<-1Establishing spending limitations on the Commonwealth; providing
2for the disposition of surplus funds; establishing the
3Taxpayer Protection Fund; and repealing provisions of The
4Fiscal Code relating to the funding of a stabilization
5reserve.

<-6Amending Titles 24 (Education), 71 (State Government) and 72
7(Taxation and Fiscal Affairs) of the Pennsylvania
8Consolidated Statutes, further providing for actuarial cost
9method and for administrative duties of board; providing for
10taxpayer protection; and making a related repeal.

11The General Assembly of the Commonwealth of Pennsylvania
12hereby enacts as follows:

<-13Section 1. Short title.

14This act shall be known and may be cited as the Taxpayer
15Protection Act.

16Section 2. Definitions.

17The following words and phrases when used in this act shall
18have the meanings given to them in this section unless the
19context clearly indicates otherwise:

20"Appropriation limit." The total of the amounts approved as 
21executive authorizations by the Governor plus the total amounts
 

1of preferred and nonpreferred appropriations made by the General 
2Assembly from the General Fund during the fiscal year 
3immediately prior to the budget year under consideration, 
4adjusted by the lesser of:

5(1) the average percentage change in personal income in
6this Commonwealth for the three preceding calendar years as
7reported by the Federal Government or as determined pursuant
8to an act of the General Assembly; or

9(2) the average percentage change in inflation for the
10three preceding calendar years plus the average percentage
11change in the State population for the three preceding years
12as reported by the annual Federal census estimates, such
13number being adjusted every decade to match the official
14Federal census.

15"Average percentage change in inflation." The average of the 
16percentage change for each of the three calendar years, from 
17October to October, immediately preceding the calendar year in 
18which a given executive budget is submitted by the Governor, in 
19the Consumer Price Index for All Urban Consumers (CPI-U), not 
20seasonally adjusted, all items index or its successor index, as 
21officially reported by the United States Department of Labor, 
22Bureau of Labor Statistics.

23"Average percentage change in personal income." The average 
24of the percentage change in personal income estimates for this 
25Commonwealth, from second calendar quarter to second calendar 
26quarter, for each of the three calendar years immediately 
27preceding the calendar year in which a given executive budget is 
28submitted by the Governor, as reported by the United States 
29Department of Commerce, Bureau of Economic Analysis, SQ4 
30quarterly income summary for this Commonwealth or its successor
 

1index or as determined pursuant to an act of the General 
2Assembly.

3"Average percentage change in State population." The average 
4of the percentage change in State population for each of the 
5three most recent years immediately preceding the calendar year 
6in which a given executive budget is submitted by the Governor, 
7as reported by the United States Census Bureau for July 1 of 
8each year.

9"Mandated service." Any program or service administered by a 
10political subdivision of the Commonwealth as a result of being 
11required to provide that program or service by State law.

12"Total spending by the Commonwealth." All General Fund 
13appropriations made by the General Assembly and all 
14appropriations from a constitutionally or statutorily 
15established fund created after the effective date of this 
16section.

17Section 3. Spending limitations.

18(a) General rule.--Total spending by the Commonwealth in any
19fiscal year shall not exceed the spending appropriation limit as
20set forth in this act.

21(b) Mandated expenses for political subdivisions.--The
22State's limit under subsection (a) shall be reduced by the
23amount of the reduction in State appropriations to a political
24subdivision for administration of a mandated service, without an
25equal or greater reduction in State-mandated expenses for said
26local government or a repeal of the mandate to provide a program
27or service.

28(c) Exceptions.--The appropriation limit of the Commonwealth
29may be exceeded in any fiscal year for the following:

30(1) To respond to a presidential or gubernatorial

1declaration of emergency if the General Assembly approves by
2two-thirds affirmative vote of the members elected to each
3house of the General Assembly. In no case shall the excess
4spending authorized by exceeding the appropriation limit in
5this manner be included in the computation base of the
6appropriation limit for any subsequent fiscal year.

7(2) In other situations if the Governor so requests, in
8writing, 30 days prior to the constitutional deadline for
9adoption of a budget for the next fiscal year, and
10simultaneously publishes that written notice in a newspaper
11of general circulation in each county and senatorial and
12representative district in which such newspapers shall be
13published, and the General Assembly subsequently approves by
14an affirmative vote of two-thirds of the members elected to
15each house of the General Assembly.

16Section 4. Disposition of surplus funds.

17(a) Transfer of surplus.--

18(1) Except as provided under paragraph (2), for any 
19fiscal year in which the Governor certifies that a surplus 
20exists, 25% of that surplus shall be deposited by the end of 
21the next succeeding quarter into the Budget Stabilization 
22Reserve Fund established in section 1701-A of the act of 
23April 9, 1929 (P.L.343, No.176), known as The Fiscal Code, 
24and 75% of that surplus shall be deposited by the end of the 
25next succeeding quarter into the Taxpayer Protection Fund 
26which is hereby established in the State Treasury.

27(2) For any fiscal year in which the State Treasurer
28certifies that the balance in the Budget Stabilization
29Reserve Fund equals or exceeds 5% of the total of all General
30Fund appropriations, 100% of the surplus certified by the

1Governor under paragraph (1) shall be deposited into the
2Taxpayer Protection Fund.

3(b) Distribution.--

4(1) Subject to the provisions of subsection (c), the 
5moneys in the Taxpayer Protection Fund shall be distributed 
6to taxpayers who have liability for the tax imposed under 
7Article III of the act of March 4, 1971 (P.L.6, No.2), known 
8as the Tax Reform Code of 1971, through a reduction in the 
9rate of such tax, which reduction shall be established by an 
10act of the General Assembly to be effective for January 1 
11through December 31 of the subsequent calendar year.

12(2) The Secretary of the Budget, in conjunction with the
13Secretary of Revenue, shall certify the rate reduction for
14the tax imposed under Article III of the Tax Reform Code of
151971, for the upcoming calendar year no later than September
1630. The new rate shall be published in the Pennsylvania
17Bulletin, posted on the State's publicly accessible Internet
18website and reported to the chairman and minority chairman of
19the Appropriations Committee of the Senate and the chairman
20and minority chairman of the Appropriations Committee of the
21House of Representatives.

22(c) Accumulation.--No moneys shall be distributed from the
23Taxpayer Protection Fund pursuant to subsection (b) until such
24time as the Secretary of the Budget certifies that the moneys
25deposited therein are sufficient to provide a reduction of at
26least 0.01% in the tax rate of taxation for the tax imposed
27under Article III of the Tax Reform Code of 1971.

28(d) Appropriated funds.--The General Assembly may at any
29time provide additional amounts from any funds available to the
30Commonwealth as an appropriation to the Budget Stabilization

1Reserve Fund.

2Section 5. Repeals.

3Repeals are as follows:

4(1) The General Assembly declares that the repeal under
5paragraph (2) is necessary to effectuate the provisions of
6this act.

7(2) Section 1702-A of the act of April 9, 1929 (P.L.343, 
8No.176), known as The Fiscal Code, is repealed.

9Section 20. Effective date.

10This act shall take effect immediately.

<-11Section 1. Section 8328(e)(1) of Title 24 of the 
12Pennsylvania Consolidated Statutes is amended to read:

13§ 8328. Actuarial cost method.

14* * *

15(e) Experience adjustment factor.--

16(1) For each year after the establishment of the accrued
17liability contribution rate for the fiscal year beginning
18July 1, 2011, any increase or decrease in the unfunded
19accrued liability, excluding the gains or losses on the
20assets of the health insurance account, due to actual
21experience differing from assumed experience, changes in
22actuarial assumptions, changes in contributions caused by the 
23final contribution rate being different from the actuarially 
24required contribution rate, active members making shared-risk 
25contributions or changes in the terms and conditions of the
26benefits provided by the system by judicial, administrative
27or other processes other than legislation, including, but not
28limited to, reinterpretation of the provisions of this part,
29and money distributed to the board by the State Treasurer 
30from the PSERS/SERS Unfunded Accrued Liability Fund, shall be

1amortized as a level percentage of compensation over a period
2of 24 years beginning with the July 1 second succeeding the
3actuarial valuation determining said increases or decreases.

4* * *

5Section 2. Section 8502 of Title 24 is amended by adding a
6subsection to read:

7§ 8502. Administrative duties of board.

8* * *

9(q) Distributions from PSERS/SERS Unfunded Accrued Liability
10Fund.--The board is authorized to accept money provided by the
11State Treasurer as a result of a distribution from the
12PSERS/SERS Unfunded Accrued Liability Fund.

13Section 3. Section 5508(f)(1) of Title 71 is amended to
14read:

15§ 5508. Actuarial cost method.

16* * *

17(f) Experience adjustment factor.--

18(1) For each year after the establishment of the accrued
19liability contribution rate and the supplemental annuity 
20contribution rate for the fiscal year beginning July 1, 2010,
21any increase or decrease in the unfunded accrued liability
22and any increase or decrease in the liabilities and funding
23for supplemental annuities, due to actual experience
24differing from assumed experience (recognizing all realized 
25and unrealized investment gains and losses over a five-year 
26period), money provided to the board as a result of a 
27distribution by the State Treasurer from the PSERS/SERS 
28Unfunded Accrued Liability Fund, changes in contributions 
29caused by the final contribution rate being different from 
30the actuarially required contribution rate, State employees
 

1making shared-risk member contributions, changes in actuarial
2assumptions or changes in the terms and conditions of the
3benefits provided by the system by judicial, administrative
4or other processes other than legislation, including, but not
5limited to, reinterpretation of the provisions of this part,
6shall be amortized in equal dollar annual contributions over
7a period of 30 years beginning with the July 1 succeeding the
8actuarial valuation determining said increases or decreases.

9* * *

10Section 4. Section 5902 of Title 71 is amended by adding a
11subsection to read:

12§ 5902. Administrative duties of the board.

13* * *

14(p) Distributions from the PSERS/SERS Unfunded Accrued
15Liability Fund.--The board is authorized to accept money
16provided to the board as a result of a distribution by the State
17Treasurer from the PSERS/SERS Unfunded Accrued Liability Fund.

18Section 5. Title 72 is amended by adding a chapter to read:

19CHAPTER 7

20TAXPAYER PROTECTION

21Sec.

22701. Short title of chapter.

23702. Definitions.

24703. Spending limitations.

25704. Disposition of surplus funds.

26§ 701. Short title of chapter.

27This chapter shall be known and may be cited as the Taxpayer
28Protection Act.

29§ 702. Definitions.

30The following words and phrases when used in this chapter

1shall have the meanings given to them in this section unless the
2context clearly indicates otherwise:

3"Appropriation limit." The total of the amount approved as 
4executive authorizations by the Governor plus the total amounts 
5of preferred and nonpreferred appropriations made by the General 
6Assembly from the General Fund during the fiscal year 
7immediately prior to the budget year under consideration, 
8adjusted by the lesser of:

9(1) the average percentage change in personal income in
10this Commonwealth for the three preceding calendar years as
11reported by the Federal Government or as determined pursuant
12to an act of the General Assembly; or

13(2) the average percentage change in inflation for the
14three preceding calendar years plus the average percentage
15change in the State population for the three preceding years
16as reported by the annual Federal census estimates, the
17number being adjusted every decade to match the official
18Federal census.

19"Average percentage change in inflation." The average of the 
20percentage change for each of the three calendar years, from 
21October to October, immediately preceding the calendar year in 
22which a given executive budget is submitted by the Governor, in 
23the Consumer Price Index for All Urban Consumers (CPI-U), not 
24seasonally adjusted, all items index or its successor index, as 
25officially reported by the United States Department of Labor, 
26Bureau of Labor Statistics.

27"Average percentage change in personal income." The average 
28of the percentage change in personal income estimates for this 
29Commonwealth, from second calendar quarter to second calendar 
30quarter, for each of the three calendar years immediately
 

1preceding the calendar year in which a given executive budget is 
2submitted by the Governor, as reported by the United States 
3Department of Commerce, Bureau of Economic Analysis, SQ4 
4quarterly income summary for this Commonwealth or its successor 
5index or as determined pursuant to an act of the General 
6Assembly.

7"Average percentage change in State population." The average 
8of the percentage change in State population for each of the 
9three most recent years immediately preceding the calendar year 
10in which a given executive budget is submitted by the Governor, 
11as reported by the United States Census Bureau for July 1 of 
12each year.

13"Mandated service." A program or service administered by a 
14political subdivision of the Commonwealth as a result of being 
15required to provide that program or service by State law.

16"PSERS." The Public School Employees' Retirement System.

17"SERS." The State Employees' Retirement System.

18"Total spending by the Commonwealth." All General Fund 
19appropriations made by the General Assembly and all 
20appropriations from a constitutionally or statutorily 
21established fund created after the effective date of this 
22section.

23§ 703. Spending limitations.

24(a) General rule.--Total spending by the Commonwealth in a
25fiscal year shall not exceed the spending appropriation limit as
26set forth in this chapter.

27(b) Mandated expenses for political subdivisions.--The
28State's limit under subsection (a) shall be reduced by the
29amount of the reduction in State appropriations to a political
30subdivision for administration of a mandated service, without an

1equal or greater reduction in State-mandated expenses for the
2local government or a repeal of the mandate to provide a program
3or service.

4(c) Exceptions.--The appropriation limit of the Commonwealth
5may be exceeded in any fiscal year for the following:

6(1) To respond to a presidential or gubernatorial
7declaration of emergency if the General Assembly approves by
8two-thirds affirmative vote of the members elected to each
9house of the General Assembly. In no case shall the excess
10spending authorized by exceeding the appropriation limit in
11this manner be included in the computation base of the
12appropriation limit for any subsequent fiscal year.

13(2) In other situations if the Governor so requests, in
14writing, 30 days prior to the constitutional deadline for
15adoption of a budget for the next fiscal year, and
16simultaneously publishes that written notice in a newspaper
17of general circulation in each county and senatorial and
18representative district in which each newspaper shall be
19published, and the General Assembly subsequently approves by
20an affirmative vote of two-thirds of the members elected to
21each house of the General Assembly.

22§ 704. Disposition of surplus funds.

23(a) Transfer of surplus.--

24(1) Except as provided under paragraph (2), for a fiscal 
25year in which the Governor certifies that a surplus exists, 
2625% of that surplus shall be deposited by the end of the next 
27succeeding quarter into the Budget Stabilization Reserve Fund 
28established in section 1701-A of the act of April 9, 1929 
29(P.L.343, No.176), known as The Fiscal Code, and 25% of that 
30surplus shall be deposited by the end of the next succeeding
 

1quarter into the Taxpayer Protection Fund which is hereby 
2established in the State Treasury and 50% of that surplus 
3shall be deposited by the end of the next succeeding quarter 
4into the PSERS/SERS Unfunded Accrued Liability Fund which is 
5hereby established in the State Treasury.

6(2) For a fiscal year in which the State Treasurer
7certifies that the balance in the Budget Stabilization
8Reserve Fund equals or exceeds 5% of the total of all General
9Fund appropriations, 25% of the surplus certified by the
10Governor under paragraph (1) shall be deposited into the
11Taxpayer Protection Fund and 75% of the surplus certified by 
12the Governor under paragraph (1) shall be deposited into the 
13PSERS/SERS Unfunded Accrued Liability Fund.

14(b) Distribution.--

15(1) Subject to the provisions of subsection (c), the 
16money in the Taxpayer Protection Fund shall be distributed to 
17taxpayers who have liability for the tax imposed under 
18Article III of the act of March 4, 1971 (P.L.6, No.2), known 
19as the Tax Reform Code of 1971, through a reduction in the 
20rate of the tax, which reduction shall be established by an 
21act of the General Assembly to be effective for January 1 
22through December 31 of the subsequent calendar year.

23(2) The Secretary of the Budget, in conjunction with the
24Secretary of Revenue, shall certify the rate reduction for
25the tax imposed under Article III of the Tax Reform Code of
261971, for the upcoming calendar year no later than September
2730. The new rate shall be published in the Pennsylvania
28Bulletin, posted on the State's publicly accessible Internet
29website and reported to the chairman and minority chairman of
30the Appropriations Committee of the Senate and the chairman

1and minority chairman of the Appropriations Committee of the
2House of Representatives.

3(3) Subject to the provisions of subsection (c):

4(i) The money in the PSERS/SERES Unfunded Accrued
5Liability Fund shall be distributed as follows when both
6systems have an unfunded accrued liability as reflected
7in the most recent actuarial report for each system:

8(A) Two-thirds shall be distributed to PSERS.

9(B) One-third shall be distributed to SERS.

10(ii) If one system no longer has an unfunded accrued
11liability, then all of the distribution shall be paid to
12the system that continues to have an unfunded accrued
13liability.

14(c) Accumulation.--No money shall be distributed from the
15Taxpayer Protection Fund pursuant to subsection (b) until the
16Secretary of the Budget certifies that the money deposited is
17sufficient to provide a reduction of at least 0.01% in the tax
18rate of taxation for the tax imposed under Article III of the
19Tax Reform Code of 1971.

20(d) Appropriated funds.--The General Assembly may at any
21time provide additional amounts from funds available to the
22Commonwealth as an appropriation to the Budget Stabilization
23Reserve Fund or to the PSERS/SERS Unfunded Accrued Liability
24Fund.

25Section 6. Repeals.

26Repeals are as follows:

27(1) The General Assembly declares that the repeal under
28paragraph (2) is necessary to effectuate the provisions of
29this act.

30(2) Section 1702-A of the act of April 9, 1929 (P.L.343,
 

1No.176), known as The Fiscal Code, is repealed.

2Section 7. Effective date.

3This act shall take effect immediately.