SUMMARY OF SENATE JOINT RESOLUTION G as introduced 2-2-95:

The joint resolution would ratify a proposed amendment to the U.S. Constitution that would require a balanced Federal budget for the fiscal year 2002, or the second fiscal year after ratification, whichever was later. The proposed amendment would become valid if ratified by the legislatures of three-fourths (38) of the states within seven years after the date of submission to the states.

As contained in Senate Joint Resolution G, the proposed amendment provides that, by law, prior to each fiscal year, Congress would have to adopt a statement of receipts and outlays for the fiscal year in which total outlays were not greater than total receipts. Congress could amend that statement, provided revised outlays were not greater than revised receipts. Further, Congress could provide in the statement for a specific excess of outlays over receipts by a vote in which three-fifths of the members of each house agreed. Congress and the President would have to ensure that actual outlays did not exceed the outlays set forth in a statement. The President would have to transmit to Congress a proposed statement of receipts and outlays for the fiscal year consistent with the provisions of the proposed amendment.

Congress could waive the restrictions in the proposed amendment for any fiscal year in which a declaration of war was in effect, or for any fiscal year in which the United States faced an imminent and serious military threat to national security as declared by a joint resolution, adopted by each house.

“Total receipts” would include all receipts of the United States except those derived from borrowing, and “total outlays” would include all outlays of the United States except those for the repayment of debt principal. The amount of the debt of the United States held by the public as of the date the proposed amendment took effect would become a permanent limit, and there could be no increase in the amount unless three-fifths of the members of each house of Congress passed a bill approving an increase.

Legislative Analyst: G. Towne

FISCAL IMPACT

The passage of Senate Joint Resolution G would have an indeterminate fiscal impact on State and local government in Michigan. The direct impact would be determined by the course that the

United States Congress and the President took to achieve a balanced Federal budget. The State currently receives over $7.0 billion of direct Federal aid that is appropriated in the Michigan State budget. Assuming that a Federal balanced budget amendment could result in reductions in some aid to states, a portion of this Federal aid to Michigan could be reduced. The exact amount would depend entirely on future action taken by the President and Congress.

The passage of a Federal balanced budget also raises concerns to the State involving State tax authority. For example, if Congress enacted an increase in Federal taxes on cigarettes and gasoline in an effort to raise revenue to balance the budget, these Federal changes could lead to reductions in the consumption of cigarettes and gasoline, which would reduce Michigan State tax revenues.

The final point of the balanced budget amendment involves the issue of the impact of the amendment on the national economy. To the extent that the amendment could lead to reductions in interest rates, the economic impact could be positive. To the extent that the balanced budget amendment limited the ability of the Federal government to stimulate the economy through fiscal policy in an economic downturn, the economic impact could be negative.

Fiscal Analyst: G. Olson

S9596\SSJRGSA

This analysis was prepared by nonpartisan Senate staff for use by the Senate in its deliberations and does not constitute an official statement of legislative intent.