Section 13312.

(a) (1) Commencing with the 2008–09 fiscal year, and notwithstanding any other provision of law, if after the annual Budget Act is enacted, the Director of Finance determines that General Fund total available resources for the fiscal year will decline substantially below the estimate of General Fund total resources available upon which the Budget Act was based, or that General Fund expenditures will increase substantially above that estimate of General Fund total resources available, the director may make reductions pursuant to subdivision (b).

(2) For purposes of this subdivision, "total resources available" includes prior year balance and revenues and transfers for the fiscal year.

(b) Upon making a determination as described in subdivision (a), the Director of Finance, in consultation with agency secretaries and other cabinet members, may reduce General Fund items of appropriation, subject to both of the following:

(1) The Director of Finance shall not reduce, pursuant to this section, the amounts appropriated for any of the following:

(A) The Legislature.

(B) Constitutional officers.

(C) Transfers pursuant to the Article XIX B of the California Constitution.

(D) Debt service, including, but not limited to, tobacco settlement revenue shortfalls, payment of interest on General Fund loans, and interest payments to the federal government.

(E) Health and dental benefits for annuitants.

(F) Equity claims before the California Victim Compensation and Government Claims Board.

(G) Augmentations for contingencies or emergencies.

(H) Local assistance appropriations.

(I) Any collective bargaining agreement with a recognized state employee organization.

(2) A General Fund state operations or capital outlay item of appropriation, and a program or category designated in any line of any schedule set forth by that appropriation, may not be reduced by more than 7 percent.

(c) Notwithstanding any provision of law to the contrary, any cost-of-living adjustment or rate increase funded in an annual Budget Act shall be subject to the following conditions:

(1) If the Director of Finance determines that suspension by up to 120 days of the effective date of a cost-of-living adjustment or rate increase funded in an annual Budget Act is necessary to mitigate conditions that would authorize the issuance of a proclamation declaring a fiscal emergency pursuant to subdivision (f) of Section 10 of Article IV of the California Constitution, that cost-of-living adjustment or rate increase shall not take effect during that time.

(2) (A) If the Governor issues a proclamation declaring a fiscal emergency pursuant to subdivision (f) of Section 10 of Article IV of the California Constitution, then no cost-of-living adjustment or rate increase funded in the annual Budget Act for that fiscal year shall take effect until the Legislature passes and sends to the Governor a bill or bills to address the fiscal emergency.

(B) Commencing with the 2009–10 fiscal year, the annual Budget Act shall include a section specifying the cost-of-living adjustments or rate increases included in the Budget Act or authorized by other statutes which may be suspended pursuant to this paragraph.

(d) The Director of Finance shall report to the Chair of the Joint Legislative Budget Committee and the chairs of the committees of each house of the Legislature that consider appropriations not less than 30 days prior to making reductions pursuant to this section. The report shall list the specific reductions, by department, agency, and program, and state the programmatic effects and impacts of each reduction.

(e) Cost-of-living adjustments for purposes of this section shall not include any apportionments made to fund a cost-of-living adjustment to augment appropriations made pursuant to Section 2558 of the Education Code, for county office of education revenue limits, or Section 42238 of the Education Code, for school district revenue limits, nor shall it include a cost-of-living adjustment negotiated in a collective bargaining agreement with a recognized state employee organization.

(f) Nothing within this section shall be construed to confer any authority upon the Director of Finance to modify or eliminate any provision of existing law.

(g) This section shall only become operative if either Senate Constitutional Amendment 1 or Assembly Constitutional Amendment 1 in the 2009–10 Third Extraordinary Session is submitted to, and approved by, the voters at a statewide election.

(Amended (as added by Stats. 2008, Ch. 751, Sec. 33) by Stats. 2009, 3rd Ex. Sess., Ch. 4, Sec. 2. Effective February 20, 2009. Section inoperative pursuant to failed condition in subd. (g). ACA 1 (2009-10 3rd Ex.), as incorporated in Prop. 1A, was rejected at the May 2009 election.)