House File 626
HOUSE FILE
BY COMMITTEE ON ECONOMIC GROWTH
(SUCCESSOR TO HSB 34)
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act revising the requirements for establishing the state
2 general fund expenditure limitation.
3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
4 TLSB 1492HV 80
5 jp/sh/8
PAG LIN
1 1 Section 1. Section 8.54, Code 2003, is amended by adding
1 2 the following new subsection:
1 3 NEW SUBSECTION. 1A. a. For the purposes of this
1 4 subsection, unless the context otherwise requires:
1 5 (1) "Annual inflation factor" means the sum of the annual
1 6 monetary inflation factor and the annual population change
1 7 factor with all of that percent change added to one hundred
1 8 percent. The annual inflation factor shall not be less than
1 9 one hundred percent.
1 10 (2) "Annual monetary inflation factor" means an index,
1 11 expressed as a percentage, determined by the department of
1 12 revenue and finance by October 15 of the calendar year in
1 13 which the fiscal year for which the factor is determined
1 14 ended, which reflects the purchasing power of the dollar as a
1 15 result of inflation during that fiscal year. In determining
1 16 the annual monetary inflation factor, the department of
1 17 revenue and finance shall use the annual percent change, but
1 18 not less than zero percent, in the gross domestic product
1 19 price deflator computed for the second quarter of the calendar
1 20 year by the bureau of economic analysis of the United States
1 21 department of commerce. The annual monetary inflation factor
1 22 shall be expressed as a percentage rounded to the nearest one=
1 23 tenth of one percent.
1 24 (3) "Annual population change factor" means the percentage
1 25 change in the state's annual population estimate for July 1 of
1 26 a calendar year as compared to the state's annual population
1 27 estimate on July 1 of the fiscal year which ended in that
1 28 calendar year. The population estimate used to calculate the
1 29 annual population change factor shall be the estimate issued
1 30 annually in December by the United States bureau of the
1 31 census.
1 32 (4) "Base year appropriation amount" means the amount
1 33 calculated as follows:
1 34 (a) The sum of the amounts appropriated from the general
1 35 fund of the state in each fiscal year of the fiscal period
2 1 beginning July 1, 1997, and ending June 30, 2002.
2 2 (b) Multiplying the sum in subparagraph subdivision (a) by
2 3 the product of the annual inflation factor for each fiscal
2 4 year of the fiscal period beginning July 1, 1997, and ending
2 5 June 30, 2002.
2 6 (c) Dividing the amount calculated in subparagraph
2 7 subdivision (b) by five.
2 8 (5) "Cumulative inflation factor" means the product of the
2 9 annual inflation factor for the fiscal year ending on June 30,
2 10 2003, and all annual inflation factors for subsequent fiscal
2 11 years as determined pursuant to this subsection.
2 12 b. An adjusted base year appropriation amount shall be
2 13 calculated for purposes of determining the state general fund
2 14 expenditure limitation by multiplying the base year
2 15 appropriation amount by the most recently calculated
2 16 cumulative inflation factor. The adjusted base year
2 17 appropriation amount shall be established annually at or about
2 18 the time of the meeting of the revenue estimating conference
2 19 held annually by December 15.
2 20 Sec. 2. Section 8.54, subsection 3, Code 2003, is amended
2 21 to read as follows:
2 22 3. Except as otherwise provided in this section, the state
2 23 general fund expenditure limitation for a fiscal year shall be
2 24 ninety=nine the lesser of the following amounts:
2 25 a. Ninety=nine percent of the adjusted revenue estimate.
2 26 b. The adjusted base year appropriation amount determined
2 27 in accordance with subsection 1A.
2 28 EXPLANATION
2 29 This bill revises the requirements for establishing the
2 30 state general fund expenditure limitation under Code section
2 31 8.54.
2 32 Under current law, the annual expenditure limitation used
2 33 by the governor and general assembly in budget deliberations
2 34 is established based upon 99 percent of the adjusted revenue
2 35 estimate for the succeeding fiscal year. The bill provides
3 1 for calculation of an initial base year appropriation amount
3 2 that is subject to annual adjustment. The bill requires the
3 3 expenditure limitation to be the lesser of either 99 percent
3 4 of the adjusted revenue estimate figure or the adjusted base
3 5 year appropriation amount. The base year appropriation amount
3 6 is defined by the bill as the annual average total
3 7 appropriations from the general fund of the state during the
3 8 five=year fiscal period beginning July 1, 1997, and ending
3 9 June 30, 2002. The base year appropriation amount is subject
3 10 to an annual adjustment inflation factor consisting of the sum
3 11 of an annual monetary inflation factor and an annual
3 12 population change factor.
3 13 The annual monetary inflation factor according to the bill
3 14 is determined by the department of revenue and finance for
3 15 purposes of indexing the state's personal net income tax and
3 16 the population change factor is the percentage change in the
3 17 state's population, based upon estimates issued by the U.S.
3 18 census bureau. The department of revenue and finance's
3 19 inflation factor is equal to the percentage change in the
3 20 gross domestic product implicit price deflator for the fiscal
3 21 year ending in the calendar year plus 100 percent.
3 22 The base year appropriation amount is subject to annual
3 23 adjustment by applying the cumulative inflation factor. The
3 24 cumulative inflation factor is derived as the product of the
3 25 inflation factor for the fiscal year ending June 30, 2003, and
3 26 all annual inflation factors for subsequent years.
3 27 LSB 1492HV 80
3 28 jp/sh/8
3 29