Clarifies the respective roles of the executive and legislative branches in the allotment system.

A BILL FOR AN ACT

SECTION 1. Chapter 37, Hawaii Revised Statutes, is amended by adding two new sections to part II be appropriately designated and to read as follows:

"§37-   Executive budget decisions; guidelines. All decisions of the governor and the director of finance in the exercise of executive authority under sections 37-32 to 37-37 and 37-74 shall be in accordance with the intent and policy of the allotment system under section 37-31.

§37-   Allotments of less than full amount of appropriations. (a) No later than twenty days after the end of each quarter, the director of finance shall submit to the legislature a written report that lists each instance in which the director has withheld an allotment of appropriated funds pursuant to:

(b) The director of finance shall provide the council of revenues a copy of the report at the time the director submits the report to the legislature."

SECTION 2. Section 37-31, Hawaii Revised Statutes, is amended to read as follows:

"§37-31 Intent and policy. It is declared to be the policy and intent of the legislature that the total appropriations made by it, or the total of any budget approved by it, for any department or establishment, shall be deemed to be the maximum amount authorized to meet the requirements of the department or establishment for the period of the appropriation, excepting as may otherwise be provided by law, and that the governor and the director of finance should be given the powers granted by sections 37-32 to 37-41 in order that savings may be effected by careful supervision throughout each appropriation period with due regard to changing conditions; and by promoting more economic and efficient management of state departments and establishments.

While the allotment system authorizes the governor to avoid wasteful expenditures in circumstances where the social purposes of the appropriation are not compromised or to reduce expenditures where unanticipated revenue shortfalls occur, it does not permit the executive branch to prioritize authorized expenditures and reallocate resources, for to do so would be a usurpation of the legislature's appropriation powers. The governor has no express or inherent power based on the governor's view of sound fiscal policy to impound funds which have been appropriated by the legislature. Impounding appropriated funds is inconsistent with a constitutional form of government in which governmental powers are distributed among three co-ordinate and co-equal branches."

SECTION 3. Section 37-36, Hawaii Revised Statutes, is amended to read as follows:

"§37-36 Modification. (a) The director of finance may modify or amend any previous allotment upon notice to the department or establishment concerned; provided that:

(b) Notwithstanding subsection (a), the total amount of allotment reductions made in reasonable anticipation of an imminent revenue shortfall shall not exceed an amount equal to the anticipated shortfall. Funds withheld pursuant to an allotment reduction shall be restored as soon as there is no longer a reasonable anticipation of an imminent revenue shortfall.

[(b)] (c) Prior to the implementation of any modification in allotment proposed by the director of finance pursuant to subsection (a), in which the sum of the modifications exceed 2.5 per cent of the total general fund appropriation made by the legislature in any fiscal year, the director shall notify the president of the senate, the speaker of the house of representatives, and the chairpersons of the senate committee on ways and means and the house of representatives committee on finance, respectively, of the director's intent.

(d) As used in this section, "reasonable anticipation of an imminent revenue shortfall" means an anticipation based on the best information available to the director of finance and the legislature, including the revenue estimates of the council on revenues pursuant to section 37-111."

SECTION 4. Section 37-37, Hawaii Revised Statutes, is amended to read as follows:

"§37-37 Reduction. (a) Except as provided in subsection (b), when the director of finance [determines] makes a reasonable determination at any time that the probable receipts from taxes or any other sources for any appropriation will be less than was anticipated, and that consequently the amount available for the remainder of the term of the appropriation or for any allotment period will be less than the amount estimated or allotted therefor, the director shall, with the approval of the governor and after notice to the department or establishment concerned, reduce the amount allotted or to be allotted; provided that no reduction reduces any allotted amount below the amount required to meet valid obligations or commitments previously incurred against the allotted funds.

(b) For the University of Hawaii, when the director of finance [determines] makes a reasonable determination at any time that the probable receipts from taxes or any other sources for any appropriation will be less than was anticipated, and that consequently the amount available for the remainder of the term of the appropriation or for any allotment period will be less than the amount estimated or allotted therefor, the director shall advise the governor of the situation, and the governor shall redetermine the allotment ceiling for the affected source or sources of funding pursuant to section 37-34, and shall advise the university and make a public declaration ten days prior to the effective date of the redetermination. The university, not more than twenty days after the governor's notification, shall submit revised estimates consistent with the governor's redetermination to the director of finance. Otherwise, the director of finance shall modify, amend, or reduce any allotment of the university to comply with the governor's redetermination; provided that no reduction shall reduce any allotted amount below the amount required to meet valid obligations or commitments previously incurred against the allotted funds.

(c) Notwithstanding subsections (a) and (b), when the director of finance reduces an allotment made as a result of a reasonable determination that probable receipts from taxes or other sources for any appropriation will be less than anticipated and less than the amount estimated or allotted therefor, the total amount of the allotment reductions shall not exceed an amount equal to the anticipated revenue deficiency. Funds withheld pursuant to an allotment reduction shall be restored as soon as there can no longer be a reasonable determination that receipts are insufficient for an appropriation.

[(c)] (d) Prior to the implementation of any reduction in allotment proposed by the director of finance or the governor pursuant to subsection (a) or (b), in which the sum of the reductions exceed 2.5 per cent of the total general fund appropriation made by the legislature in any fiscal year, the director of finance shall notify the president of the senate, the speaker of the house of representatives, and the chairpersons of the senate committee on ways and means and the house of representatives committee on finance, respectively, of the director's intent."

SECTION 5. Section 37-74, Hawaii Revised Statutes, is amended to read as follows:

"§37-74 Program execution. (a) Except as limited by policy decisions of the governor, appropriations by the legislature, and other provisions of law, the several agencies responsible for administering state programs shall administer their program assignments and shall be responsible for their proper management.

(b) The appropriations by the legislature for a biennium shall be allocated between the two fiscal years of the biennium in the manner provided in the budget or appropriations act and as further prescribed by the director of finance. The amounts allocated for each fiscal year shall be subject to the allotment system prescribed in chapter 37, part II. Each agency (except the courts), in estimating its quarterly requirements under chapter 37, part II, shall prepare a plan for the fiscal year for the operation of each of the programs it is responsible for administering. The operations plan shall be in such form and content as the department of budget and finance may prescribe. It shall be submitted, together with the estimated quarterly requirements, to the department of budget and finance on such date as the department may prescribe.

(c) The department of budget and finance shall:

(d) Notwithstanding subsection (c), when the director of finance modifies or withholds an expenditure as a result of a reasonable determination that state receipts and surplus will be insufficient to meet the authorized expenditure levels, the total amount of the expenditures modified or withheld shall not exceed an amount equal to the anticipated revenue deficiency. Expenditures modified or withheld shall be restored as soon as the director can no longer make a reasonable determination that state receipts and surpluses are insufficient.

[(d)] (e) No appropriation transfers or changes between programs or agencies shall be made without legislative authorization; provided that:

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval.