Joint Fiscal Office outlines rescission rules, emergency‑board options and draft Senate language to respond to federal funding cuts

Emily Burton and Catherine Benham of the Joint Fiscal Office (JFO) briefed the committee on April 25 about current rescission law and proposed budget language the Senate added to address potential federal funding reductions.

The JFO presentation summarized current statute and described a three‑tier approach the budget language uses to provide administrative flexibility without bypassing legislative oversight. The memo presented to the committee explains how reductions in the state revenue forecast normally trigger a rescission process and how the emergency board and Joint Fiscal Committee (JFC) participate when the General Assembly is not in session.

Why it matters: Committee members and JFO staff emphasized that federal funding is large and unevenly distributed across departments. The language under consideration would create a clearer baseline for measuring federal reductions, give the emergency board limited authority to transfer a specifically appropriated contingency, and preserve legislative review in larger rescissions.

Key points from the briefing

- Current rescission process: JFO summarized the current law: rescission is triggered when the revenue forecast declines and the governor or administration prepares a plan for expenditure reductions. The transcript identifies the rescission statute as “32 BSA 704 B” and related budget statutes referenced by JFO staff.

- Three‑tier mechanics and thresholds: Under current statute the governor may implement reductions for small forecast declines, while larger shortfalls require the Joint Fiscal Committee or the General Assembly. JFO discussed the statutory 1% and 4% thresholds (illustrative dollar amounts were given from recent forecasts) and how those trigger different review paths. JFO noted the e‑board adoption of a federal‑funds baseline historically uses the federal funds number in the most recent Appropriations Act, which creates problems because federal funds change year to year.

- Senate budget language and contingency pot: JFO described Senate language in the FY26 budget that (1) designates $138,520,000 as unallocated carryforward into FY26 and (2) creates a contingent appropriation of up to $45,000,000 to the Agency of Administration to be transferred by the Emergency Board if federal funds are reduced while the General Assembly is out of session. JFO staff said the appropriation is intended to be a dedicated pot that the Emergency Board could access for federally driven shortfalls rather than reverting to other recurring appropriations.

- Definitions and calculation method: The JFO proposal recommends measuring changes in federal funds against an unduplicated appropriation baseline by government function (for example, human services, corrections, natural resources). The proposal excludes interdepartmental transfers and Global Commitment from the denominator and excludes the Education Fund from the government‑function calculation to avoid skewing thresholds.

- Process safeguards and reporting: The draft language would require the Secretary of Administration to prepare expenditure reduction plans for JFC consideration at thresholds below statutory limits, and would allow JFC to recommend emergency board transfers, rainy‑day fund access, or reversions as part of a coordinated plan. If reductions exceed specified thresholds, the General Assembly would reconvene to act.

Quotes

- Emily Burton, Joint Fiscal Office: “Rescission ... is when spending authority that is previously approved by the General Assembly has to be reduced when the General Assembly is out of session, typically triggered by a change in the revenue forecast.”

- JFO presenters on the Senate approach: staff described the goal as establishing a clear FY26 baseline for federal funds, measuring subsequent reductions against that baseline, and creating a narrowly‑scoped contingency appropriation to be used only if federal funding is reduced while the legislature is not meeting.

Committee discussion and next steps

Members asked operational questions on timing (the July forecast, how quickly the Emergency Board could act), the interaction between the 2% Emergency Board cap (about $44M) and the $45M contingency the Senate set aside, and how receivables and timing differences in federal payments would be handled. JFO staff and committee members noted that federal funding streams can be slow to change and that program‑specific impacts vary widely (a small grant can be critical to one provider while a large program can absorb some reduction).

JFO staff encouraged committee members to review the budget text and flagged that language may move in conference committee. The committee scheduled follow‑up briefings and asked JFO to provide clarifying language and worked examples showing how the calculations and transfer authority would play out across government functions.