2006 -- S 3050

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LC03048

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2006

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A N A C T

RELATING TO TAXATION -- PROPERTY TAXES

     

     

     Introduced By: Senators Paiva-Weed, J Montalbano, Alves, Lenihan, and Felag

     Date Introduced: April 27, 2006

     Referred To: Senate Finance

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 44-5-2 of the General Laws in Chapter 44-5 entitled "Levy and

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Assessment of Local Taxes" is hereby amended to read as follows:

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     44-5-2. Maximum levy. -- (a) A Through and including its fiscal year 2007, a city and or

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town may levy a tax in an amount not more than five and one-half percent (5.5%) in excess of the

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amount levied and certified by that city or town for the prior year. The amount levied by a city or

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town is deemed to be consistent with the five and one-half percent (5.5%) levy growth cap if the

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tax rate is not more than one hundred and five and one-half percent (105.5%) of the prior year's

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tax rate and the budget resolution or ordinance, as applicable, specifies that the tax rate is not

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increasing by more than five and one-half percent (5.5%) except as specified in subsection (c) of

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this section. In all years when a revaluation or update is not being implemented, a tax rate is

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deemed to be one hundred five and one-half percent (105.5%) or less of the prior year's tax rate if

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the tax on a parcel of real property, the value of which is unchanged for purpose of taxation, is no

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more than one hundred five and one-half percent (105.5%) of the prior year's tax on the same

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parcel of real property. In any year when a revaluation or update is being implemented, the tax

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rate is deemed to be one hundred five and one-half percent (105.5%) of the prior year's tax rate as

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certified by the division of local government assistance in the department of administration. In its

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fiscal year 2008, a city or town may levy a tax in an amount not more than five and one-quarter

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percent (5.25%) in excess of the total amount levied and certified by that city or town for its fiscal

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year 2007. In its fiscal year 2009, a city or town may levy a tax in an amount not more than five

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percent (5%) in excess of the total amount levied and certified by that city or town for its fiscal

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year 2008. In its fiscal year 2010, a city or town may levy a tax in an amount not more than four

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and three-quarters percent (4.75%) in excess of the total amount levied and certified by that city

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or town in its fiscal year 2009. In its fiscal year 2011, a city or town may levy a tax in an amount

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not more than four and one-half percent (4.5%) in excess of the total amount levied and certified

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by that city or town in its fiscal year 2010. In its fiscal year 2012, a city or town may levy a tax in

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an amount not more than four and one-quarter percent (4.25%) in excess of the total amount

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levied and certified by that city or town in its fiscal year 2011. In its fiscal year 2013 and in each

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fiscal year thereafter, a city or town may levy a tax in an amount not more than four percent (4%)

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in excess of the total amount levied and certified by that city or town for its previous fiscal year.

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      (b) The office of municipal affairs in the department of administration shall monitor city

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and town compliance with this levy cap, issue periodic reports to the general assembly on

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compliance, and make recommendations on the continuation or modification of the levy cap on or

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before December 31, 1987, December 31, 1990, and December 31, every third year thereafter.

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The chief elected official in each city and town shall provide to the office of municipal affairs

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within thirty (30) days of final action, in the form required, the adopted tax levy and rate and

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other pertinent information.

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      (c) The amount levied by a city or town may exceed the five and one-half percent (5.5%)

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percentage increase as specified in subsection (a) of this section if the city or town qualifies under

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one or more of the following provisions:

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      (1) The city or town forecasts or experiences a loss in total non-property tax revenues

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and the loss is certified by the department of administration.

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      (2) The city or town experiences or anticipates an emergency situation, which causes or

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will cause the levy to exceed five and one-half percent (5.5%) the percentage increase as

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specified in subsection (a) of this section. In the event of an emergency or an anticipated

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emergency, the city or town shall notify the auditor general who shall certify the existence or

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anticipated existence of the emergency. Without limiting the generality of the foregoing, an

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emergency shall be deemed to exist when the city or town experiences or anticipates health

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insurance costs, retirement contributions or utility expenditures which exceed the prior fiscal

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year's health insurance costs, retirement contributions or utility expenditures by a percentage

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greater than two (2) times the percentage increase as specified in subsection (a) of this section.

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      (3) A city or town forecasts or experiences debt services expenditures which are more

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than one hundred five and one-half percent (105.5%) of exceed the prior year's debt service

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expenditures by an amount greater than the percentage increase as specified in subsection (a) of

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this section and which are the result of bonded debt issued in a manner consistent with general

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law or a special act. In the event of the debt service increase, the city or town shall notify the

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department of administration which shall certify the debt service increase above one hundred five

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and one-half percent (105.5%) of the percentage increase as specified in subsection (a) of this

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section the prior year's debt service. No action approving or disapproving exceeding a levy cap

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under the provisions of this section affects the requirement to pay obligations as described in

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subsection (d) of this section.

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      (4) Any levy pursuant to subsection (c) of this section in excess of the five and one-half

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percent (5.5%) percentage increase specified in subsection (a) of this section shall be approved by

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a majority vote of the governing body of the city or town or in the case of a city or town having a

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financial town meeting, the majority of the electors present and voting at the town financial

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meeting shall approve the excess levy.

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     (5) In addition to the approval required by subdivision (c)(4) of this subsection, any levy

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pursuant to subsection (c) of this section in any city or town's fiscal year subsequent to fiscal year

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2007 in excess of the percentage increase specified in subsection (a) of this section shall also be

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subject to approval by the electors of that city or town at a municipal budget referendum election

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conducted in accordance with the provisions of section 45-3-25 of the general laws. Any such

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municipal budget referendum election shall be conducted not less than fifteen (15) days nor more

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than thirty (30) days after certification of the approval required by subdivision (c)(4) of this

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subsection.

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      (d) Nothing contained in this section constrains the payment of present or future

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obligations as prescribed by section 45-12-1, and all taxable property in each city or town is

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subject to taxation without limitation as to rate or amount to pay general obligation bonds or notes

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of the city or town except as otherwise specifically provided by law or charter.

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     SECTION 2. Sections 44-35-3 and 44-35-6 of the General Laws in Chapter 44-35

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entitled "Property Tax and Fiscal Disclosure - Municipal Budgets" are hereby amended to read as

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follows:

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     44-35-3. Definitions. -- (a) "Adjusted current property tax rate" means the estimated

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property tax rate that would be necessary in the next fiscal year to raise one hundred and five and

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one-half percent (105.5%) of the property tax revenues in the next fiscal year that were levied in

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the town's or city's current fiscal year. the maximum levy authorized by section 44-5-2 of the

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general laws.

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      (b) "Chief elected official" means the highest locally elected official in each town or city.

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      (c) "Proposed property tax rate" means the estimated property tax rate that is proposed

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by a town or city to support its operating budget for the town's or city's next fiscal year.

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     44-35-6. Publication of property tax rates. -- At least ten (10) calendar days prior to the

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hearing for the purpose of adopting the town or city budget, the chief elected official in each town

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or city shall cause to be published a notice indicating the town's or city's intent to consider

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adopting a property tax levy. This notice shall be published in a newspaper of general circulation

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in the town or city. However, this notice may not be placed in that portion of the newspaper

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where legal notices and classified advertisements appear. This notice shall constitute notice of

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public hearing which may coincide with the hearing on the proposed budget and shall be by and

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in the following form:

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      (CITY, TOWN) of (NAME)

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      NOTICE OF PROPOSED PROPERTY TAX

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      RATE CHANGE

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      The (City, Town) proposes to increase (decrease) its property tax levy to ________ in

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the ________ budget year; the property tax levy this year is __________, THIS IS A

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PROPOSED INCREASE (DECREASE) OF ______%.

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      It has been estimated that the proposed increase (decrease) in property tax revenues will

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result in a property tax rate of $________ (proposed property tax rate) per $1,000 assessed

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valuation, as compared to the current property tax rate of $________ per $1,000 assessed

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valuation.

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      A property tax rate of $________ (adjusted current property tax rate) would be needed in

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the coming budget year to raise five and one-half percent (5.5%) more, as an adjustment for

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increased costs, than the property tax revenues being raised in the current budget year. the

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maximum levy authorized by section 44-5-2 of the general laws.

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      The (City, Town) budget __________ will be considered at (date, time, place).

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      The above property tax estimates have been computed in a manner approved by the

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Rhode Island Department of Administration.

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     Chief Elected Official

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     SECTION 3. Section 44-45-2 of the General Laws in Chapter 44-45 entitled "Omnibus

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Property Tax Relief and Replacement Act" is hereby amended to read as follows:

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     44-45-2. Legislative findings. -- The general assembly finds and declares that the

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following conditions confront Rhode Island at this time:

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      (1) In 1982, the governor's advisory commission to study the financial operations of state

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and local governments found that "when the state and local tax system is viewed in its totality, it

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becomes clear that property tax relief and replacement is needed".

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      (2) Rhode Island has a serious over reliance on the property tax, as evidenced by the

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facts that:

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      (i) Rhode Islanders paid forty-nine dollars and ninety-two cents ($49.92) per capita in

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property tax collections in fiscal year 1983, compared to a U.S. average of thirty-four dollars and

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seventy-one cents ($34.71), ranking this state sixth highest in the nation;

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      (ii) Per one thousand dollars ($1,000) of personal income, property tax collections in

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Rhode Island equaled five hundred and thirty-seven dollars ($537) that year, compared to a three

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hundred and eighty-one dollar ($381) U.S. average, placing the state ninth highest nationally; and

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      (iii) Rhode Island's cities and towns derived fifty-eight and nine-tenths percent (58.9%)

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of their own-source local general revenue from the property tax in fiscal year 1983, compared to

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an average of only twenty-eight and eight-tenths percent (28.8%) for all the states.

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      (3) In 1983-84, Rhode Island ranked only forty-third nationally in terms of state support

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for public elementary and secondary school, providing only thirty-six percent (36%) of these

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revenues.

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      (4) The state educational operations aid formula should be gradually increased until the

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state and municipalities equally share the cost of providing local education.

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      (5) The state should also share a greater portion of its economically sensitive growth

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taxes with its cities and towns in order to further shift the burden of funding essential municipal

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services from the property tax.

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      (6) The growth in property tax levies should be capped to five and one-half percent

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(5.5%) annual growth as a quid pro quo for receiving increased state aid to reduce reliance on the

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property tax. in accordance with section 44-5-2 of the general laws.

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      (7) Cities and towns should be assisted in their efforts to control school and municipal

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expenditures by appropriately amending state arbitration and school budgeting laws.

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     SECTION 4. Chapter 45-2 of the General Laws entitled "General Powers" is hereby

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amended by adding thereto the following section:

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     45-2-3.2. Availability of funds upon failure of city or town to approve annual

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appropriation. Unless otherwise provided by a city or town charter, in an emergency caused

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by a failure of a city or town to approve an annual appropriation measure, the same amounts

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appropriated in the previous fiscal year shall be available for each department and division

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thereof, subject to monthly or quarterly allotments, in accordance with seasonal requirements, as

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determined by the city or town's chief financial officer: provided, that expenditures for payment

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of bonded indebtedness of the city or town and interest thereon shall be in such amounts as may

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be required, regardless of whether or not an annual appropriation ordinance is enacted by the city

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or town council.

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     SECTION 5. Sections 35-3-7 and 35-3-20.1 of the General Laws in Chapter 35-3 entitled

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"State Budget" are hereby amended to read as follows:

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     35-3-7. Submission of budget to general assembly -- Contents. -- (a) On or before the

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third Thursday in January in each year of each January session of the general assembly, the

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governor shall submit to the general assembly a budget containing a complete plan of estimated

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revenues and proposed expenditures, with a personnel supplement detailing the number and titles

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of positions of each agency and the estimates of personnel costs for the next fiscal year. Provided,

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however, in those years that a new governor is inaugurated, the new governor shall submit the

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budget on or before the first Thursday in February. In the budget the governor may set forth in

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summary and detail:

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      (1) Estimates of the receipts of the state during the ensuing fiscal year under laws

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existing at the time the budget is transmitted and also under the revenue proposals, if any,

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contained in the budget, and comparisons with the estimated receipts of the state during the

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current fiscal year, as well as actual receipts of the state for the last two (2) completed fiscal

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years.

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      (2) Estimates of the expenditures and appropriations necessary in the governor's

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judgment for the support of the state government for the ensuing fiscal year, and comparisons

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with appropriations for expenditures during the current fiscal year, as well as actual expenditures

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of the state for the last two (2) complete fiscal years.

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      (3) Financial statements of the

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      (i) Condition of the treasury at the end of the last completed fiscal year;

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      (ii) The estimated condition of the treasury at the end of the current fiscal year; and

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      (iii) Estimated condition of the treasury at the end of the ensuing fiscal year if the

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financial proposals contained in the budget are adopted.

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      (4) All essential facts regarding the bonded and other indebtedness of the state.

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      (5) A report indicating those program revenues and expenditures whose funding source

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is proposed to be changed from state appropriations to restricted receipts, or from restricted

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receipts to other funding sources.

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      (6) Such other financial statements and data as in the governor's opinion are necessary or

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desirable.

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      (b) Any other provision of the general laws to the contrary notwithstanding,: the

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proposed appropriations submitted by the governor to the general assembly for the next ensuing

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fiscal year should not be more than five and one-half percent (5.5%) in excess of total state

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appropriations, excluding any estimated supplemental appropriations, enacted by the general

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assembly for the fiscal year previous to that for which the proposed appropriations are being

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submitted; provided, that the increased state share provisions required to achieve fifty percent

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(50%) state financing of local school operations as provided for in P.L. 1985, ch. 182, shall be

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excluded from the definition of total appropriations.

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     (1) the budget proposed by the governor for fiscal year 2008 shall not propose the

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appropriation of general revenue expenditures in excess of one hundred five and one-quarter

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percent (105.25%) of the total general revenue appropriations, excluding any estimated

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supplemental appropriations, enacted by the general assembly for fiscal year 2007;

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     (2) the budget proposed by the governor for fiscal year 2009 shall not propose the

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appropriation of general revenue expenditures in excess of one hundred five percent (105%) of

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the total general revenue appropriations, excluding any estimated supplemental appropriations,

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enacted by the general assembly for fiscal year 2008;

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     (3) the budget proposed by the governor for fiscal year 2010 shall not propose the

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appropriation of general revenue expenditures in excess of one hundred four and three-quarters

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percent (104.75%) of the total general revenue appropriations, excluding any estimated

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supplemental appropriations, enacted by the general assembly for fiscal year 2009;

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     (4) the budget proposed by the governor for fiscal year 2011 shall not propose the

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appropriation of general revenue expenditures in excess of one hundred four and one-half percent

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(104.5%) of the total general revenue appropriations, excluding any estimated supplemental

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appropriations, enacted by the general assembly for fiscal year 2010;

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     (5) the budget proposed by the governor for fiscal year 2012 shall not propose the

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appropriation of general revenue expenditures in excess of one hundred four and one-quarter

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percent (104.25%) of the total general revenue appropriations, excluding any estimated

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supplemental appropriations, enacted by the general assembly for fiscal year 2011; and

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     (6) the budget proposed by the governor for fiscal year 2013 and for each fiscal year

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thereafter shall not propose the expenditure of general revenue expenditures in excess of one

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hundred four percent (104%) of the total general revenue appropriations, excluding any estimated

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supplemental appropriations, enacted by the general assembly for the previous fiscal year.

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      (c) Notwithstanding the provisions of subsection 35-3-7(a), the governor shall submit to

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the general assembly a budget for the fiscal year ending June 30, 2006 not later than the fourth

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(4th) Thursday in January 2005.

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     35-3-20.1. Limitation on state spending. Limitations on state spending. -- (a) No

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appropriation, supplemental appropriation, or budget act shall cause the aggregate state general

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revenue appropriations enacted for the fiscal year to exceed ninety-eight percent (98%) of the

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estimated state general revenues for the fiscal year from all sources, including estimated

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unencumbered general revenues not continued or reappropriated to the new fiscal year remaining

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at the end of the previous fiscal year. Estimated unencumbered general revenues are calculated by

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taking the estimated general revenue cash balance at the end of the fiscal year less estimated

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revenue anticipation bonds or notes, estimated general revenue encumbrances, estimated

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continuing general revenue appropriations, and the amount of the budget reserve and cash

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stabilization account at the end of the fiscal year. The amount of the general revenue estimate and

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estimated unencumbered general revenue remaining shall be determined by the state controller

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and approved by the auditor general in conformance with accounting procedures currently in use.

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The excess of any unencumbered general revenue shall be determined by subtracting from the

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actual unencumbered general revenues at the end of any fiscal year an amount which together

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with the latest estimated general revenues is necessary to fund the ensuing fiscal year's general

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revenue budget, including the required estimated general revenue supplemental and annual

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appropriations.

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      (b) The amount between the applicable percentage in subsection (a) and one hundred

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percent (100%) of the estimated state general fund revenue for any fiscal year as estimated in

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accordance with subsection (a) shall be appropriated in any given fiscal year into the budget

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reserve and cash stabilization account; provided, that no payment will be made which would

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increase the total of the budget reserve and cash stabilization account to more than three percent

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(3%) of only the estimated state general fund revenues as set by subsection (a). In the event that

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the payment to be made into the budget reserve and cash stabilization account would increase the

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amount in the account to more than three percent (3%) of estimated state general revenues, the

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amount shall be transferred to the state bond capital fund, to be used solely for the purposes of

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reduction of state indebtedness, payment of debt service, and/or funding of capital projects.

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However, there shall be no expenditures of money under this section without passage of a specific

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appropriation by the general assembly.

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      (c) Within forty-five (45) days after the close of any fiscal year, all unencumbered

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general revenue in the year end surplus account from the fiscal year shall be transferred to the

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general fund.

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     (d) No appropriation, supplemental appropriation, or budget act shall cause the aggregate

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state general revenue appropriations enacted for any fiscal year to exceed the percentile increase

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over the aggregate state general revenues appropriated for the previous fiscal year by more than

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the percentile increase specified in section 35-3-7 of this title, except by the affirmative vote of

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three-fifths (3/5) of the full membership of each house of the general assembly.

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     SECTION 6. This act shall take effect upon passage.

     

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LC03048

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EXPLANATION

OF

A N A C T

RELATING TO TAXATION -- PROPERTY TAXES

***

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     This act would reduce the percentage increase a city or town may increase property taxes

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over the previous year from five and one half percent (5.5%) to five and one quarter percent

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(5.25%) in 2008 and to four percent (4%) in 2013.

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     This act would take effect upon passage.

     

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LC03048

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S3050