Increases funds in the Emergency and Budget Reserve Fund, also known as the Rainy Day Fund. (HB2312 HD1)

A BILL FOR AN ACT

SECTION 1. The purpose of this Act is to strengthen the emergency and budget reserve fund by making an appropriation to double the size of the fund to a total of $110,000,000 at the beginning of fiscal year 2006-2007. The emergency and budget reserve fund, also known as the "rainy day fund," serves as a temporary supplemental source of funding for the State during times of emergency, economic downturn, or unforeseen reduction in revenues.

Hawaii's economy registered one of its best years ever in 2005. The current solid rates of growth in employment, personal income, and tax collections are indicative of the continuing broad-based expansion of the local economy.

The time is ideal to set aside funds to prepare for setbacks or unexpected crises, and at the same time, move us toward the goal of maintaining a reserve of five per cent of revenues. The National Association of State Budget Officers has consistently recommended that states maintain a reserve of five per cent of revenues to safeguard against budget instability due to unforeseeable circumstances. For Hawaii, this recommendation translates to a fund balance of over $200,000,000. Passage of this measure will represent a significant step toward that objective and will increase our financial reserves for future emergencies. It will also have a positive effect on maintaining the State's strong credit rating.

SECTION 2. There is appropriated out of the general revenues of the State of Hawaii the sum of $1 or so much thereof as may be necessary for fiscal year 2006-2007 to be deposited into the emergency and budget reserve fund.

The sum appropriated shall be expended by the department of budget and finance.

SECTION 3. This Act shall take effect on July 1, 2020.