AN ACT Relating to appropriations and expenditures by the state and placing limitations thereon; adding a new chapter to Title 43 RCW; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Appropriation" includes every act of the legislature, whether relating to one or more fiscal years, to pay out money, to authorize money to be paid out, to incur an obligation to pay out money, to expend funds, or to authorize the expenditure of funds.

(2) "Covered appropriation" means an appropriation from covered revenues but does not include an appropriation for debt service or otherwise to repay borrowings by the state, an appropriation for emergency expenditures made pursuant to section 5 of this act, or a direct appropriation to a state-administered public employee retirement system.

(3) "Covered revenues" means moneys received or estimated to have been received (under standards promulgated in rules issued by the office of fiscal management) by the state from all sources except:

(a) Funds received from the federal government either directly or through another government entity;

(b) Revenue dedicated by the Constitution to specific purposes;

(d) Returns of principal from investments;

(e) Earnings from the investment of revenues that are not covered revenues;

(f) Earnings from the investment of the budget stabilization account established pursuant to RCW 43.88.525 if the earnings are reinvested in the account;

(g) Insurance proceeds received from involuntary conversion or destruction of capital assets to the extent reinvested in capital assets;

(h) The proceeds from the sale of bonds or other borrowing of the state if the bonds or borrowing matures in five years or more or if the sale or borrowing has been specifically approved by the voters;

(i) Revenues used for emergency expenditures described in section 5 of this act; and

(j) Funds received or collected for other government entities.

(5) "Debt service" means payments of interest on, principal of, and management costs related to bonded indebtedness of the state.

(6) "Emergency" means an extraordinary event or occurrence which could not have been reasonably foreseen or prevented and which requires immediate appropriation of funds to preserve the health and safety of the people.

(7) "Personal income" means personal income in the state as shown in reports of the United States department of commerce or a successor agency.

NEW SECTION. Sec. 2. (1) A session of the legislature that adjourns prior to publication of reports of personal income of the people of the state for a year may use the most reliable estimate of personal income for that year, as determined in accordance with rules promulgated by the office of fiscal management, to determine a temporary limit on covered appropriations. Appropriations made under a temporary limit are not subject to judicial review on the grounds that the limit determined from published reports of personal income is exceeded.

(2) If appropriations are made under a temporary limit, the next session of the legislature shall reduce prior appropriations not yet expended to the extent necessary to conform to the limit as then determined from published reports of personal income of the people of the state.

NEW SECTION. Sec. 3. Covered appropriations of the state for a fiscal year shall not exceed the limit established in this section. The limit for the fiscal year beginning July 1, 1986, shall be the difference between covered appropriations for the fiscal year beginning July 1, 1985, and the amounts attributable to the fiscal year beginning July 1, 1985, for the buy-back of the twenty-fifth month, which difference shall be increased by the lesser of five percent or one-third of the percentage change in state personal income during the calendar years 1983, 1984, and 1985. Thereafter, the limit shall be the lesser of the growth of personal income or cost of living (as measured by the gross national product deflator) plus population growth.

NEW SECTION. Sec. 4. All unobligated cash surplus not transferred to the budget stabilization account pursuant to RCW 43.88.530 shall be used to roll back taxes as follows. The surplus shall be accumulated in the sales and use tax reduction account, which is hereby created in the state general fund. The purpose of this account is to facilitate reduction of the state sales and use tax rate. At the end of each biennium, the accumulated surplus in the account shall be used to provide taxpayer relief by reducing the state sales and use tax rate for the next biennium by an amount equivalent to the surplus.

NEW SECTION. Sec. 5. (1) For any fiscal year, the limitation on covered appropriations in section 3 of this act may be exceeded upon declaration of an emergency by a law approved by two-thirds of each house of the legislature.

(2) The law shall set forth the nature of the emergency, the estimated costs resulting from the emergency, and the method by which the costs are to be defrayed. The limitation may be exceeded only for the fiscal year in which the emergency is declared.

NEW SECTION. Sec. 6. If the cost of providing a service is transferred, in whole or in part, from the covered appropriations of the state to the appropriations of another government entity, the limit on covered appropriations shall be decreased accordingly.

NEW SECTION. Sec. 7. The limit on covered appropriations imposed by this chapter may be changed by a majority vote of the electors voting on the proposition if at least fifty percent of the electors of state vote on the proposition. The proposition shall state in dollars both the amount of the existing limit and the amount of the proposed limit, the reasons for the proposed change, and shall specify whether the change is permanent or limited to the number of fiscal periods stated in the measure. If the change is for a stated number of fiscal periods, subject to a further change made as provided in this section, upon expiration of the stated period, the limit on appropriations shall be the limit on appropriations in effect for the fiscal period immediately prior to the first fiscal period to which the change applies, adjusted as provided in this chapter for the interim period.

NEW SECTION. Sec. 8. This chapter shall not be construed to impair the ability of the state to meet its obligation with respect to existing or future bonded indebtedness.

NEW SECTION. Sec. 9. Sections 1 though 8 of this act shall constitute a new chapter in Title 43 RCW.

NEW SECTION. Sec. 10. This act shall take effect on July 1, 1986, if the proposed amendment to Article VIII of the state Constitution, which would establish a limitation on state expenditures, is validly submitted to and is approved and ratified by the voters at the general election to be held in November 1985. If the proposed amendment is not so approved and ratified, this act shall be null and void in its entirety.