RETRIEVE BILL Debt Reform Const Bill - 001
Legislative Bill Drafting Commission
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S. --------
SENATE
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IN SENATE--Introduced by Sen
--read twice and ordered printed,
and when printed to be committed
to the Committee on
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ASSEMBLY
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IN ASSEMBLY--Introduced by M. of A.
--read once and referred to the
Committee on
*CONSTCOR*
(Prohibits certain borrowing ar-
rangements)
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Const. prohib cert borrowing
CONCURRENT RESOLUTION
OF THE SENATE AND ASSEMBLY
proposing amendments to article 7 of
the constitution, in relation to the
prohibition of certain borrowing
arrangements, the authorization for
the contracting of debt, the manner
by which payments are appropriated
and the manner by which payments are
appropriated and paid
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1 Section 1. Resolved (if the concur), That section 11 of article
2 7 of the constitution be amended to read as follows:
3 § 11. 1. Except the debts or refunding debts specified in sections 9,
4 10 and 13 of this article, no debt shall be hereafter contracted by or
5 in behalf of the state, unless as authorized in subdivision 2 or 3 of
6 this section, or as expressly provided for elsewhere in this constitu-
7 tion, the state shall not enter into any financing or other similar
8 arrangement, whether by statute, contract, lease, or otherwise, whereby
9 the state agrees to make payments which will be used directly or indi-
10 rectly, for the payment of interest, installments of principal, contrib-
11 utions to sinking funds, or related payments on indebtedness issued or
12 contracted by any state agency, municipality, individual, or public or
13 private corporation for state purposes or to finance assistance made or
14 to be made by or on behalf of the state for any purpose. The foregoing
15 restrictions shall apply whether or not the obligation of the state to
16 make such payments is subject to appropriation or is otherwise contin-
17 gent.
18 2. The state may contract debt which is secured by a pledge of the
19 full faith and credit of the state if such debt shall be authorized by
20 law, for some single capital work or purpose, to be distinctly specified
21 therein. No; provided that no such law shall take effect until it
22 shall, at a general election, have been submitted to the people, and
23 have received a majority of all the votes cast for and against it at
24 such election nor shall it be submitted to be voted on within three
25 months after its passage nor at any general election when any other law
26 or any bill shall be submitted to be voted for or against.
27 3. The state may also contract debt, in a manner prescribed by law,
28 which is secured by a pledge of specific revenues of the state. The
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1 legislature shall, by law, identify the capital works or purposes to be
2 financed with such debt. Revenues in excess of the required payments of
3 interest and installment payments of principal, contributions to sinking
4 funds, and related payments on such debt shall be available for such
5 other purposes, as provided by law.
6 4. The state may not contract debt pursuant to subdivision 2 or 3 of
7 this section unless the total outstanding principal amount of such debt
8 as of the last day of the immediately preceding fiscal year is less than
9 the designated percentage of the total personal income of the state
10 applicable to such fiscal year, where such personal income is defined by
11 and calculated in accordance with law. The total outstanding principal
12 amount of debt shall include all debt or other obligations contracted
13 pursuant to subdivisions 2 and 3 of this section issued on and after
14 January first, two thousand two. The outstanding principal amount of
15 debt, with regard to the inclusion of either refunded or refunding obli-
16 gations, shall be defined by law. The designated percentage shall be
17 six-tenths of one percent for fiscal year two thousand two--two thousand
18 three, and shall increase by five-tenths of one percent in fiscal year
19 two thousand three--two thousand four, by four-tenths of one percent
20 in fiscal year two thousand four--two thousand five, and by one-third
21 of one percent in each of the five subsequent fiscal years. The desig-
22 nated percentage for fiscal year two thousand ten--two thousand eleven
23 and for each fiscal year thereafter shall be three and one-half percent.
24 5. The state may not contract debt pursuant to subdivision 3 of this
25 section unless the total outstanding principal amount of such debt as of
26 the last day of the immediately preceding fiscal year is less than the
27 designated percentage of the total personal income of the state applica-
28 ble to such fiscal year, as defined pursuant to subdivision 4 of this
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1 section. The total outstanding principal amount of debt shall include
2 all debt or other obligations contracted pursuant to subdivision 3 of
3 this section issued on and after January first, two thousand two. The
4 outstanding principal amount of debt, with regard to the inclusion of
5 either refunded or refunding obligations, shall be defined by law. The
6 designated percentage shall not exceed the limitations set forth in
7 subdivision 4 of this section for each fiscal year and, in no event,
8 shall not exceed one and three-quarters percent.
9 6. The state may not contract debt pursuant to subdivision 2 or 3 of
10 this section unless the total amount of interest, installments of prin-
11 cipal, contributions to sinking funds, and related payments on a cash
12 basis of accounting for such debt in the immediately preceding fiscal
13 year is less than the designated percentage of total governmental funds
14 receipts for such fiscal year, where such total governmental receipts is
15 defined by and calculated in accordance with law. This shall include the
16 total amount of payments on such debt issued on and after January first,
17 two thousand two, but shall not include payments in any fiscal year made
18 by the state to defease or retire debt not required by mandatory
19 payments nor payments made by the state for debt issued to refund debt
20 that was issued prior to January first, two thousand two. The designated
21 percentage shall be six-tenths of one percent for fiscal year two thou-
22 sand two--two thousand three, and shall increase by five-tenths of one
23 percent in fiscal year two thousand three--two thousand four, by four-
24 tenths of one percent in fiscal year two thousand four--two thousand
25 five, and by one-third of one percent in each of the ten subsequent
26 fiscal years. The designated percentage for fiscal year two thousand
27 fifteen--two thousand sixteen and for each fiscal year thereafter shall
28 be five percent.
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1 7. The legislature shall provide by law for the manner by which debt
2 authorized by this section shall be contracted, provided that neither
3 house of the legislature shall consider any such bill unless it shall
4 have been printed and upon the desks of the members, in its final form,
5 at least fourteen calendar legislative days prior to its final passage.
6 8. The legislature may, at any time after the approval of such law by
7 the people, if no debt shall have been contracted in pursuance there-
8 of of a particular law authorized under subdivision 2 or 3 of this
9 section, repeal the same such law authorizing the issuance of such
10 debt; and may at any time, by law, forbid the contracting of any further
11 debt or liability under such law.
12 9. No debt shall be contracted pursuant to subdivision 2 or 3 of this
13 section, except to finance capital works or purposes.
14 10. The state may contract debt to refund debt contracted pursuant to
15 subdivision 2 or 3 of this section provided such refundings are
16 conducted in accordance with the provisions of section 13 of this arti-
17 cle.
18 11. The provisions of subdivision 1 of this section shall not prohibit
19 the state from providing monies for payment of interest, installments of
20 principal, contributions to sinking funds, or related payments on obli-
21 gations which were contracted prior to the effective date of such subdi-
22 vision or on obligations issued to refund such obligations, provided
23 such refundings are conducted in accordance with the provisions of
24 section 13 of this article.
25 § 2. Resolved (if the concur), That section 12 of article 7 of
26 the constitution be amended to read as follows:
27 § 12. Except the debts or refunding debts specified in sections 9, 10
28 and 13 of this article, all debts contracted by the state and each
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1 portion of any such debt from time to time so contracted shall be
2 subject to the following rules:
3 1. The principal of each debt or any portion thereof shall either be
4 paid in equal annual installments or in installments that result in
5 substantially level or declining debt service payments such as shall be
6 authorized by law, or, in the alternative, contributions of principal in
7 the amount that would otherwise be required to be paid annually shall be
8 made to a sinking fund.
9 2. When some portions of the same debt are payable annually while
10 other portions require contributions to a sinking fund, the entire debt
11 shall be structured so that the combined amount of annual installments
12 of principal paid and/or annual contributions of principal made in each
13 year shall be equal to the amount that would be required to be paid if
14 the entire debt were payable in annual installments.
15 3. When interest on state obligations is not paid at least annually,
16 there shall also be contributed to a sinking fund at least annually, the
17 amount necessary to bring the balance thereof, including income earned
18 on contributions, to the accreted value of the obligations to be paid
19 therefrom on the date such contribution is made, less the sum of all
20 required future contributions of principal, in the case of sinking fund
21 obligations, or payments of principal, in the case of serial obli-
22 gations. Notwithstanding the foregoing, nothing contained in this
23 subdivision shall be deemed to require contributions for interest to
24 sinking funds if total debt service due on the debt or portion thereof
25 in the year such interest is due will be substantially the same as the
26 total debt service due on such debt or portion thereof in each other
27 year or if the total amount of debt service due in each subsequent year
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1 on such debt or portion thereof shall be less than the total debt
2 service due in each prior year.
3 4. The first annual installment on such debt shall be paid, or the
4 first annual contribution shall be made to a sinking fund, not more than
5 one year, and the last installment shall be paid, or contribution made
6 not more than thirty forty years, after such debt or portion thereof
7 shall have been contracted, provided, however, that in contracting any
8 such debt the privilege of paying all or any part of such debt prior to
9 the date on which the same shall be due may be reserved to the state in
10 such manner as may be provided by law.
11 5. No such debt shall be contracted for a period longer than that of
12 the probable life of the capital work or purpose for which the debt is
13 to be contracted, or in the alternative, the weighted average period of
14 probable life of the capital works or purposes for which such indebt-
15 edness is to be contracted. The probable lives of such capital works or
16 purposes shall be determined by general laws, which determination shall
17 be conclusive.
18 6. The money arising from any loan creating such debt or liability
19 shall be applied only to the capital work or purpose specified in the
20 act authorizing such debt or liability, or for the payment of such debt
21 or liability, including any notes or obligations issued in anticipation
22 of the sale of bonds evidencing such debt or liability.
23 7. Any sinking funds created pursuant to this section shall be main-
24 tained and managed by the state comptroller or an agent or trustee
25 designated by the state comptroller, and amounts in sinking funds
26 created pursuant to this section, and earnings thereon, shall be used
27 solely for the purpose of retiring the obligations secured thereby
28 except that amounts in excess of the required balance on any contrib-
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1 ution date and amounts remaining in such funds after all of the obli-
2 gations secured thereby have been retired shall be deposited in the
3 general fund.
4 8. No appropriation shall be required for disbursement of money, or
5 income earned thereon, from any sinking fund created pursuant to this
6 section for the purpose of paying principal of and interest on the obli-
7 gations for which such fund was created, except that interest shall be
8 paid from any such fund only if, and to the extent that, it is not paya-
9 ble annually and contributions on account of such interest were made
10 thereto.
11 9. The provisions of section 15 of this article shall not apply to
12 sinking funds created pursuant to this section.
13 10. When state obligations are sold at a discount or premium, the debt
14 incurred for purposes of determining the amount of debt issued or
15 outstanding pursuant to a voter approved bond referendum or other limi-
16 tation on the amount of debt that may be issued or outstanding for a
17 capital work or purpose shall be deemed to include only the amount of
18 money actually received by the state notwithstanding the face amount of
19 such obligations.
20 § 3. Resolved (if the concur), That section 16 of article 7 of
21 the constitution be amended to read as follows:
22 § 16. The legislature shall annually provide by appropriation for the
23 payment of the interest upon and installments of principal of all debts
24 or refunding debts created on behalf of the state except those
25 contracted under section 9 of this article, as the same shall fall due,
26 and for the contribution to all of the sinking funds created by law, of
27 the amounts annually to be contributed under the provisions of section
28 12, 13 or 15 of this article, and related payments. If With respect
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1 to debt contracted pursuant to subdivision 2 of section 11 of this
2 article, if at any time the legislature shall fail to make any such
3 appropriation, the comptroller shall set apart from the first revenues
4 thereafter received, applicable to the general fund of the state, a sum
5 sufficient to pay such interest, installments of principal, or
6 contributions to such sinking fund, or related payments, as the case may
7 be, and shall so apply the moneys thus set apart. With respect to debt
8 contracted pursuant to subdivision 3 of section 11 of this article, if
9 at any time the legislature shall fail to make any such appropriation,
10 the comptroller shall set apart from the first revenues received and
11 pledged to such payments, a sum sufficient to pay such interest,
12 installments of principal, or contributions to such sinking fund, or
13 related payments, as the case may be, and shall so apply the moneys thus
14 set apart, provided however that such revenues must be set aside and
15 applied in a manner which ensures that pledged revenues are applied only
16 to payments on debt for which such revenues were pledged pursuant to
17 subdivision 3 of section 11 of this article. The comptroller may be
18 required to set aside and apply such revenues as aforesaid, at the suit
19 of any holder of such bonds.
20 Notwithstanding the foregoing provisions of this section, the
21 comptroller may covenant with the purchasers of any state obligations
22 that they shall have no further rights against the state for payment of
23 such obligations or any interest thereon after an amount or amounts
24 determined in accordance with the provisions of such covenant is
25 deposited in a described fund or with a named or described agency or
26 trustee. In such case, this section shall have no further application
27 with respect to payment of such obligations or any interest thereon
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1 after the comptroller has complied with the prescribed conditions of
2 such covenant.
3 § 4. Resolved (if the concur), That the foregoing amendment be
4 referred to the first regular legislative session convening after the
5 next succeeding general election of members of the assembly, and, in
6 conformity with section 1 of article 19 of the constitution, be
7 published for 3 months previous to the time of such election.