S.J.R. 2 Section 1. The following amendment to the Constitution of 1 the State of Iowa is proposed: 2 The Constitution of the State of Iowa is amended by adding 3 the following new section to a new Article: 4 ARTICLE _____. 5 EXPENDITURE LIMITATION. 6 Section 1. General fund expenditure limitation. 7 1. For the purposes of this section: 8 a. “Adjusted revenue estimate” means the most recent revenue 9 estimate determined before January 1, or a later and lower 10 revenue estimate determined before adjournment of the regular 11 session of the general assembly, for the general fund for the 12 following fiscal year, as determined by the revenue estimating 13 conference, adjusted by subtracting estimated refunds payable 14 from that estimated revenue. However, if the state general 15 fund expenditure limitation is calculated based upon the 16 adjusted revenue estimate and not based upon the net revenue 17 estimate and the general assembly holds an extraordinary 18 session prior to the commencement of the fiscal year to which 19 the adjusted revenue estimate applies and if before or during 20 the extraordinary session the revenue estimating conference 21 determines a lower revenue estimate, the lower estimate shall 22 be used for calculating the adjusted revenue estimate. 23 b. “Current fiscal year” means the fiscal year preceding 24 the fiscal year to which the state general fund expenditure 25 limitation applies. 26 c. “General fund” means the principal operating fund of the 27 state. 28 d. “Net revenue estimate” means the most recent revenue 29 estimate determined before January 1, or a later and lower 30 estimate determined before adjournment of the regular 31 session of the general assembly, for the general fund 32 for the current fiscal year, as determined by the revenue 33 estimating conference, and adjusted by subtracting estimated 34 refunds payable from that estimated revenue. However, if 35 -1- LSB 1635XS (3) 88 ns/tm 1/ 5

S.J.R. 2 the state general fund expenditure limitation is calculated 1 based upon the net revenue estimate and not based upon the 2 adjusted revenue estimate and the general assembly holds an 3 extraordinary session prior to the completion of the fiscal 4 year to which the net revenue estimate applies and if before 5 or during the extraordinary session the revenue estimating 6 conference determines a lower revenue estimate for the current 7 fiscal year, the lower estimate shall be used for calculating 8 the net revenue estimate for the general fund. 9 e. “New revenue” means moneys received by the general fund 10 due to increased tax rates or fees or newly created taxes or 11 fees over and above those moneys received by the general fund 12 due to state taxes or fees in effect as of January 1 following 13 the most recent meeting of the revenue estimating conference. 14 “New revenue” also includes moneys received by the general 15 fund due to new transfers to the general fund over and above 16 those moneys received by the general fund due to transfers in 17 effect as of January 1 following the most recent meeting of the 18 revenue estimating conference. 19 2. A state general fund expenditure limitation is created, 20 as calculated in subsection 3, for each fiscal year beginning 21 on or after July 1 following ratification by the voters of this 22 amendment to the Constitution of the State of Iowa. 23 3. The state general fund expenditure limitation for a 24 fiscal year shall be the lesser of the following amounts: 25 a. Ninety-nine percent of the adjusted revenue estimate for 26 the following fiscal year for the general fund. 27 b. One hundred four percent of the current fiscal year net 28 revenue estimate for the general fund. 29 4. The state general fund expenditure limitation shall be 30 used by the governor in the preparation and approval of the 31 budget and by the general assembly in the budget process. 32 5. If a new revenue source is proposed, the budget revenue 33 projection used for that new revenue source for the period 34 beginning on the effective date of the new revenue source and 35 -2- LSB 1635XS (3) 88 ns/tm 2/ 5

S.J.R. 2 ending in the fiscal year in which that source is included in 1 the adjusted revenue estimate or the net revenue estimate, 2 as applicable, shall be ninety-five percent of the amount 3 remaining after subtracting estimated refunds payable from the 4 projected revenue from that source. 5 6. If a revenue decrease is proposed, the projection for the 6 revenue source used for that revenue decrease for the period 7 beginning on the effective date of the revenue decrease and 8 ending in the fiscal year in which that decrease is included in 9 the adjusted revenue estimate or the net revenue estimate, as 10 applicable, shall be one hundred percent of the amount of the 11 projected revenue decrease from that source. 12 7. The scope of the state general fund expenditure 13 limitation calculated in accordance with this section shall not 14 include federal funds, donations, constitutionally dedicated 15 moneys, and moneys expended from a state retirement system. 16 8. The governor shall submit and the general assembly shall 17 pass a budget which does not exceed the state general fund 18 expenditure limitation. The governor shall not approve or 19 disapprove appropriation bills or items of appropriation bills 20 passed by the general assembly in a manner that would cause the 21 final appropriations approved by the governor to exceed the 22 state general fund expenditure limitation. 23 9. The governor shall not submit and the general assembly 24 shall not pass a budget which in order to balance assumes 25 reversion of any part of the total of the appropriations 26 included in the budget. 27 10. The general assembly shall establish by law a general 28 fund of the state and a revenue estimating conference. The 29 general assembly shall enact laws to implement this section. 30 11. The general assembly may suspend the application of this 31 article by passage of a joint resolution, subject to approval 32 by the governor, by two-thirds of the members elected to each 33 house of the general assembly. 34 Sec. 2. REFERRAL AND PUBLICATION. The foregoing amendment 35 -3- LSB 1635XS (3) 88 ns/tm 3/ 5

S.J.R. 2 to the Constitution of the State of Iowa is referred to the 1 general assembly to be chosen at the next general election 2 for members of the general assembly, and the secretary of 3 state is directed to cause the same to be published for three 4 consecutive months previous to the date of that election as 5 provided by law. 6 EXPLANATION 7 The inclusion of this explanation does not constitute agreement with 8 the explanation’s substance by the members of the general assembly. 9 This joint resolution proposes an amendment to the 10 Constitution of the State of Iowa establishing a new Article 11 that relates to the state budget by creating a constitutionally 12 required state general fund expenditure limitation. 13 The expenditure limitation is the lesser of 99 percent 14 of the adjusted revenue estimate for the general fund for 15 the following fiscal year or 104 percent of the net revenue 16 estimate for the general fund for the current fiscal year. 17 The amendment defines “adjusted revenue estimate” and “net 18 revenue estimate” and requires that the estimates be determined 19 by a revenue estimating conference, which is required to be 20 established by the general assembly by law. The amendment 21 requires the expenditure limitation to be used by the governor 22 in preparation of the governor’s budget and by the general 23 assembly in the budget process, and requires the governor to 24 submit, and the general assembly to pass, a budget that does 25 not exceed the expenditure limitation. The amendment prohibits 26 the governor from approving or disapproving of appropriations 27 in a manner that would cause the final budget approved by the 28 governor to exceed the expenditure limitation. 29 If a new revenue source is proposed, 95 percent of the 30 estimate of that new revenue, less the estimated refunds 31 payable, shall be included in the revenue estimate used 32 to calculate the expenditure limitation. If a new revenue 33 decrease is proposed, 100 percent of the estimate of that 34 revenue decrease shall be included in the revenue estimate used 35 -4- LSB 1635XS (3) 88 ns/tm 4/ 5

S.J.R. 2 to calculate the expenditure limitation. 1 The amendment authorizes the general assembly to suspend the 2 application of the expenditure limitation by passage of a joint 3 resolution, subject to approval by the governor, by two-thirds 4 of the members elected to each house of the general assembly. 5 The joint resolution, if adopted, will be referred to the 6 next general assembly for adoption a second time in identical 7 form before being submitted to the electorate for ratification. 8 -5- LSB 1635XS (3) 88 ns/tm 5/ 5