STATE OF GEORGIA BUDGET LAW
What does the Georgia Constitution say about debt?
How does the appropriations process work?
What constitutes a valid obligation of State funds?
When do appropriated State funds lapse?
Presented by: John A. Thornton, Sr.
April 16, 2017
TheGeorgiaGeneralAssembly
• GGA convenes 2nd
Monday in January
• Regular session may not exceed 40 days
• The Georgia Constitution requires the Georgia General Assembly to pass an appropriations act.
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AppropriationsAct
• A “Legal Budget”
• A “Balanced Budget”
• The appropriations act establishes “spending limits”. • Legal level of control is “Fund source within Program”
• Formerly “Object Class”
• Contains certain Mandatory Appropriations
• Budgetary Basis of Accounting
ConstitutionalHistory
• 10 Constitutions
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1777
1789
1798 – 63 years
1861 1865
1868
1877 – 68 years
1945
1976
1983
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AAABondRating
• Constitution of 1877
• Constitution of 1983
• Conservative Fiscal Management
• Mandatory appropriations
• Moderate Debt Burden
• Well‐funded Pensions
State of Georgia Budget Law
• The Constitution of the State of Georgia (Article VII, Section IV, Paragraph 8) says:
“Except as provided in this Constitution, the credit of
the state shall not be pledged or loaned to any
individual, company, corporation, or association…”
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Debt
Debt Permitted by the Georgia Constitution
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To defend the State in time of war.
To supply a temporary deficit in the State Treasury.
To finance certain capital outlay projects through general obligation debt or guaranteed revenue debt.
* All debt must be approved by the Georgia General Assembly*
Debt not permitted by the Georgia Constitution
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Independent actions of a State Agency
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Debt to the State is created when a State Agency incurs an obligation without current funds available
AppropriationsProcess– Roleofthe
Governor
• Agency budget requests (for FY to begin next July 1) due to the Office of Planning and Budget (OPB) by Sept. 1 • Agency requests represent a comprehensive collection of funding needs and strategies to meet the needs of their respective programs and initiatives.
• OPB begins to analyze budget requests
• The Governor sets the “revenue estimate” establishing the framework for the development of the budget.
• State law requires that the Governor’s budget recommendation be provided to the Georgia General Assembly within five days of the legislature’s convening in January.
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AppropriationsProcess– Roleofthe
GeorgiaGeneralAssembly
• The appropriations bill begins in the House of Representatives.
• House eventually approves and transfers the appropriations bill to the Senate.
• Can decrease budget
• Rearrange budget
• The Senate adopts their “substitute” bill and it is sent back to the House for adoption or rejection.
• The final appropriations bill is generally agreed on by a “Conference Committee” for final vote.
Post‐ AppropriationsActPassage
• Governor
• The Governor has 40 days to sign the bill.
• Governor has constitutional right of “line‐item veto”
• Manages budget during fiscal year
• Can choose to not “allot” State Funds
• Budget Amendments (Federal & Other Funds)
• Georgia General Assembly
• Override vetos by 2/3 majority in each chamber
• Fiscal Affairs – Budget transfers
• Normally, the General Appropriations Act is amended in the following session.
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RevenueCollectionsandWithdrawals
fromtheStateTreasury
• Revenue Collections – Ga Constitution Art. VII, Para. II
• Funds the Appropriations Act
• Revenue Shortfall Reserve utilized if collections do not cover allotments
• Withdrawal of State Funds from State Treasury
• Warrant Process
• Initiated by OPB
• Verified by Comptroller General (final authorization)
ObligationofStateFunds
If the Obligation is for…
The Obligation is Valid ….
Performance of Work other than Personal Services
On the date the agency makes a binding written commitment to obtain the goods or services
Personal Services by an Employee
When the services are performed
Public Utility Services
When the agency receives the services
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ObligationofStateFunds(Encumbrance)
• A valid obligation should be supported by the following information:
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Confirmed Vendor
Specific Project/Services/Goods
Specific Price for Project/Services/Goods
Stated Time or Range of Time for Delivery/Completion
• Documentation of this type should be available from appropriately executed purchase orders, contracts, etc. The presence of these conditions correspond to the elements of an enforceable contract in that they support the concept of mutual assent.
ObligationofStateFunds
“…No agency of the State may execute a contract with a private party for the purchase of goods or services which purports to obligate appropriations or state funds from any other source not on hand at the time of the contract or where the fiscal obligation of the state agency depends for its full performance upon such future appropriations or the continued existence of any other source of state funds.” Attorney General Opinion 74 – 115
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ObligationofStateFunds
• The underlying principles of the Georgia Constitution do not
require that a contract end with the end of the fiscal year or that it be limited to a term of 12 months.
ObligationofStateFunds
Obligating Funds for use in the ‘Out Year’ A State agency may execute a contract for the purchase of goods and services even though the term of that contract extends to the next fiscal year if the State agency has on hand at the time of the execution of the contract the available appropriated funds necessary to meet its entire
obligation under the contract.
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ConstructionofStateCapitol
• Atlanta reaffirmed as capital city in December 1877
• Funds were not on hand to build the new capitol building
• General Assembly appropriated $1 million in 1883 from Special Capitol Tax
• Completed in July 1889. $118.40 returned to State Treasury.
Timeline
May 11
FY 2015
FY 2016
Year End
Governor signs Appropriations Act
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Unobligated State Funds @ June 30
• “All appropriated state funds, except for mandatory appropriations required by the Constitution, remaining unexpended and not contractually obligated at the expiration of the general appropriations act shall lapse.” (Article III, Section 9, Paragraph 4 (c) – State of Georgia Constitution)
• General Appropriations Act expires on June 30 each year
• Surplus funds are returned to the State Treasury at year end.
• Reserve of State Funds – No constitutional support
ViolationsoftheAppropriationsAct
1. Over‐expenditures at the legal level of budgetary control
2. Expenditures greater than Funds Available at the legal level of budgetary control
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State of Georgia Budget Law
A brief Summary
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Unexpended/Unobligated funds lapse at June 30
Agencies cannot obligate appropriations not yet made (Debt)
An agency may contract (and charge to FY 15) for goods/services applicable to FY 16 as long as funds are on hand.
A contract may be greater than 12 months
Some expenses can be charged to FY 15 or FY 16
Agencies may enter into a contract applicable to FY 16 prior to June 30 as long as Appr. Act has been signed.
State of Georgia Budget Law
A brief Summary
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A valid obligation must have:
a) Confirmed Vendor
b) Specific Project/Services/Goods
c) Specific Price
d) Stated Time Range
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