Senate Joint Resolution 8 - Introduced SENATE JOINT RESOLUTION 8 BY SMITH , DIX , FEENSTRA , ANDERSON , ERNST , CHELGREN , BERTRAND , SCHNEIDER , BREITBACH , CHAPMAN , ZUMBACH , GREINER , SEGEBART , JOHNSON , HOUSER , KAPUCIAN , GUTH , SINCLAIR , ROZENBOOM , WHITVER , BOETTGER , ZAUN , SORENSON , and BEHN SENA TE JOINT RESOLUTION A Joint Resolution proposing amendments to the Constitution of 1 the State of Iowa relating to the state budget by creating 2 a state general fund expenditure limitation, providing for 3 a taxpayers trust fund, requiring authorization for certain 4 bonds, and restricting certain state revenue changes. 5 BE IT RESOLVED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 2125XS (6) 85 jp/sc

S.J.R. 8 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 new Article XIII: 4 ARTICLE XIII. 5 EXPENDITURE LIMITATION. 6 General fund expenditure limitation. SECTION 1. 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 lesser 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 a revenue estimating 13 conference which shall be established by the general assembly 14 by law, adjusted by subtracting estimated refunds payable 15 from that estimated revenue. However, if the state general 16 fund expenditure limitation is calculated based upon the 17 adjusted revenue estimate and the general assembly holds an 18 extraordinary session prior to the commencement of the fiscal 19 year to which the adjusted revenue estimate applies and before 20 or during the extraordinary session the revenue estimating 21 conference determines a lesser revenue estimate, the lesser 22 estimate shall be used for 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 which shall be established by the general assembly by 28 law. 29 d. “Net revenue estimate” means the most recent revenue 30 estimate determined before January 1, or a later and lesser 31 estimate determined before adjournment of the regular 32 session of the general assembly for the general fund for the 33 current fiscal year, as determined by the revenue estimating 34 conference, and adjusted by subtracting estimated refunds 35 -1- LSB 2125XS (6) 85 jp/sc 1/ 8

S.J.R. 8 payable from that estimated revenue. However, if the state 1 general fund expenditure limitation is calculated based upon 2 the net 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 before 5 or during the extraordinary session the revenue estimating 6 conference determines a lesser revenue estimate for the current 7 fiscal year, such lesser estimate shall be used for calculating 8 the net revenue estimate for the general fund. 9 e. “New revenue” means moneys which are received by the 10 general fund due to increased tax rates or fees or newly 11 created taxes or fees over and above those moneys which are 12 received due to state taxes or fees which are in effect as 13 of January 1 following the most recent meeting of the state 14 revenue estimating conference. “New revenue” also includes 15 moneys received by the general fund due to new transfers over 16 and above those moneys received by the general fund due to 17 transfers which are in effect as of January 1 following the 18 most recent meeting of the state revenue estimating conference. 19 Except for transfers provided for by law, the state revenue 20 estimating conference shall determine whether transfers to the 21 general fund are to be considered as new revenue in determining 22 the state general fund expenditure limitation. 23 f. “Surplus” means the cumulative excess of revenue and 24 other financing sources over expenditures and other financing 25 uses for the general fund at the end of a fiscal year. 26 2. A state general fund expenditure limitation is created 27 and calculated in subsection 3, for each fiscal year beginning 28 on or after July 1 following the effective date of this 29 section. 30 3. Except as otherwise provided in this section, the state 31 general fund expenditure limitation for a fiscal year shall be 32 the lesser of the following amounts: 33 a. Ninety-nine percent of the adjusted revenue estimate for 34 the general fund for the following fiscal year. 35 -2- LSB 2125XS (6) 85 jp/sc 2/ 8

S.J.R. 8 b. One hundred four percent of the current fiscal year net 1 revenue estimate for the general fund. 2 4. The state general fund expenditure limitation shall be 3 used by the governor in the preparation and approval of the 4 budget and by the general assembly in the budget process. 5 5. If a new revenue source is proposed, the budget revenue 6 projection used for that new revenue source for the period 7 beginning on the effective date of the new revenue source and 8 ending in the fiscal year in which the source is included in 9 the adjusted revenue estimate or the net revenue estimate, 10 as applicable, shall be ninety-five percent of the amount 11 remaining after subtracting estimated refunds payable from the 12 projected revenue from that source. If a new revenue source 13 is established and implemented, the original state general 14 fund expenditure limitation amount provided for in subsection 15 3 shall be recalculated to include ninety-five percent of the 16 estimated revenue from that source that is attributed to the 17 revenue estimate used to calculate the original limitation 18 amount. 19 6. a. Unless provided otherwise in accordance with 20 paragraph “b” , if there is a surplus existing at the end of a 21 fiscal year which exceeds ten percent of the revenue estimate 22 used to establish the state general fund expenditure limitation 23 for that fiscal year and the actual net revenue for the general 24 fund exceeds such revenue estimate for that fiscal year, the 25 surplus shall be transferred to a taxpayers trust fund. Except 26 for temporary cash flow purposes, moneys in the taxpayers trust 27 fund shall only be used in accordance with appropriations 28 or transfers made by the general assembly for purposes of 29 providing tax relief. 30 b. A portion of the surplus equal to ten percent or less 31 of the revenue estimate used to establish the state general 32 fund expenditure limitation for the following fiscal year or 33 a greater portion may be included in such revenue estimate if 34 approved in a bill receiving the affirmative votes of at least 35 -3- LSB 2125XS (6) 85 jp/sc 3/ 8

S.J.R. 8 two-thirds of the members elected to each house of the general 1 assembly. The state general fund expenditure limitation shall 2 be recalculated accordingly. 3 7. If a bill or joint resolution provides for a new 4 enactment of revenue or appropriations bonding authority, or 5 an expansion of existing revenue or appropriations bonding 6 authority, which bonds are funded in whole or in part from 7 revenue from the general fund or from another portion of the 8 state treasury, the bill or joint resolution shall not become 9 law unless approved by the affirmative votes of at least 10 two-thirds of the members elected to each house of the general 11 assembly. In addition, the state general fund expenditure 12 limitation for the initial or subsequent fiscal year to 13 which the bill or joint resolution applies shall include any 14 appropriations of such revenue for the fiscal year. 15 8. The scope of the state general fund expenditure 16 limitation calculated in accordance with this section shall not 17 include federal funds, donations, constitutionally dedicated 18 moneys, and moneys expended from a state retirement system. 19 9. The governor shall submit and the general assembly shall 20 pass a budget which does not exceed the state general fund 21 expenditure limitation. The governor shall not approve or 22 disapprove appropriation bills or items of appropriation bills 23 passed by the general assembly in a manner that would cause 24 the final budget approved by the governor to exceed the state 25 general fund expenditure limitation. 26 10. The governor shall not submit and the general assembly 27 shall not pass a budget which in order to balance assumes 28 reversion of any part of the total of the appropriations 29 included in the budget. 30 11. The state shall use consistent standards, in accordance 31 with generally accepted accounting principles, for all state 32 budgeting and accounting purposes. 33 12. The general assembly shall enact laws to implement this 34 section. 35 -4- LSB 2125XS (6) 85 jp/sc 4/ 8

S.J.R. 8 Sec. 2. The following amendment to the Constitution of the 1 State of Iowa is proposed: 2 The Constitution of the State of Iowa is amended by adding 3 the following new sections to new Article XIII: 4 ARTICLE XIII. 5 TWO-THIRDS MAJORITY FOR TAX LAW CHANGES. 6 Two-thirds majority to increase taxes. SECTION 1. A bill 7 containing provisions enacting, amending, or repealing the 8 state income tax or enacting, amending, or repealing the state 9 sales and use taxes, in which the aggregate fiscal impact of 10 those provisions relating to those taxes results in a net 11 increase in state tax revenue, as determined by the general 12 assembly, shall require the affirmative votes of at least 13 two-thirds of the members elected to each house of the general 14 assembly for passage. This section does not apply to income 15 tax or sales and use taxes imposed at the option of a local 16 government. 17 Two-thirds majority to enact new state tax. SEC. 2. A bill 18 that establishes a new state tax to be imposed by the state 19 shall require the affirmative votes of at least two-thirds of 20 the members elected to each house of the general assembly for 21 passage. 22 Enforcement of two-thirds majority requirement. SEC. 3. A 23 lawsuit challenging the proper enactment of a bill pursuant to 24 section 1 or 2 shall be filed no later than one year following 25 the enactment. Failure to file such a lawsuit within the 26 one-year time limit shall negate the two-thirds majority 27 requirement as it applies to the bill. 28 Each bill to which section 1 or 2 applies shall include a 29 separate provision describing the requirements for enactment 30 prescribed by section 1 or 2. 31 Implementation. SEC. 4. The general assembly shall enact 32 laws to implement sections 1 through 3. 33 Sec. 3. The foregoing proposed amendments to the 34 Constitution of the State of Iowa are referred to the general 35 -5- LSB 2125XS (6) 85 jp/sc 5/ 8

S.J.R. 8 assembly to be chosen at the next general election for members 1 of the general assembly, and the Secretary of State is directed 2 to cause them to be published for three consecutive months 3 previous to the date of that election as provided by law. 4 EXPLANATION 5 This resolution proposes two amendments within a new Article 6 XIII to the Constitution of the State of Iowa which relate to 7 state budgets and state revenue. 8 The first amendment creates a state general fund expenditure 9 limitation. The amount of the limitation is the lesser of 10 99 percent of the adjusted revenue estimate for the general 11 fund of the state for the following fiscal year or 104 percent 12 of the net revenue estimate for the general fund for the 13 current fiscal year. The amendment defines adjusted revenue 14 estimate and net revenue estimate and requires that the 15 estimates be determined by a revenue estimating conference 16 which is to be created by the general assembly by law. The 17 expenditure limitation is required to be used by the governor 18 in preparation of the governor’s budget and by the general 19 assembly in the budget process. The governor is prohibited 20 from approving or disapproving of appropriations in a manner 21 that would cause the final budget approved by the governor to 22 exceed the expenditure limitation. 23 If a new revenue source is established and implemented, 95 24 percent of the estimate of that new revenue shall be included 25 in the revenue estimate used to calculate the expenditure 26 limitation. 27 If there is a surplus existing at the end of a fiscal year 28 which exceeds 10 percent of the revenue estimate used to 29 calculate the expenditure limitation for the fiscal year and 30 the actual net revenue for the general fund for the fiscal 31 year exceeds such revenue estimate for the fiscal year, the 32 surplus is required to be transferred to a taxpayers trust 33 fund. However, any portion of the surplus which is equal 34 to 10 percent or less of the amount of the adjusted revenue 35 -6- LSB 2125XS (6) 85 jp/sc 6/ 8

S.J.R. 8 estimate for the following fiscal year or a greater portion 1 may be included in the revenue estimate used to calculate the 2 expenditure limitation if inclusion is approved in a bill by at 3 least two-thirds of the members elected to each house of the 4 general assembly. The expenditure limitation is recalculated 5 accordingly. 6 The enactment of a bill or joint resolution providing for new 7 or expanded authority to issue revenue or appropriations bonds 8 funded in whole or in part from revenue from the general fund 9 or from another portion of the state treasury requires a vote 10 of at least two-thirds of the members elected to each house of 11 the general assembly. In addition, the appropriations of such 12 revenue are required to be included in the state general fund 13 expenditure limitation for each applicable fiscal year. 14 The first amendment also requires the state to use generally 15 accepted accounting principles for state budgeting and 16 accounting purposes. The amendment provides that the general 17 assembly shall enact laws to implement the amendment. 18 The second amendment contained in the resolution requires a 19 two-thirds majority vote of the members elected to each house 20 of the general assembly for certain tax law changes. Any bill 21 that enacts, amends, or repeals the state income tax or the 22 state sales and use tax, and which causes, in the aggregate, an 23 increase in state tax revenues, as determined by the general 24 assembly, must be adopted by at least two-thirds of the members 25 elected to each house of the general assembly. A two-thirds 26 majority vote of the members elected to each house of the 27 general assembly is required in order to enact a new state tax 28 to be imposed by the state. A lawsuit challenging enactment 29 of a bill subject to either two-thirds majority passage 30 requirement must be filed no later than one year from the date 31 of enactment of the bill. Finally, the amendment provides 32 that the general assembly shall enact laws to implement the 33 amendment. 34 The resolution, if adopted, will be referred to the next 35 -7- LSB 2125XS (6) 85 jp/sc 7/ 8