(a) The General Assembly shall not authorize an increase in general budget expenditures for any fiscal year above the amount of general budget expenditures authorized for the previous fiscal year by a percentage which exceeds the greater of the percentage increase in personal income or the percentage increase in inflation, unless the Governor declares an emergency or the existence of extraordinary circumstances and at least three-fifths of the members of each house of the General Assembly vote to exceed such limit for the purposes of such emergency or extraordinary circumstances. Any such declaration shall specify the nature of such emergency or circumstances and may provide that such proposed additional expenditures shall not be considered general budget expenditures for the current fiscal year for the purposes of determining general budget expenditures for the ensuing fiscal year and any act of the General Assembly authorizing such expenditures may contain such provision.

(b) As used in this section:

(1) “Increase in personal income” means the compound annual growth rate of personal income in the state over the preceding five calendar years, using data reported by United States Bureau of Economic Analysis;

(2) “Increase in inflation” means the increase in the consumer price index for all urban consumers, all items, less food and energy, during the preceding calendar year, calculated on a December over December basis, using data reported by the United States Bureau of Labor Statistics; and

(3) “General budget expenditures” means expenditures from appropriated funds authorized by public or special act of the General Assembly, provided (A) general budget expenditures shall not include expenditures for payment of the principal of and interest on bonds, notes or other evidences of indebtedness, expenditures pursuant to § 4-30a, or expenditures of any federal funds granted to the state or its agencies, (B) expenditures for the implementation of federal mandates or court orders shall not be considered general budget expenditures for the first fiscal year in which such expenditures are authorized, but shall be considered general budget expenditures for such year for the purposes of determining general budget expenditures for the ensuing fiscal year, (C) expenditures for federal programs in which the state is participating on October 31, 2017, for which the state receives federal matching funds shall be considered general budget expenditures, but expenditures for federal programs in which the state commences participation after October 31, 2017, for which the state receives federal matching funds shall not be considered general budget expenditures for the first fiscal year in which such expenditures are authorized, but shall be considered general budget expenditures for such year for the purposes of determining general budget expenditures for the ensuing fiscal year, (D) for the fiscal years ending June 30, 2018, to June 30, 2022, inclusive, general budget expenditures shall not include annual expenditures for the payment of the portion of the actuarially determined employer contribution representing the unfunded liability for that fiscal year of any retirement system, other than the teachers’ retirement system, or any alternative retirement program administered by the State Employees Retirement Commission, and (E) for the fiscal years ending June 30, 2018, to June 30, 2026, inclusive, general budget expenditures shall not include annual expenditures for the payment of the portion of the actuarially determined employer contribution representing the unfunded liability for that fiscal year of the teachers’ retirement system. As used in this section, “federal mandates” means those programs or services in which the state must participate, or in which the state participated on July 1, 1991, and in which the state must meet federal entitlement and eligibility criteria in order to receive federal reimbursement, provided expenditures for program or service components which are optional under federal law or regulation shall be considered general budget expenditures.

(c) A base year adjustment shall be made in any fiscal year in which (1) any expenditure funded in the previous fiscal year by an appropriation is funded in the current fiscal year by either state bonding, a revenue intercept or a nonappropriated state funding source if the program or purpose being funded in the current fiscal year is essentially the same as that funded in the previous fiscal year, or (2) any expenditure funded in the previous fiscal year by either state bonding, a revenue intercept or a nonappropriated state funding source is funded in the current fiscal year by an appropriation if the program or purpose being funded in the current fiscal year is essentially the same as that funded in the previous fiscal year.