Report Title:

Emergency and Budget Reserve Fund; Rainy Day Fund; Deposits

 

Description:

Ensures funds are available for future fiscal emergencies by replenishing and building-up the Emergency and Budget Reserve Fund when general fund carry-over balances become available.

 


HOUSE OF REPRESENTATIVES

H.B. NO.

1067

TWENTY-FIFTH LEGISLATURE, 2009

 

STATE OF HAWAII

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO DEPOSITS INTO THE EMERGENCY AND BUDGET RESERVE FUND.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


SECTION 1. The emergency and budget reserve fund was established by Act 304, Session Laws of Hawaii 1999, for the purpose of creating a financial reserve to lessen the negative impact of emergencies or economic downturns on the state budget. During periods of economic growth, tax collections can exceed spending needs thus creating a short-term budget surplus. However, when the economy is sluggish, tax revenues generally decline even as the need for important public services continues unabated, resulting in short-term budget deficits. Also known as a rainy day fund, the emergency and budget reserve fund provides critical resources for reducing the impact of these short-term deficits.

One of the key features of a rainy day fund is that it balances the highs and lows of an economic cycle by setting aside surplus revenues in good years, and using the saved revenues to offset budget shortfalls in bad years. Currently, the emergency and budget reserve fund is funded by a portion of the proceeds from the Hawaii tobacco settlement and the State is not required to deposit surplus revenues into the fund.

To ensure that the emergency and budget reserve fund has sufficient resources to lessen the impact of short-term budget deficits, another source of funding must be made available to supplement moneys deposited through the Hawaii tobacco settlement.

The purpose of this Act is to require a percentage of surplus general fund revenues be deposited into the State's emergency and budget reserve fund during periods of economic growth in order to ensure that the fund functions as needed to meet budgeting requirements during periods of economic downturn.

SECTION 2. Chapter 37, Hawaii Revised Statutes, is amended by adding to part V a new section to be appropriately designated and to read as follows:

"37- Compliance with expenditure ceiling. Notwithstanding any other law to the contrary, the general fund expenditure ceiling requirement shall not apply to appropriations made to the emergency and budget reserve fund but shall apply to appropriations authorized from the emergency and budget reserve fund."

SECTION 3. Section 328L-3, Hawaii Revised Statutes, is amended to read as follows:

"328L-3 Emergency and budget reserve fund. (a) There is established in the state treasury the emergency and budget reserve fund which shall be a special fund administered by the director of finance, into which shall be deposited:

(1) Twenty-four and one-half per cent of the moneys received from the tobacco settlement moneys under section 328L-2(b)(1);

(2) Appropriations made by the legislature to the fund[.] ; and

(3) One per cent of the state general fund balance at the close of the fiscal year whenever:

(A) The general fund balance at the close of the fiscal year exceeds five per cent of general fund revenues for the fiscal year; and

(B) General fund revenues for the fiscal year exceed general fund revenues for the preceding fiscal year by five per cent.

The deposit to the emergency and budget reserve fund shall be made through an appropriation during the next regular session. For the purpose of this section, the general fund balance at the close of the fiscal year shall take into account any tax refund or tax credit, pursuant to article VII, section 6 of the Constitution of the State of Hawaii, that is provided during the same regular session as the appropriation depositing such moneys to the emergency and budget reserve fund.

(b) All interest earned from moneys in the emergency and budget reserve fund shall be credited to the general fund.

(c) Expenditures from the emergency and budget reserve fund shall be a temporary supplemental source of funding for the State during times of emergency, economic downturn, or unforeseen reduction in revenues. No expenditures shall be made from the emergency and budget reserve fund except pursuant to appropriations. The general appropriations bill or the supplemental appropriations bill, as defined in section 9 of article VII of the Constitution of the State of Hawaii, shall not be used to appropriate moneys from the emergency and budget reserve fund. The governor, through an appropriations bill, may recommend expenditures from the emergency and budget reserve fund by setting forth the purposes of the expenditures consistent with subsection (d), the amounts, and the reasons justifying the necessity for the appropriations.

(d) The legislature may make appropriations from the fund for the following purposes:

(1) To maintain levels of programs determined to be essential to public health, safety, welfare, and education;

(2) To provide for counter cyclical economic and employment programs in periods of economic downturn;

(3) To restore facilities destroyed or damaged or services disrupted by disaster in any county; and

(4) To meet other emergencies when declared by the governor or determined to be urgent by the legislature.

Any act making appropriations from the emergency and budget reserve fund shall include a declaration of findings and purposes setting forth the purposes, the amounts, and the reasons why the appropriations are necessary and shall require a two-thirds majority vote of each house of the legislature.

(e) Appropriations for the following purposes from the emergency and budget reserve fund are specifically prohibited:

(1) To meet expenses of the legislature;

(2) To provide for salary adjustments for officials appointed pursuant to article V, section 6 or article VI, section 3 of the Constitution of the State of Hawaii and for others whose salaries are directly related to salaries of these officials; and

(3) To fund cost items in any collective bargaining contract."

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect July 1, 2009.

 

INTRODUCED BY:

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By Request