The bill amends Chapter 35-3 of the General Laws by introducing a new section titled "State spending growth limit." This section defines key terms such as "state spending," which refers to the total amount of appropriations authorized by the General Assembly from all sources of revenue in the annual state budget; "inflation rate," defined as the percentage change in the Consumer Price Index for All Urban Consumers (CPI-U) for the most recent calendar year; and "personal income growth rate," which is the percentage change in Rhode Island personal income for the most recent calendar year, as published by the U.S. Bureau of Economic Analysis or another reliable source designated by the Director of Administration.

The bill establishes that total state spending authorized by the General Assembly for any fiscal year shall not exceed the total state spending authorized for the previous fiscal year, increased by the greater of the inflation rate or the personal income growth rate.

It also outlines exceptions to this spending limit, which include expenditures for debt service payments or retirement of principal on bonds; federal funds received by the state that are required to be spent under federal law; emergency expenditures declared by the governor and approved by a two-thirds (2/3) vote of the General Assembly; and any other exceptions that the General Assembly may prescribe by law.

Furthermore, the bill mandates that the Director of Administration shall annually publish a report comparing actual state spending growth with the limits set forth in this section and submit it to the governor and the General Assembly. If the General Assembly authorizes spending that exceeds the limits, the governor is required to provide a plan to reduce expenditures in the following fiscal year to comply with the limits. The act will take effect upon passage.