BILL NUMBER: S1296
SPONSOR: BORRELLO
 
TITLE OF BILL:
An act to amend the state finance law, in relation to establishing a
spending cap
 
PURPOSE:
This legislation will cap the growth of state spending and increase the
allowable reserve of the rainy-day fund.
 
SUMMARY OF PROVISIONS:
Section one of the bill would amend the State Finance Law ("SFL") to add
a new Article 17, establishing a state spending cap.
*New SFL § 244 sets for definitions for article 17.
*New SFL § 245 establishes a spending cap, which limits the growth of
state operating funds spending to no more than-the average rate of
inflation of the three previous calendar years. In addition, the section
requires the governor to certify that the executive budget is consistent
with the cap and the comptroller will provide, within five days of
action by the Legislature upon the budget, a determination as to whether
the state budget as enacted exceeds the annual spending growth cap.
Finally, the section provides that if the Comptroller finds that the
state budget as enacted exceeds the annual spending growth cap, the
Governor must take corrective action, such as a veto, reducing state
agency spending within the control of the Executive or working with the
Legislature to enact spending reductions, to ensure that funding is
limited to the amount of the annual spending cap.
*New SFL § 246 provides that upon a finding of an emergency by the
Governor, he or she may declare-an emergency by executive order. Based
upon such declaration, the Governor may submit and the Legislature may
authorize by a two-thirds super majority ,a budget containing a percent-
age increase in state operating fund spending over the prior fiscal year
that exceeds the annual spending growth cap.
Section 2 of the bill would increase the maximum capacity of the state's
rainy day reserve from 3 percent of General Fund spending to 10 percent
of General Fund spending.
Section 3 would make the act effective.
 
EXISTING LAW:
SFL S 92-cc (2) establishes a maximum balance in the rainy-day reserve
fund of three percent of the aggregate amount projected to be disbursed
annually from the General Fund.
 
JUSTIFICATION:
State government spending has grown substantially in recent years espe-
cially in good economic times. Such growth has forced the State to take
drastic actions to stabilize; its finances when revenues decline dramat-
ically during periods of economic difficulty. For example, from 2002-03
to 2007-08, State Operating Funds spending grew from $52.8 billion to
$77.0 billion -- an average annual rate of 7.86 percent. To end this
pattern of boom and bust cycle budgeting, and impose greater fiscal
discipline on state government, this legislation would enact a strict
cap limiting the growth of State Operating Funds spending. It also
significantly increases the maximum capacity of the State's rainy-day
reserve so that surpluses that accrue as a result of this cap can be
used to help address revenue declines during times of economic difficul-
ty.
If the cap proposed in this legislation had been in place from 2002-03
to 2007-08, average annual spending growth during that period would have
averaged 2.6 percent. Additionally, 2007-08 State Operating Funds spend-
ing would have totaled $60.0 billion - $17.0 billion lower than actual
results.
 
LEGISLATIVE HISTORY:
2024: S681/A5893 Referred to Finance
2023: S681/A5893 Referred to Finance
2022: S.1756 Referred to Finance
2020: S.7622 Referred to Finance
2018 S.365 Passed Senate
2017 S.365 Passed Senate
2016 S.5507 Passed Senate
2015 S.5507 Referred to Finance
2014 S.3770 Referred to Rules.
2013 S.3770 Passed Senate
2012 S.716 Passed Senate
2011 S.716 Passed Senate
2010 S.5916 Referred to Finance
2009 S.5916 Referred to Rules
 
FISCAL IMPLICATIONS:
To Be Determined
 
EFFECTIVE DATE:
30 days after it shall have become law.