meet, and continue to meet.

Unemployment Insurance

Currently, unemployment compensation is available to workers who are actively searching for a job, unemployed or working reduced hours, and are facing unemployment due to no fault of their own. Unemployment compensation is provided to workers through the state’s Unemployment Trust Fund. This is funded by a tax on qualified employers of the first $8,000 of each employee’s gross earnings and through grants. To draw from this trust fund unemployed citizens must meet certain requirements. First, it must be determined that the claimant earned enough wages in the preceding 12-18 months to be eligible for compensation. If a person is out of work due to their employer not having enough work or reducing hours, unsafe working conditions, or if they or their child were the victim of domestic violence, stalking, or sexual assault, they are eligible to receive benefits.

However, a person will not be eligible to receive compensation if they voluntarily left their job for personal reasons, were fired for cause, did not earn enough wages during the 12–18-month determination period, are not eligible to work in the United States, or are already receiving workers’ compensation from an on-site injury.[vi]

Finally, to qualify for benefits the claimant must be actively searching for work, mentally and physically able to work, legally able to work in the United States, and available to start new work. These work requirements could have been strengthened through House Bill 29, proposed by Representative Ed Oliver in the 2025 regular session, which would have increased the number of prospective job contracts sent per week to remain eligible for unemployment insurance from 3 to 5 The bill was approved by the Alabama House but was not voted on by the full Senate [vii]

In Alabama, weekly unemployment benefits range from a weekly minimum of $45 to a maximum of $275, determined by the claimant’s base period earnings. Recipients can generally receive benefits for a term of 14-20 weeks, with some extensions available for citizens participating in approved job training.[viii]

Medicaid

Currently, to qualify for Medicaid in Alabama all prospective recipients must meet a range of income requirements depending on the program and situation. Under current Alabama law applicants are allowed to self-attest to certain eligibility factors with very little follow-up or verification after the fact. Senate Bill 245, proposed by Senator Arthur Orr in the 2025 Regular Session, aims to significantly reduce Medicaid fraud by eliminating recipients’ ability to self-attest to certain eligibility requirements. The elimination of this self-attestation would not change any eligibility requirements, it would simply cross-check and verify information provided by applicants through various databases. This legislation directs Medicaid to create an eligibility cross-check system, that would electronically and systematically verify information across databases. Lastly, this bill proposes annual accountability reporting on fraud and investigations. [ix] [x] [xi]

Supplemental Nutritional Assistance Program (SNAP)

Alabama’s SNAP program (aka food stamps, EBT) is administered by the Department of Human Resources following federal guidelines. This program aids families with a monthly income of up to 125% of the federal poverty line. Alabama currently employs a broad-based categorical eligibility (BBCE), which allows households to automatically qualify for SNAP if they are already receiving other forms of assistance. The BBCE loophole allows families that far exceed the strict federal requirements to still receive SNAP benefits, raising questions about the program’s integrity. [xii] [xiii]

Senate Bill 246, proposed by Senator Arthur Orr in 2025, prohibits the use of BBCE in determining SNAP eligibility in favor of a system of cross checks and verification. This bill also requires a return to strict compliance with federal income and asset eligibility thresholds, effectively closing the BBCE loophole. Finally, the proposed legislation would require enhanced electronic data-matching between databases to verify information and eliminate fraud.[xiv]

What Other States are Doing Congress

HR 1, President Donald Trump’s Big Beautiful Bill Act, was a comprehensive legislative package passed by the United States Congress in 2025. This package covered a wide array of policy issues the Trump Administration has prioritized, including federal changes to unemployment insurance, Medicaid, and SNAP. These changes are aimed at reducing federal expenditures, administrative burdens, and welfare fraud. HB 1 tightens requirements for UI recipients to remain enrolled in the program. Notably, recipients must complete and document at least 5 job search activities per week. This legislation also shortens the maximum duration for UI benefits, reducing the number of weeks individuals can receive assistance.[xv]

This legislation also introduced substantial changes to Medicaid. Medicaid eligibility is contingent on at least 80 hours per month of work, education, or service, with certain exemptions. HB 1 also increases cost sharing responsibility. Medicaid recipients’ earning 100% and 138% the federal poverty line may be required to pay up to $35 copays for medical services received. States are now required to verify enrollee eligibility every 6 months, instead of annually. Finally, the Big Beautiful Bill prohibits Medicaid from covering gender-affirming care and restricts funding to certain providers. The SNAP program’s eligibility requirements and cost sharing requirements were also increased for enrollees and states, respectively.

North Carolina

In 2021, Senate Bill 116, the Putting North Carolina Back to Work Act, was introduced in the North Carolina General Assembly. The bill would have withdrawn North Carolina from the Federal Pandemic Unemployment Compensation program, which provided $300 in enhanced weekly benefits to unemployment claimants. In addition to this provision, the Putting North Carolina Back to Work Act required unemployment claimants to respond to any interview request by an employer offering suitable work within 48 hours. It further required that once an interview request has been made, an interview must be scheduled within seven days[xvii].

The Putting North Carolina Back to Work Act was approved by the General Assembly but vetoed by Governor Roy Cooper.

Iowa

During its 2023 legislative session, the Iowa Legislature considered a bill to require between 4-6 work searches each week that an individual received unemployment benefits. The legislative set a sliding scale for the number of searches required which would be tied to the number of available jobs in the state. When more than 60,000 jobs were available, six searches would be required each week. If less than 50,000 jobs were available across the state, four searches would be required each week to continue receiving unemployment benefits[xviii]. The bill was not approved by the Iowa Legislature.

Pennsylvania

In 2024, Pennsylvania lawmakers introduced a bill that would have established a process for employers to report refusals to work. The bill was aimed at addressing situations in which job candidates admitted to only applying for a job in order to comply with the states unemployment compensation requirements, with no intention to accept a position. The proposal required the Pennsylvania Department of Labor to create forms allowing employers to report unemployment insurance claimants who “discourage their own hire”[xix]. The bill passed the Pennsylvania Senate but was not considered by the House of Representatives.

Florida

In addition to the requirement of submitting five job applications per week (with some exceptions), new unemployment insurance claimants in Florida are required to register with the Employ Florida Marketplace. The claimant provides information (training, resume, location, etc.) through the website that is used to connect employers with potential employees.[xx]

Georgia

In 2023, Georgia implemented its Pathways for Coverage Initiative. This program ties coverage eligibility for certain adults to completing at least 80 hours a month of work, service, or education. This program incentivizes labor force participation and expands eligibility to some individuals who did not previously qualify for coverage.[xxi]

Mississippi

To be eligible to receive SNAP benefits, enrollees in Mississippi aged 16-59 must either work 30 hours per week, participate in SNAP employment and training, accept suitable jobs, and not voluntarily reduce hours below 30 without good cause.

Further, in Mississippi, Able-Bodied Adults Without Dependents (ABAWDs) must participate in at least 80 hours per month of work, training, or service to maintain eligibility. Non-compliant ABAWD are limited to three months of benefits within a 36-month period.[xxii]

Potential Reforms to Consider

Representative Ed Oliver introduced House Bill 29 for the 2025 Regular Legislative Session that would have ensured that Alabamians who are receiving unemployment compensation are actively seeking employment. Under current law, unemployment recipients are required to make a reasonable effort to secure work in order to continue receiving benefits. This includes contacting at least three prospective employers each week that they are receiving unemployment benefits Under the provisions of Oliver’s bill, the number of weekly contacts would have increased from three to five[xxiii]. The bill was passed by the House of Representatives but was never brought to the Senate floor for a vote. In 2022, the Legislature increased the required number of weekly contacts from one to three[xxiv].

Current law also requires that if a person is offered “suitable work” and fails to accept the position, they are barred from receiving unemployment compensation benefits for at least one week and not more than five weeks. Representative Oliver’s bill would have eliminated the range and set the disqualification period at five weeks, strengthening the penalties for failing to accept work and choosing to remain in the state’s unemployment system[xxv].

Representative Oliver’s approach to strengthening unemployment compensation requirements is reasonable and measured. Asking someone who is receiving a direct benefit from the state to increase their efforts to find gainful employment not only benefits the individual, put will decrease the overall stress to the state’s Unemployment Compensation Trust Fund, which experienced shortfalls during the COVID-19 pandemic and was ultimately replenished by federal relief funds[xxvi].

Similarly, increasing the time period that unemployment benefit recipients are disqualified from receiving those benefits for declining to accept a job offer is reasonable as well. Unemployment compensation is intended to bridge the gap between jobs. Ultimately taxpayers are helping fellow citizens who have found themselves without a job. Taxpayers should only continue to do so if benefit recipients are actively engaged in looking for another job and willing to accept any job that they are qualified for. A one-week disqualification period is not enough of a disincentive for some Alabamians to choose to forgo employment in favor of remaining on unemployment benefits.

Alabama should also consider adopting a model like Mississippi’s ABAWD program, where to receive SNAP benefits able-bodied individuals must be gainfully employed or actively searching for employment. Able-bodied Medicaid recipients should also meet this criterion, with certain exceptions (dependents, pregnant, etc.). Further, these programs should implement a unified verification and cross-checking system to reduce fraud and decrease administrative burdens.

Conclusion

Unemployment compensation and other safety-net programs should provide temporary aid to Alabamians who are truly in need. The goal of welfare programs should be to provide necessary assistance, but not to promote long-term dependency on the programs. Strengthening welfare work requirements is another piece of the puzzle towards reducing Alabama’s labor participation rate and putting more citizens back to work.

GUIDE TO THE ISSUES

Expand Portable Benefits for Alabama’s Changing Workforce

Overview

The rise of the gig economy and independent contracting has left a growing share of workers without access to traditional employment benefits. In the United States, tens of millions of people engage in independent work, including freelancers, contractors, and app-based workers[i]. In Alabama alone, around 79,000 people work in app-based rideshare or delivery jobs, and many more are self-employed in other industries[ii].

Unlike full-time W 2 employees, these independent workers typically do not receive health insurance, retirement plans, paid leave, or other benefits through an employer[iii]. This gap creates financial insecurity and “job lock,” where workers feel tied to jobs solely to keep benefits[iv] It also means independent contractors may have to fund their own benefits or forgo benefits altogether, a tradeoff they accept for the flexibility of independent work[v].

Portable benefits, which are essentially benefits tied to the individual worker rather than any single job or employer, offer a promising solution to this problem. In practice, they often take the form of flexible, worker-owned benefit accounts that employees or businesses can contribute to, and which travel with the worker from job to job. Funds in a portable benefits account can be used for typical benefits such as health insurance premiums, retirement savings, paid time off, disability coverage, or other needs[vi]

Policymakers nationwide are increasingly interested in portable benefits as an alternative to rigid employment mandates. Rather than reclassifying contractors as employees, portable benefits aim to preserve independent work arrangements while extending a measure of security to those workers. Surveys show this is what most independent workers prefer. Over 80% of independent workers want access to benefits but also wish to not become traditional employees[vii].

Portable benefits represent a free-market, voluntary solution that can empower gig workers with financial security without sacrificing flexibility.

Current Law

Alabama became a national leader on this issue in 2025 by enacting a first-of-its-kind portable benefits law. Senate Bill 86 by Senator Arthur Orr established a legal framework for “Portable Benefit Accounts” for independent contractors. Under this law, Alabama businesses may voluntarily contribute to a portable benefits account owned by an independent contractor they engage with, as a form of compensation. The law builds in several protections and incentives to make this arrangement attractive[viii].

First, it provides that there is no impact on worker classification. The statute explicitly provides that a company’s contributions do not reclassify the worker as an employee. In other words, offering benefits through a portable account will not trigger an “employee” designation or new employer obligations[ix]. This safe harbor alleviates the biggest legal barrier that previously deterred businesses from giving benefits to contractors[x].

Second, the program is entirely optional for both businesses and employees. Companies can choose whether to contribute, and contractors can opt in or out There is no mandate[xi]

There are also tax advantages for both parties. Contributions a business makes to a contractor’s benefit account are treated as a tax-deductible business expense, and the contractor does not owe state income tax on the value contributed. This effectively mirrors the tax treatment of traditional employer-provided benefits[xii].

The law also provides a range of eligible benefits including health insurance premiums, retirement savings accounts, or life or disability insurance. The law allows an independent worker to build a customized benefits portfolio with contributions from one or multiple employers[xiii].

Finally, the statute specifies that businesses contributing to a portable account do not become subject to Alabama’s workers’ compensation requirements for that worker. This reinforces the classification safe harbor by clarifying that such contributions aren’t treated as providing formal employee benefits under state law[xiv].

Reforms in Other States

Tennessee

In April 2025, Tennessee Governor Bill Lee signed the “Voluntary Portable Benefit Plan Act” into law. Much like Alabama’s law, Tennessee’s reform provides a safe harbor for companies to contribute to independent contractors’ benefits without affecting their contractor status. It allows voluntary contributions to portable benefit accounts and protects firms from misclassification risks. Because Tennessee has no state income tax on wages, the emphasis of its law is on legal clarity rather than tax treatment. Tennessee’s move was widely seen as part of a growing national movement to support flexible benefits for gig workers[xv].

Utah

Utah passed the first state portable benefits law in 2023, which explicitly removed legal barriers by stating that offering benefits would not alter a worker’s independent contractor status. This opened the door for pilot programs. For example, after Utah’s law passed, Shipt and the benefits platform Stride partnered to deliver health coverage and other benefits to gig workers in Utah. Utah’s example demonstrated that allowing voluntary benefit contributions could work in practice and not just theory[xvi].

Florida

Florida has also shown interest in portable benefits. In early 2025, legislation was introduced in the Florida House (HB 1067) to establish portable benefit accounts for independent contractors and sole proprietors, with provisions for voluntary contributions by any person or hiring entity. The bill would have created a framework similar to Alabama’s. While Florida’s proposal garnered attention, it was not enacted during the 2025 session[xvii].

Additional Reforms Alabama Should Consider

Alabama’s new portable benefits program is an excellent start, but there are several opportunities to build on it and further strengthen the system for both workers and businesses. The goal of any reforms should be to expand access to benefits in a voluntary, flexible manner, empowering workers rather than imposing new mandates. Below are recommendations for additional reforms beyond current Alabama law:

·Broaden the Safe Harbor for Benefits Provision: Alabama should consider explicitly extending the misclassification safe harbor to any form of benefits provided to independent contractors, not just contributions to portable accounts. Currently, Senate Bill 86 ensures benefit account contributions won’t affect a worker’s status.

Additional legislation could clarify that offering any benefit, such as allowing a contractor to buy into a company’s health plan or providing a stipend for insurance, will not, by itself, trigger reclassification. This would give businesses greater confidence to pilot creative benefit offerings. Utah’s law took this approach, affirmatively stating that no agency may reclassify a worker solely because they received benefits[xviii].

Enable an “Independent Worker” Registration or Certification: To reduce ambiguity in worker classification, Alabama could create a system for individuals to register as independent contractors with the state if they meet certain criteria. Under such a reform, a person who plans to work as a freelancer/contractor could file a simple declaration or obtain a certification of independent status, and hiring entities could then rely on that status in good faith. Mercatus researchers recommend this as a way to give businesses assurance that a worker is legitimately independent[xix].

Facilitate Group Benefit Purchasing and Pools: One disadvantage independent workers face is buying benefits on the individual market, which can be costly. Alabama could pursue reforms to make group rates and risk-pooling accessible to independent workers.

Allow Association Benefit Plans: The state can explicitly allow individuals to band together to purchase group insurance. For instance, Alabama could clarify that any group of independent workers or sole proprietors can form an association (or use an existing professional association) to negotiate health insurance or other benefits, regardless of industry or affiliation, as long as they are state residents. This would let freelancers pool their risk to get lower premiums similar to a large employer’s plan[xx].

Let Contractors opt into Employer Plans: Alabama could also encourage companies to voluntarily open their employee benefit plans to independent contractors who work with them. While ERISA and federal rules govern many benefit plans, at least for fullyinsured plans Alabama could permit this practice without treating the contractor as an employee for state purposes[xxi].

Promote and Educate to Build Participation: A policy is only as good as its implementation. Alabama should invest in outreach and partnerships to ensure independent workers and businesses know about these new options.

In considering these reforms, it’s important to maintain the voluntary, flexible nature of Alabama’s approach. All of the above options respect freedom of contract and avoid imposing new burdens on those who prefer the current system. Portability should not be conflated with mandates. The success of Alabama’s law and those in surrounding states lies in expanding choices for independent workers, not forcing any company or worker into a one-size-fits-all model.

By implementing the above reforms, Alabama can incrementally build a robust portable benefits ecosystem.

Conclusion

Alabama can solidify its position as a leader in adapting labor policy to the 21st-century workforce. The portable benefits law enacted in 2025 was a groundbreaking step that balances the needs of independent workers and businesses while preserving the flexibility and entrepreneurial spirit of independent work. To build on that foundation, Alabama’s policymakers should consider the additional reforms discussed above. These reforms would further reduce the barriers that keep independent contractors from obtaining benefits, and they would encourage a competitive market for benefit solutions to flourish in our state.

With thoughtful reforms, Alabama can achieve an inclusive economy where benefits follow the worker, and every Alabamian, whether traditionally employed or self-employed, has a chance to attain financial stability and security for themselves and their families.