BILL NUMBER: SCA 33INTRODUCED BILL TEXT INTRODUCED BY Senator Wyland AUGUST 30, 2010 A resolution to propose to the people of the State of California an amendment to the Constitution of the State, by repealing and adding Article XIII B thereof, and by amending Section 8.5 of Article XVI thereof, relating to expenditure limits. LEGISLATIVE COUNSEL'S DIGEST SCA 33, as introduced, Wyland. Expenditure limit. Existing provisions of the California Constitution prohibit the annual appropriations subject to limitation, as defined, of any entity of state or local government from exceeding the entity's adjusted annual appropriations limit. These provisions also require 50% of the excess revenues received by the state in a fiscal year and the fiscal year immediately following it to be transferred and allocated, from a fund established for that purpose, to the State School Fund, and the remaining 50% of those excess revenues to be returned by a revision of tax rates or fee schedules within the next 2 subsequent fiscal years. This measure would repeal those provisions, and instead would prohibit total expenditures of state General Fund and special fund revenues from annually increasing by more than the annual percentage increase in the cost of living, multiplied by the annual percentage increase in state population. The measure would require excess General Fund revenues to be allocated in prescribed amounts first to a reserve account, and then, to the extent excess revenues remain, to the State School Fund and to personal income taxpayers. Vote: 2/3. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. Resolved by the Senate, the Assembly concurring, That the Legislature of the State of California at its 2009-10 Regular Session commencing on the first day of December 2008, two-thirds of the membership of each house concurring, hereby proposes to the people of the State of California, that the Constitution of the State be amended as follows: First-- That Article XIII B thereof is repealed. Second-- That Article XIII B is added thereto, to read: ARTICLE XIII B EXPENDITURE LIMIT SECTION 1. (a) (1) The total expenditures made for a fiscal year from General Fund revenues and state special fund revenues, in the aggregate, shall not increase from the amount of those total expenditures for the immediately preceding fiscal year by more than the percentage increase in the cost of living multiplied by the percentage increase in the state population. If the total expenditures made for the immediately preceding fiscal year were less than the total amount of allowable expenditures for that year, then the total expenditures made for the current fiscal year may not exceed the total amount of allowable expenditures for the immediately preceding fiscal year. (2) As used in this section, "percentage change in the cost of living" means the percentage change from April 1 of the prior year to April 1 of the current year in the California Consumer Price Index for all items, as determined by the Department of Industrial Relations or its successor. For purposes of this calculation, "current year" means the calendar year in which the fiscal year commences. (3) As used in this section, "percentage change in state population" means the change in population of the State as determined by the Department of Finance, or its successor agency, revised, as necessary, to reflect the periodic census conducted by the United States Department of Commerce, or its successor agency. (b) The expenditure limit in subdivision (a) may be exceeded for a fiscal year in an emergency as described in this subdivision, but any such excess expenditures are not part of the expenditure base for the purposes of determining the total amount of allowable expenditures for the next fiscal year pursuant to subdivision (a). As used in this subdivision, "emergency" means the existence, as declared by the Governor, of conditions of disaster or extreme peril to the safety of persons and property within the State, or parts thereof, caused by conditions such as an attack or a probable or imminent attack by an enemy of the United States, or fire, flood, drought, storm, civil disorder, earthquake, or volcanic eruption. (c) For purposes of implementing subdivision (d) for each fiscal year, the Department of Finance, or its successor agency, shall do all of the following: (1) Estimate, no less frequently than quarterly, the total amount of revenues that will be received during the fiscal year for deposit in the General Fund or in a special fund. The department shall publish the final estimate made for a fiscal year pursuant to this paragraph in a final budget summary. (2) Determine the total amount of revenues received during the fiscal year for deposit in the General Fund or in a special fund. (3) Determine the balance of the General Fund and of each special fund as of the end of the fiscal year. (d) If the total amount of revenues received during the fiscal year for deposit in the General Fund and in state special funds exceeds the total amount of allowable expenditures for that fiscal year, the amount of that excess shall be attributed in proportionate shares to the General Fund and to each special fund, by multiplying the balance of each of those funds at the end of the fiscal year by the percentage by which the total revenues received exceed the total amount of allowable expenditures for that fiscal year. That portion of the excess amount attributed to each special fund shall be transferred to a reserve in that special fund subject to expenditure in a subsequent fiscal year. The amount of these excess revenues attributable to the General Fund shall be allocated from the General Fund as follows: (1) To the Special Reserve Account, which is hereby created in the General Fund, to the extent that this account contains an amount no greater than 10 percent of the total amount of allowable expenditures for the fiscal year. Notwithstanding any other provision of this section, funds in the reserve account may be expended in an amount equal to the amount by which the total amount of revenues determined by the Department of Finance to have been received during the fiscal year for deposit in the General Fund is less than the department's final estimate of that amount made pursuant to paragraph (1) of subdivision (c) for that fiscal year. Any funds expended from the Special Reserve Account pursuant to this paragraph are part of the expenditure base for the purpose of determining the total amount of allowable expenditures for the next fiscal year pursuant to subdivision (a). Subject to the 10-percent restriction set forth in this paragraph, any unexpended balance in the reserve account, including any interest earnings, shall carry over from one fiscal year to the next. (2) Revenue that exceeds the amount that may be deposited into the reserve account shall be allocated as follows, which allocations shall not be part of the expenditure base for the purpose of determining the total amount of allowable expenditures for the next fiscal year pursuant to subdivision (a): (A) Fifty percent shall be transferred and allocated, from a fund established for that purpose, pursuant to Section 8.5 of Article XVI. (B) Fifty percent shall be paid as a rebate to all personal income taxpayers in shares determined in proportion to each taxpayer's tax liability for the tax year that encompasses the first half of the fiscal year for which the excess exists. (e) If the financial responsibility for providing services is transferred, in whole or in part, from the state government to an entity of local government, then the total amount of allowable expenditures in the fiscal year that the transfer is implemented shall be reduced by an amount equal to the cost of providing the transferred services, to prevent an effective increase in the total amount of allowable expenditures. For the purposes of this subdivision, a transfer of financial responsibility for providing services does not include any mandate of a program or level of service for which reimbursement is required by Section 3. SEC. 2. (a) As used in Section 7.5 of Article IV, "the percentage increase in the appropriations limit for the State established pursuant to Article XIII B" means the percentage change in California per capita personal income from the prior year, plus (1) the percentage change in the State's population multiplied by the percentage change in the State's budget in the prior fiscal year that is expended for other than educational purposes for kindergarten and grades 1 to 12, inclusive, and the community colleges, and (2) the percentage change in the total statewide average daily attendance in kindergarten and grades 1 to 12, inclusive, and the community colleges, multiplied by the percentage of the State's budget in the prior fiscal year that is expended for educational purposes for kindergarten and grades 1 to 12, inclusive, and the community colleges. (b) As used in Section 8 of Article XVI, "change in the cost of living pursuant to paragraph (1) of subdivision (e) of Section 8 of Article XIII B" means the percentage change in California per capita personal income from the prior year. SEC. 3. (a) Whenever the Legislature or any state agency mandates a new program or higher level of service on any local government, the State shall provide a subvention of funds to reimburse that local government for the costs of the program or increased level of service. However, the Legislature may, but is not required to, provide a subvention of funds for the following mandates: (1) Legislative mandates requested by the local agency affected. (2) Legislation defining a new crime or changing an existing definition of a crime. (3) Legislative mandates enacted prior to January 1, 1975, or executive orders or regulations initially implementing legislation enacted prior to January 1, 1975. (b) (1) Except as provided in paragraph (2), for the 2005-06 fiscal year and every subsequent fiscal year, for a mandate for which the costs of a local government claimant have been determined in a preceding fiscal year to be payable by the State pursuant to law, the Legislature shall either appropriate, in the annual Budget Act, the full payable amount that has not been previously paid, or suspend the operation of the mandate for the fiscal year for which the annual Budget Act is applicable in a manner prescribed by law. (2) Payable claims for costs incurred prior to the 2004-05 fiscal year that have not been paid prior to the 2005-06 fiscal year may be paid over a term of years, as prescribed by law. (3) Ad valorem property tax revenues shall not be used to reimburse a local government for the costs of a new program or higher level of service. (4) This subdivision applies to a mandate only as it affects a city, county, city and county, or special district. (5) This subdivision shall not apply to a requirement to provide or recognize any procedural or substantive protection, right, benefit, or employment status of any local government employee or retiree, or of any local government employee organization, that arises from, affects, or directly relates to future, current, or past local government employment and that constitutes a mandate subject to this section. (c) A mandated new program or higher level of service includes a transfer by the Legislature from the State to cities, counties, cities and counties, or special districts of complete or partial financial responsibility for a required program for which the State previously had complete or partial financial responsibility. Third-- That Section 8.5 of Article XVI thereof is amended to read: SEC. 8.5. (a) In addition to the amount required to be applied for the support of school districts and community college districts pursuant to Section 8, the Controller shall during each fiscal year transfer and allocate all revenues available pursuant to subparagraph (A) of paragraph1(2) of subdivision(a)(d) of Section21 of Article XIII B to that portion of the State School Fund restricted for elementary and high school purposes, and to that portion of the State School Fund restricted for community college purposes, respectively, in proportion to the enrollment in school districts and community college districts respectively. (1) With respect to funds allocated to that portion of the State School Fund restricted for elementary and high school purposes, no transfer or allocation of funds pursuant to this section shall be required at any time that the Director of Finance and the Superintendent of Public Instruction mutually determine that current annual expenditures per student equal or exceed the average annual expenditure per student of the 10 states with the highest annual expenditures per student for elementary and high schools, and that average class size equals or is less than the average class size of the 10 states with the lowest class size for elementary and high schools. (2) With respect to funds allocated to that portion of the State School Fund restricted for community college purposes, no transfer or allocation of funds pursuant to this section shall be required at any time that the Director of Finance and the Chancellor of the California Community Colleges mutually determine that current annual expenditures per student for community colleges in this State equal or exceed the average annual expenditure per student of the 10 states with the highest annual expenditures per student for community colleges.(b) Notwithstanding the provisions of Article XIII B, funds allocated pursuant to this section shall not constitute appropriations subject to limitation.(c)(b) From any funds transferred to the State School Fund pursuant to subdivision (a), the Controller shall each year allocate to each school district and community college district an equal amount per enrollment in school districts from the amount in that portion of the State School Fund restricted for elementary and high school purposes and an equal amount per enrollment in community college districts from that portion of the State School Fund restricted for community college purposes.(d)(c) All revenues allocated pursuant to subdivision (a) shall be expended solely for the purposes of instructional improvement and accountability as required by law.(e)(d) Any school district maintaining an elementary or secondary school shall develop and cause to be prepared an annual audit accounting forsuchthose funds and shall adopt a School Accountability Report Card for each school.