Appropriations and the G-Bill

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While all bills have to pass the house of origin by next Monday, February 25, bills dealing with special appropriations have three extra days to make it to their crossover deadline.

Last week the Joint Committee on Appropriations adopted a general fund revenue estimate of slightly over $1.7 billion for FY20, an increase of about 3.5% over the current fiscal year.

The state’s 4.5% sales and use tax is the single largest revenue source for the state’s general fund and accounts for almost two-thirds of the general fund.  Collections from lottery activities and the contractor’s excise tax are the next two largest sources of general fund revenue, both estimated at slightly over $120 million.  There have been several bills introduced over the past several years to stop or curtail video lottery in the state.  These bills have failed, largely over questions about how to replace that revenue or how to identify which areas of government spending to cut.

Once revenue targets are set, the Appropriations Committee begins the process of creating the Legislative General Appropriations Act.  This is a two-week process where the committee goes agency-by-agency, line-by-line, to create their recommended spending plan for the general operation of State functions.  When the final draft of the General Appropriations Bill (called the G-Bill) is complete, the Committee votes to introduce the bill.  In odd-numbered years, such as this, the bill is sent to the Senate first.  In even-numbered years, the G-Bill is sent to the House first, for consideration and action on the floor.

While special appropriations bills require a two-thirds vote for approval, the G-Bill requires only a simple majority vote i

n both houses of the legislature. The vote requirement is lower than that of a special appropriation to prevent a minority group from disrupting the ordinary business of state government.

After the G-Bill’s approval by both houses, it is sent to the Governor. This is usually the final bill legislators act on before the two-week veto break.  The Governor then has five days to sign the bill (or fifteen, if the Legislature is in recess), to veto specific line items, or to let the bill go into effect without a signature.

If the Governor strikes, or “line item vetoes,” any item from the G-Bill, the bill is reconsidered by the Legislature. If two-thirds of all members of each house pass the bill again with the original appropriation amount, it becomes law; otherwise, the line-item veto stands.

Complete budget information can be found on the Legislative Research Council website under the “Budget” tab.

Halfway there…

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As we transition to the second half of the legislative session, legislators are facing crunch time to cover some significant ground.  This Thursday – Valentine’s Day – is the deadline for the Appropriations committee to decide how much they think we will have to spend this year.  The revenue estimate will be key to making several major decisions, such as how to fund nursing homes, education, community support providers, state employees, and any one-time special projects.

Two big questions will be: 1) how much revenue will come in from collecting online sales taxes? and 2) when and how will the anticipated recession affect the general fund?

On Friday of the following week, all committees must have acted on all bills in the house of origin.  Monday, February 25, is “crossover day,” when all House bills have to be acted on in the House and sent to the Senate, and all Senate bills acted on by the Senate and sent to the House.  It’s a legislative tradition to wear black on crossover day because of all the bills that historically die that day.

There are a couple of bills this year dealing with school capital outlay.  HB1139 would repeal the cap on taxes levied by a school district for capital outlay.  HB1141 would increase the maximum taxes levied by a school district, from $2,800/student to $3,800/student.

Capital outlay impacts every property owner, but how exactly does it work?

School districts have the authority to levy up to $3 per $1,000 of valuation for capital outlay purposes. Unlike the school general fund levy which varies among classes of property, the capital outlay levy is the same for all land classes.  This money can be used to purchase capital assets, including books and software, cover transportation costs, and pay for warranties on capital assets.  A school district may transfer up to 45% of its capital outlay taxes to the school general fund.   Growth of the school capital outlay fund is capped at three percent or inflation, whichever is less.

When the legislature changed the school funding formula in 2016, one of the provisions set a limit of $2,800 per student for capital outlay purposes starting in 2021.  The same growth limitation of three percent or inflation is applied to the per-student limit.

Last year, the legislature recognized that some school districts had current capital outlay obligations exceeding $2,800 per student.  School districts that had acquired debt prior to July 1, 2016, can ask for the obligation payment plus an additional $2,800 per student.  Districts that did not have debt prior to 2016 are bound by whichever of the two limiting factors will generate the fewest tax dollars – the three-percent-or-inflation index or the per-student cap.

The school funding formula is one of the more intricate parts of our state budget, and the capital outlay fund is only a portion of that formula.  I welcome your questions on the topic!