Colorado Legislative Council Staff

STATE and LOCAL

REVISED CONDITIONAL FISCAL NOTE

(replaces Fiscal Note dated January 26, 1998)

State General Fund Expenditure Impact

State Cash Fund Revenue and Expenditure Impact

Local Revenue Impact

TITLE:            CONCERNING AN INCENTIVE PROGRAM FOR STATE AGENCIES TO REDUCE COSTS.

Summary of Legislation

            This reengrossed bill allows any agency to implement measures that reduce costs below the agency’s appropriations for any fiscal year. Any agency that achieves cost savings may transfer 10 percent of the amount of the savings from one funded line item in its budget to any other funded line item in the same fiscal year. The bill prohibits an agency from using the savings to fund new positions or to employ additional personnel. Prior to expending the savings, the agency is required to enter into a memorandum of understanding with the Joint Budget Committee. The bill specifies that cost savings may be spent only for reinvestment in technology or other capital projects related to the item of appropriation to which the moneys were transferred.

            The bill also requires the General Assembly to appropriate 50 percent of the savings that each agency realizes within any fiscal year to the School Construction and Renovation Fund (created in HB 98-1231) for the fiscal year following the fiscal year in which the savings were achieved.

            The bill allows the General Assembly to reduce an agency’s appropriations for the fiscal year following the fiscal year in which the agency achieved the savings by the amount of the savings if the General Assembly determines the agency is no longer maintaining the measures the agency used to achieve the savings. The General Assembly is prohibited from using the cost savings as a justification to reduce the funding for any line item, or the total amount of the agency’s appropriation, an agency may receive for the fiscal year following the fiscal year in which the agency achieved the savings. The bill, however, does not affect the General Assembly’s authority to reduce an agency’s appropriations for any reason other than cost savings.

            The bill will become effective at 12:01 a.m. on the day following the ninety-day period after adjournment sine die of the General Assembly, or on the date of the official declaration of the vote of the people as proclaimed by the Governor, if a referendum petition is filed pursuant to Article V, Section 1 (3) of the State Constitution.

            The bill may affect state expenditures. The bill will create a new source of revenue to local school districts, subject to any cost savings realized by state agencies. Therefore, the reengrossed bill is assessed as having a conditional fiscal impact.

State Expenditures

            This bill allows a state agency to create cost saving measures and to apply one-half of any resulting cost savings to line items in the agency’s current year operating budget. The bill requires the General Assembly to appropriate the remaining one-half of the resulting savings to the School Construction and Renovation Fund in the successive fiscal year. The bill specifies that “cost savings” means any money that an agency does not expend from its appropriations for a given fiscal year that is a direct result of cost-cutting measures, but does not include or be a result of a case load reduction.

            The bill transfers certain unexpended moneys from a state agency’s operating budget to the School Construction and Renovation Fund in the successive fiscal year for use by local school districts. The transfer of any moneys to the fund is dependent upon: 1) the agency establishing a cost-cutting measure, and 2) the agency actually realizing a cost reduction within that fiscal year.

            The Department of Law believes that agencies that employ these cost savings measures may be required to incur additional legal services costs for rulemaking during FY 1998-99. The department estimates that each applicable agency may require up to 40 hours of legal services at a cost of $1,920 cash fund exempt, unless one agency is specifically authorized to adopt rules for all agencies.

Local Government Impact

            This bill may provide a new source of revenue to the School Construction and Renovation Fund for use by local school districts if state agencies establish cost-cutting measures and realize cost reductions as a result of those cost-cutting measures. The amounts of those cost savings, if any, have not been estimated.

Spending Authority

            This fiscal note would imply that no new state spending authority or appropriations are required for FY 1998-99 to implement the provisions of this bill.

Departments Contacted

            All State Agencies