A BILL TO BE ENTITLED
AN ACT to strengthen the savings reserve, as recommended by the legislative research commission.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 143C‑4‑2 reads as rewritten:
"§ 143C‑4‑2.  Savings Reserve.
(a)	Creation. – The Savings Reserve is established as a reserve in the General Fund and is a component of the unappropriated General Fund balance.
(b)	General Use of Funds. – In each fiscal year, funds reserved to the Savings Reserve shall be available for expenditure, in an aggregate amount that does not exceed seven and one‑half percent (7.5%) of the prior fiscal year's General Fund net appropriations operating budget, upon appropriation by a majority vote of the membership of the Senate and House of Representatives present and voting for any of the following purposes:
(1)	To cover a decline in General Fund revenue from one fiscal year to another.
(2)	To cover the difference between that fiscal year's base budget needs and projected revenue.
(3)	To pay costs imposed by a court or administrative order.
(4)	To provide relief and assistance from the effects of an emergency, as that term is defined in G.S. 166A‑19.3.
(b1)	Extraordinary Use of Funds. – In each fiscal year, funds reserved to the Savings Reserve shall be available for expenditure upon a two‑thirds vote of the membership of the Senate and House of Representatives present and voting for any of the following purposes:
(1)	To use for any of the purposes set forth in subdivisions (1) through (4) of subsection (b) of this section in an aggregate amount that exceeds seven and one‑half percent (7.5%) of the prior fiscal year's General Fund net appropriations operating budget.
(2)	For a purpose not set forth in subdivisions (1) through (4) of subsection (b) of this section in any amount.
	
(d)	Transfer of Funds Into Savings Reserve. – Each Current Operations Appropriations Act enacted by the General Assembly shall transfer to the Savings Reserve fifteen percent (15%) of each fiscal year's estimated growth in State tax revenues, except that if that transfer would cause the balance of the Reserve to exceed the recommended Savings Reserve balance developed pursuant to subsection (e) of this section then the amount transferred pursuant to this subsection shall be reduced accordingly.
(e)	Consensus Estimate. – The Office of State Budget and Management and the Fiscal Research Division of the General Assembly shall jointly develop and annually produce an evaluation of the adequacy of the Savings Reserve based on the volatility of North Carolina's General Fund tax structure, which shall take into consideration relevant statistical and economic literature. After completing the evaluation, these entities may revise the methodology as needed to estimate the target for the Savings Reserve balance, which shall be calculated so as to be sufficient to cover two years of need for nine out of 10 scenarios involving a decline in General Fund revenue from one fiscal year to the next fiscal year. The recommended balance shall be expressed as a percentage of the prior year General Fund net appropriations operating budget. The Office of State Budget and Management shall report this percentage to the Chairs of the House of Representatives and Senate Appropriations and Finance Committees no later than February 1 of each year.
(f)	General Assembly May Appropriate Additional Funds. – Nothing in this section shall be construed to prohibit the General Assembly from depositing additional funds into the Savings Reserve."
SECTION 2.  G.S. 143C‑3‑5(b) reads as rewritten:
"§ 143C‑3‑5.  Budget recommendations and budget message.
…
(b)	Odd‑Numbered Years. – In odd‑numbered years the budget recommendations shall include the following components:
(1)	A Recommended State Budget setting forth goals for improving the State with recommended expenditure requirements, funding sources, and performance information for each State government program and for each proposed capital improvement. The Recommended State Budget may be presented in a format chosen by the Director, except that the Recommended State Budget shall clearly distinguish program base budget requirements, program reductions, program eliminations, program expansions, and new programs, and shall explain all proposed capital improvements in the context of the Six‑Year Capital Improvements Plan and as required by G.S. 143C‑8‑6.
(1a)	The Governor's Recommended State Budget shall include a base budget, which shall be presented in the budget support document pursuant to subdivision (2) of this subsection.
…
(3)	A Current Operations Appropriations Act that makes appropriations for each fiscal year of the upcoming biennium for the operating expenses of all State agencies as contained in the Recommended State Budget, together with a Capital Improvements Appropriations Act that authorizes any capital improvements projects.
…
(6)	The Governor's Recommended State Budget shall include a transfer to the Savings Reserve of fifteen percent (15%) of the estimated growth in State tax revenues for each fiscal year of the upcoming biennium. This subdivision applies only if, and to the extent that, the balance of the Savings Reserve remains below the recommended Savings Reserve balance developed pursuant to G.S. 143C‑4‑2(e)."
SECTION 3.  G.S. 142‑15.4 reads as rewritten:
"§ 142‑15.4.  Savings from refinancing of general obligation bonds to be placed in the Savings Reserve.
(a)	Whenever general obligation bonds issued or incurred by the State are refinanced:
(1)	The General Assembly shall not reduce the funds appropriated for servicing the refinanced debt during the fiscal biennium in which the refinancing occurs.
(2)	The State Controller shall, in conjunction with the State Treasurer, periodically transfer the savings resulting from the refinancing of the debt to the Savings Reserve established pursuant to G.S. 143C‑4‑2 during the fiscal biennium in which the refinancing occurs.
(3)	The Director of the Budget shall, in the fiscal biennium immediately following the refinancing, adjust the amount of debt service funded in the base budget so that it aligns with actual debt service needs.
(b)	Subsection (a) of this section applies only if, and to the extent that, the balance of the Savings Reserve remains below the recommended Savings Reserve balance developed pursuant to G.S. 143C‑4‑2(e)."
SECTION 4.  G.S. 142‑96 reads as rewritten:
"§ 142‑96.  Savings from refinancing of special indebtedness to be placed in the Savings Reserve.
(a)	Whenever special indebtedness issued or incurred pursuant to this Article is refinanced:
(1)	The General Assembly shall not reduce the funds appropriated for servicing the refinanced debt during the fiscal biennium in which the refinancing occurs.
(2)	The State Controller shall, in conjunction with the State Treasurer, periodically transfer the savings resulting from the refinancing of the debt to the Savings Reserve established pursuant to G.S. 143C‑4‑2 during the fiscal biennium in which the refinancing occurs.
(3)	The Director of the Budget shall, in the fiscal biennium immediately following the refinancing, adjust the amount of debt service funded in the base budget so that it aligns with actual debt service needs.
(b)	Subsection (a) of this section applies only if, and to the extent that, the balance of the Savings Reserve remains below the recommended Savings Reserve balance developed pursuant to G.S. 143C‑4‑2(e)."
SECTION 5.  G.S. 143C‑5‑4(b)(8) reads as rewritten:
"(8)	Statutory transfers to reserves. – Notwithstanding G.S. 143C‑4‑2 and G.S. 143C‑4‑3, funds shall not be reserved to the Savings Reserve or the Repairs and Renovations Reserve and the State Controller shall not transfer funds from the unreserved fund balance to those reserves on June 30 of the prior fiscal year."
SECTION 6.  G.S. 147‑86.11(e)(7) reads as rewritten:
"(7)	The State Controller may use cash reserved to the Savings Reserve and cash from other funds, including special funds, that is not needed temporarily to meet the cash flow needs of the General Fund, but only to the extent that this authority can be used without jeopardizing the ability of reserves or funds, including special funds, to meet their ongoing obligations. Any cash transferred from reserves or funds, including special funds, shall be fully restored by the end of the fiscal year in which the funds were transferred, and interest shall be paid on all cash transferred to the General Fund pursuant to this subdivision from interest‑bearing accounts."
SECTION 7.  During the 2019 Regular Session of the General Assembly, it is the intent of the General Assembly to study whether the changes to the Savings Reserve enacted in this act have successfully accomplished its purpose of establishing and maintaining sufficient reserves to address unanticipated events and circumstances such as natural disasters, economic downturns, threats to public safety, health, and welfare, and other emergencies.
SECTION 8.  Sections 3 and 4 of this act become effective July 1, 2017. The remainder of this act becomes effective October 1, 2017.