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Senate committee reviews proposed contingency reserve to set aside unexpected revenue for housing, education and tax relief
Summary
Finance staff told the Senate Appropriations Committee that language in Section 54 of the Budget Adjustment Act would reserve unallocated year-end revenue for priorities that include permanent housing, property tax relief and education; senators pressed officials about impacts on existing pension and balance-reserve formulas.
Adam Gresham, Commissioner of Finance and Management, briefed the Senate Appropriations Committee on a proposed contingency reserve in Section 54 of the Budget Adjustment Act that would set aside unallocated, year-end revenue for priorities including education, housing and property tax relief.
Gresham said the provision "was meant to acknowledge that there may be extra funding at the end of the year that we're not aware of." He told the committee that January revenue showed a single-month surplus of about $30,000,000 above forecast, and the administration wants a mechanism to hold uncommitted funds for later use.
The proposal names housing and property-tax relief as primary priorities while allowing funds to be used for "any other uses determined to be in the best interest of the public in the subsequent fiscal year." Several senators questioned the open-ended phrase and who would decide what is "in the best interest." Gresham said the determination would be made by the Legislature and the governor when they appropriate the funds.
Committee members also asked whether the contingency language would replace current statutory distributions of surplus revenue. Gresham and staff referenced an existing split under current law (described in the session as a 50/25/25 distribution) that directs half of certain overage to the balance reserve, one-quarter to the state employees pension, and one-quarter to a teachers' post-retirement benefits account. Senators warned that altering that distribution could be perceived as changing commitments made as part of prior pension agreements.
Gresham noted the administration was aware of those concerns and said the contingency language was intended as an additional tool to avoid a revenue "cliff" in future years by setting aside funds in advance of need. He also reminded the committee that the administration planned to add $15,000,000 to pensions in the current cycle, a step meant to meet actuarially determined employer contributions.
Committee members asked for more precise drafting on who may direct usage of the reserve and how it would interact with the balance reserve and pension-related distributions. Several senators said they preferred addressing allocations in the larger budget bill so there would be more clarity on dollar amounts.
The committee did not take a formal vote on the Section 54 language during the hearing; staff agreed to return with clarified drafting and additional detail about interactions with existing statutory distributions.
The committee also discussed related budget technical items later in the session.
