GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1991

H	1 

HOUSE BILL 198

Short Title:  1991 Budget Reform Act.	(Public)
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Sponsors: Representatives Pope; Abernethy, Bowman, Esposito, Grady, Grimmer, Howard, Sam Hunt, H. Hunter, Hurley, Justus, Loflin, Mavretic, Morgan, Rhyne, Russell, Wilson, and Wood.
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Referred to:  Appropriations.
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March 4, 1991

A BILL TO BE ENTITLED
AN ACT TO RESTRUCTURE THE GENERAL FUND BUDGET PROCESS SO AS TO ASSURE MORE STABLE BUDGETING, BY PROVIDING FOR USE OF THE PRIOR CALENDAR YEAR'S COLLECTIONS AS THE REVENUE ESTIMATES, LIMITING USE OF REVERSIONS TO ONE-TIME EXPENDITURES, AND PROVIDING FOR A RESERVE FUND.
The General Assembly of North Carolina enacts:
PART 1.  STATUTORY CHANGES.
––-REVENUE ESTIMATES/ANNUAL BUDGET
Section 1.  The Executive Budget Act, Article 1 of Chapter 143 of the General Statutes, is amended by adding the following new sections:
"§ 143-2.1.  Collections for prior calendar year to be revenue estimates for next fiscal year.
(a)	In preparing the budget for a fiscal year, the Governor shall use as the State funds revenue estimate for the General Fund no more than the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year, with the following changes only:
(1)	If any revenue decreases were effective for only part of that calendar year, the revenue estimate shall be reduced by an annualized total of the impact of such decreases;
(2)	If the budget proposes any revenue reductions to be effective during the fiscal year, the revenue estimate shall be reduced by the total estimated amount of such reductions during the fiscal year;
(3)	Any one-time revenues in the prior calendar year shall not be included in the revenue estimates; and
(4)	If the budget proposes any revenue increases due to increases in taxes or fees to be enacted, or new taxes or fees to be enacted, an estimate of collections of such increased or new taxes or fees may be made.
(b)	In enacting the budget for a fiscal year, the General Assembly shall use as the revenue estimate no more than the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year, with the following changes only:
(1)	If any revenue decreases were effective for only part of that calendar year, the revenue estimate shall be reduced by an annualized total of the impact of such decreases;
(2)	If the budget proposes or assumes any revenue reductions to be effective during the fiscal year, the revenue estimate shall be reduced by the total estimated amount of such reductions during the fiscal year;
(3)	Any one-time revenues in the prior calendar year shall not be included in the revenue estimates; and
(4)	If the budget proposes any revenue increases due to increases in taxes or fees to be enacted, or new taxes or fees to be enacted, an estimate of collections of such increased or new taxes or fees may be made, but the revenue estimate for that fiscal year may not exceed the lower of an estimate made by the Fiscal Research Division or an estimate made by the Office of Budget and Management.
(c)	If the budget contains an estimate of any credit balance at the end of the fiscal year ending immediately prior to the beginning of the fiscal year covered by the budget, one-half of that credit balance may be proposed only for capital projects, or other projects with a fiscal impact only in that fiscal year.
(d)	Revenue from borrowings in the prior calendar year shall not be included in the estimates, unless expenditure of the funds is proposed during the fiscal year covered by the proposed budget.  Proposed revenue from borrowing in the proposed budget shall only be included to the extent that appropriations against such borrowings are budgeted.
(e)	If the General Assembly appropriates any credit balance in the State treasury at the end of the fiscal year ending immediately prior to the beginning of the fiscal year covered by the budget, one-half of that credit balance may be appropriated only for capital projects, or other projects with a fiscal impact only in that fiscal year.
(f)	The purpose of this section is to provide an estimate to be used in the budget process, so that enactment of the budget need not wait until the end of the fiscal year.  This will enable shortening of the legislative session, as well as allowing State agencies and local governments adequate time to implement the adopted budget.
	(g)  In order to provide transition in implementing this section, the Governor may add to the revenue estimate under subsection (a) of this section not more than the following:
FISCAL YEAR	MAXIMUM AMOUNT TO BE ADDED
1992-93	     	Not more than eighty-five percent (85%) of the difference between the estimated fiscal year revenue and the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year.
1993-94	     	Not more than seventy percent (70%) of the difference between the estimated fiscal year revenue and the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year.
1994-95	     	Not more than fifty percent (50%) of the difference between the estimated fiscal year revenue and the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year.
1995-96	     	Not more than twenty-five percent (25%) of the difference between the estimated fiscal year revenue and the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year.
(h)	In order to provide transition in implementing this section, the General Assembly may add to the revenue estimate under subsection (b) of this section, not more than the following:
FISCAL YEAR	MAXIMUM AMOUNT TO BE ADDED
1991-92	     	Not more than ninety-five percent (95%) of the difference between the consensus estimated fiscal year revenue and the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year.
1992-93	     	Not more than eighty-five percent (85%) of the difference between the consensus estimated fiscal year revenue and the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year.
1993-94	     	Not more than seventy percent (70%) of the difference between the consensus estimated fiscal year revenue and the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year.
1994-95	     	Not more than fifty percent (50%) of the difference between the consensus estimated fiscal year revenue and the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year.
1995-96	     	Not more than twenty-five percent (25%) of the difference between the consensus estimated fiscal year revenue and the total State funds received for the calendar year ending December 31 immediately prior to the fiscal year.
	(i)  For the purpose of subsection (g) of this section, the revenue estimate is that of the Director of the Budget.  For the purposes of subsection (h) of this section, the consensus revenue estimate is that agreed on by the Director of the Budget and the Fiscal Research Division, provided that if no such agreement is reached, it means the lower of the revenue estimate of the Director of the Budget and the revenue estimate of the Fiscal Research Division.
"§ 143-2.2.  Reserve Fund.
(a)	There is established in the State treasury a Reserve Fund.
(b)	The General Assembly hereby appropriates to the Reserve Fund one-half of any General Fund credit balance in the State treasury at the end of the fiscal year ending immediately prior to the fiscal year covered by the budget.
(c)	If the Director of the Budget determines:
(1)	Pursuant to the provisions of G.S. 143-25 that the aggregate revenues collected and available during a fiscal year are not sufficient to pay all of the appropriations for that fiscal year in full; or
(2)	Pursuant to the provisions of Article III, Section 5(3) of the Constitution of North Carolina that receipts during a fiscal year, when added to the surplus remaining in the State treasury at the beginning of the fiscal year will not be sufficient to meet budgeted expenditures
he may, in his discretion, transfer funds from the Reserve Fund to pay the appropriations for the fiscal year in full.  If the Director of the Budget decides not to transfer the funds from the General Reserve Fund as provided in this section, he shall proceed as provided in G.S. 143-25 or Article III, Section 5(3) of the Constitution to administer the budget so as to prevent any overdraft or deficit.
(d)	During any fiscal year, the Governor and Council of State may allocate out of the Reserve Fund monies in a total not to exceed ten percent (10%) of the total in the fund at the beginning of the fiscal year for contingencies and emergencies, as follows:  any institution, department, commission, or other agency or activity of the State, or other activity in which the State is interested, desiring an allotment out of the Reserve Fund, shall upon forms prescribed and furnished by the Director of the Budget, present such request in writing to the Director of the Budget, with such information as he may require, and if the Director of the Budget shall approve such request, in whole or in part, he shall forthwith present the same to the Governor and Council of State, and upon their order only shall such allotment be made.  If the Director shall disapprove the request of such an allotment out of the Reserve Fund, he shall transmit his refusal and his reason therefor to the Governor and Council of State for their information.
	Funds allocated from the Reserve Fund under this subsection may be used only for the purpose for which they were allocated and may not be reallocated for another purpose by the Governor and the Council of State.  If the funds are not spent or encumbered for the purpose for which they were allocated by the end of the fiscal year and if the Governor and the Council of State do not reallocate them for that same purpose, the funds shall revert to the Reserve Fund.  Also, if the funds are not needed for the purpose for which they were allocated, the funds shall revert to the Reserve Fund.
Any statute providing for funds to be allocated out of the Contingency and Emergency Fund provides authority for such funds to be allocated out of the Reserve Fund under the procedures of this subsection, within the percentage limitation provided by this subsection.
(e)	The General Assembly may make appropriations out of the Reserve Fund, but such appropriations must be for one-time use, and may be made only while the General Assembly is convened in Extra Session.
(f)	If the total of funds in the Reserve Fund at the end of the fiscal year exceeds an amount equal to five percent (5%) of the total General Fund appropriation for the prior fiscal year, the excess over five percent (5%) may be appropriated by the General Assembly:
(1)	To provide tax relief to the citizens of North Carolina;
(2)	To create or increase appropriations of State dedicated funds; or
(3)	For purposes permitted under G.S. 143-2.1(e)."
Sec. 2.  This act becomes effective for budgets beginning with the budget for fiscal year 1991-92, except that G.S. 143-2.2, except for subsection (b), becomes effective July 1, 1991.