A Next-Generation Tax and Expenditure Limitation Act

Short Title: Responsible Budgeting Act.

Section 1. Structural Balance

(a) Sense of the Legislature: Stewarding taxpayers’ funds requires a close connection between spending and revenue. Structural balance provides this link over the medium term instead of each year to provide policy stability, secure the rule of law, and preserve the state’s fiscal independence. This structural balance spending limit generally lets spending grow along with a rolling average of the state’s economic growth and includes a deficit brake that adjusts the spending limit to maintain the bond between spending and revenue.

(b) The limit on fiscal year spending equals enacted spending in the prior fiscal year increased by the structural balance factor.

(1) The structural balance factor is the difference between—

(A) The average rate of growth of gross state product during the five calendar years preceding the regular legislative session and

(B) The deficit brake.

(2) The deficit brake—

(A) Has an initial and a minimum value of 0,

(B) Increases by 0.2 percentage points, cumulatively, for the upcoming fiscal year after a fiscal year when spending was more than revenue, and

(C) Decreases by 0.2 percentage points, cumulatively, for the upcoming fiscal year after a fiscal year when spending was less than revenue.

(c) The legislature may adjust the limit on fiscal year spending—

(1) To reflect enacted changes in revenue collections, or

(2) To provide for emergencies under Section 2.

(d) The terms “revenue” and “spending” include all funds, accounts, and other moneys received (other than borrowed funds) and expended by the state, excluding the receipt and expenditure of funds transferred from the federal government.

Section 2. Emergency spending.

(a) The legislature may authorize spending in excess of the limit otherwise applicable in section 1 through legislation that includes an emergency declaration describing the situation and which obtains the support of two-thirds of the members present and voting of the Senate and the House of Representatives.

(b) Emergency spending shall be offset by equal reductions in the spending limit for each of the subsequent six fiscal years.

(c) Neither emergency spending nor its subsequent offset shall otherwise affect the basis for calculating subsequent spending limits under Section 1.

(d) An emergency is a sudden, urgent, unforeseen, and temporary situation that requires immediate expenditure to preserve the health, safety, and general welfare of the people.

Section 3. Reserve Fund

(a) In General.—Budget surpluses shall be deposited in a reserve fund. Interest and other earnings on the fund shall accrue to the fund.

(b) The reserve fund and current revenue shall support spending within the limit established in Section 1, including emergency adjustments.

(c) When the reserve fund equals [15] percent of the current spending limit, further surpluses shall reduce general debt or, as the legislature may direct, other liabilities of the state. Surplus revenue used to reduce state liabilities shall be excluded from the spending limit in section 1.

Section 4. Raising Revenue [optional]

(a) Legislation to enact a net increase in revenue shall require the approval of two-thirds of members from each of the House of Representatives and the Senate.

AND/OR

(b) Legislation to enact a net increase in revenue shall be referred to and shall require the approval of the state’s electors in the next regularly scheduled general election. No such proposed revenue increase shall take effect, nor may the limit on fiscal year spending be increased pursuant to Section 1(b)(1), unless and until the Secretary of State certifies that such a referendum has been approved by a majority of electors.

Section 5. Implementation and Effective Date.

(a) The legislature shall have power to enact legislation to implement and enforce provisions of this Article.

(b) This Article shall take effect for the fiscal year that begins not less than 60 days following its adoption.