BILL ANALYSIS
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( Without Reference to File )
ASSEMBLY THIRD READING
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As Amended February 14, 2009
2/3 vote.
SUMMARY : This constitutional amendments, which would be called
the "Budget Stabilization Act", creates a reserve fund
(colloquially referred to as a "rainy day fund") to be used in
economic downturns. Annually 3% of General Funds (GF) revenue
would be deposited in this fund. In addition this provision
would deposit unanticipated increases in revenues into this
reserve fund, and defines the process for calculation how
unanticipated revenue would be determined. Finally, this
constitutional amendment provides a mechanism to fund the
education obligations that would ensue if the Constitution
Amendment contained in SCA 2 x3 was adopted by voters.
Specifically; this constitutional amendment :
1)Removes SCA 30 of the 2007-08 Regular Session, from the
ballot.
2)Removes and amends SCA 13 of the 2007-08 Regular Session by
making the following changes:
a) Renames the Budget Stabilization Account as the Budget
Stabilization Fund Establishes the Supplemental Education
Payment Account and the Supplemental Budget Stabilization
Account;
b) Increases the fund minimum balance from 5% to 12.5% that
must be achieved before the 3% contribution to the Budget
Stabilization Fund would cease;
c) Prohibits the Governor from suspending or reducing the
amount transferred to the Budget Stabilization Fund that is
used for the Supplemental Education Payment fund purposes,
but continues to allow the Governor to suspend the balance
of the annual contribution by executive order;
d) Excludes the contribution to the Supplemental Education
fund from the requirement to use up to $5 billion of the
Budget Stabilization Fund to retire Deficit Recover Bonds;
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e) Allows the appropriation of funding from the Budget
Stabilization Fund when:
i) Total forecasted revenues for a fiscal year are not
sufficient to cover the prior year GF expenditures,
adjusted for population and inflation; and,
ii) An emergency is declared by the Governor.
f) Allows borrowing from the Budget Stabilization Fund
within a fiscal year for cash management purposes;
g) Requires a sum equal to 1.5% of GF revenues to be
transferred from the Budget Stabilization Fund to the
Supplemental Education Payment Account, beginning in
October 1, 2011, until the amount of supplemental education
payments have been allocated. This provision is
implemented if the requirement for supplemental educational
payments is adopted by voters in a separate constitutional
amendment; and,
h) Requires that after the payments are no longer necessary
for the Supplemental Education Payment Account that funds
are transferred to the Supplemental Budget Stabilization
Account. Funding in the Supplemental Budget Stabilization
Account can be used to retire outstanding general
obligation or other bond debt.
3)Creates Section 21 to Article XIV of the Constitution which:
a) Requires the Director of Finance forecast the revenue
amount for the budget year based upon a linear regression
analysis of revenues over the last 10 years. This Article
also requires current year revenues to be estimated based
upon as similar methodology;
b) Defined unanticipated revenues as the lesser of:
i) Forecasted current year GF revenues exceeding the
forecasted budget year GF revenue;
ii) Estimated budget year GF revenue exceeding the
forecasted GF defined in a) above.
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c) Stipulates the uses of unanticipated revenues will be
transferred to the Budget Stabilization Fund except if
needed to satisfy GF obligations for education expenditures
as stipulated in Section 8 of the constitution, established
by Proposition 98;
d) Appropriates any unanticipated revenue to retire
outstanding budgetary obligations if the amount of the
Budget Stabilization Funds equals 12.5% of GF revenues.
These obligations are prioritized in the following way:
i) First use of these funds would be for outstanding
obligations for local government payments, articulated in
Article XIII (Proposition 1A), transportation funding
(Proposition 42) obligations, and bond indebtedness; and,
ii) Any remaining funds could be used for one time
expenditures, unfunded liabilities-including pension
liabilities, transferred to the Budget Stabilization
Fund, or returned to taxpayers on a one-time basis.
Analysis Prepared by : Christian Griffith / BUDGET / (916)
319-2099
FN: 0000126