1. (a) For the state fiscal year beginning July 1, 2003, and ending June 30, 2004, the state spending cap is equal to the result determined under STEP THREE of the following formula:

   STEP ONE: Determine the sum of the total of the appropriations made from the state general fund and the property tax replacement fund (including continuing appropriations) for the state fiscal year beginning July 1, 2002, and ending June 30, 2003.

   STEP TWO: Subtract from the STEP ONE result two hundred forty-three million dollars ($243,000,000), which is the amount of certain reversions made by state agencies.

   STEP THREE: Multiply the STEP TWO result by one and thirty-five thousandths (1.035).

2. (b) For the state fiscal year beginning July 1, 2004, and ending June 30, 2005, the state spending cap is equal to the product of the result determined under subsection (a) multiplied by one and thirty-five thousandths (1.035).
3. (c) The state spending cap for a state fiscal year beginning after June 30, 2005, is equal to the product of the state spending growth quotient for the state fiscal year determined under section 3 of this chapter multiplied by the state spending cap for the immediately preceding state fiscal year.

4. (d) The state spending cap imposed under this section is increased in the initial state fiscal year in which the state receives additional revenue for deposit in the state general fund as a result of the enactment of a law that:

   1. (1) establishes a new tax or fee after June 30, 2002;
   2. (2) increases the rate of a previously enacted tax or fee after June 30, 2002; or

   3. (3) reduces or eliminates an exemption, a deduction, or a credit against a previously enacted tax or fee after June 30, 2002.

      The amount of the increase is equal to the average revenue that the budget agency estimates will be raised by the legislative action in the initial two (2) full state fiscal years in which the legislative change is in effect.

5. (e) The state spending cap imposed under this section is decreased in the initial state fiscal year in which the state is affected by a decrease in revenue deposited in the state general fund as the result of the enactment of a law that:

   1. (1) eliminates a tax or fee after June 30, 2002;
   2. (2) eliminates any part of a tax rate or fee after June 30, 2002; or

   3. (3) establishes or increases an exemption, a deduction, or a credit against a tax or fee after June 30, 2002.

      The amount of the decrease is equal to the average revenue that the budget agency estimates will be lost as a result of the legislative action in the initial two (2) full state fiscal years in which the legislative change is in effect.

As added by P.L.192-2002(ss), SEC.4. Amended by P.L.146-2008, SEC.10.