BILL ANALYSIS                                                                                                                                                                                                    

                                                                  ACA 1 X3
                                                                  Page  1

          (  Without Reference to File  )

          ACA 1 X3 (Niello)
          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  

          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  

             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)  

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