A BILL FOR AN ACT

SECTION 1. The purpose of this Act is to propose amendments to article VII of the Constitution of the State of Hawaii in order to establish a mechanism for the State to build a financial reserve to be used when there is an emergency or economic downturn, or when there is an unforeseen reduction in revenues. The proposal is (1) to establish an emergency and budget reserve fund, and (2) to clarify when the general fund expenditure ceiling shall apply to certain appropriations of state funds.

SECTION 2. Article VII of the Constitution of the State of Hawaii is amended by adding a new section to be appropriately designated and to read as follows:

SECTION . There shall be established by law an emergency and budget reserve fund to receive moneys set aside as financial reserves for the State.

Expenditures from the emergency and budget reserve fund are meant to be a temporary supplemental source of funding during times of emergency, economic downturn, or unforeseen reduction in revenues. No expenditures shall be made from the emergency and budget reserve fund except pursuant to appropriations approved by a three-fourths vote of the members of each house of the legislature."

SECTION 3. Appropriations of moneys into the emergency and budget reserve fund shall be regarded as measures to save for a rainy day, rather than spending measures, and thus shall be excluded from the general fund expenditure ceiling as stipulated in article VII, section 9 of the Constitution of the State of Hawaii. When the reserves are actually used to fund programs, such expenditures shall then be counted against the expenditure ceiling.

SECTION 4. Article VII, section 9, of the Constitution of the State of Hawaii is amended to read as follows:

Section 9. In each regular session in an odd-numbered year, the legislature shall transmit to the governor an appropriation bill or bills providing for the anticipated total expenditures of the State for the ensuing fiscal biennium. In such session, no appropriation bill, except bills recommended by the governor for immediate passage, or to cover the expenses of the legislature, shall be passed on final reading until the bill authorizing operating expenditures for the ensuing fiscal biennium, to be known as the general appropriations bill, shall have been transmitted to the governor.

In each regular session in an even-numbered year, at such time as may be provided by law, the governor may submit to the legislature a bill to amend any appropriation for operating expenditures of the current fiscal biennium, to be known as the supplemental appropriations bill, and bills to amend any appropriations for capital expenditures of the current fiscal biennium, and at the same time the governor shall submit a bill or bills to provide for any added revenues or borrowings that such amendments may require. In each regular session in an even-numbered year, bills may be introduced in the legislature to amend any appropriation act or bond authorization act of the current fiscal biennium or prior fiscal periods. In any such session in which the legislature submits to the governor a supplemental appropriations bill, no other appropriation bill, except bills recommended by the governor for immediate passage, or to cover the expenses of the legislature, shall be passed on final reading until such supplemental appropriations bill shall have been transmitted to the governor.

Notwithstanding any other provision to the contrary, the legislature shall establish a general fund expenditure ceiling which shall limit the rate of growth of general fund appropriations, excluding appropriations to the emergency and budget reserve fund and federal funds received by the general fund, to the estimated rate of growth of the State's economy as provided by law. No appropriations in excess of such ceiling shall be authorized during any legislative session unless the legislature shall, by a two-thirds vote of the members to which each house of the legislature is entitled, set forth the dollar amount and the rate by which the ceiling will be exceeded and the reasons therefor.

The general fund expenditure ceiling shall also apply to expenditures authorized from the emergency and budget reserve fund."

SECTION 5. The question to be printed on the ballot shall be as follows:

"Shall article VII of the Constitution of the State of Hawaii be amended to:

SECTION 6. New constitutional material is underscored.

SECTION 7. This Act shall take effect upon compliance with article XVII, section 3, of the Constitution of the State of Hawaii.