Sec. 1. 5 MRSA §1513, sub-§1, as corrected by RR 1999, c. 2, §1, is amended to read:

1. Maine Rainy Day Fund. As the first priority before any other transfer, the State Controller shall at the close of each fiscal year reserve from the unappropriated surplus of the General Fund an amount equal to 1/2 25% of the excess of total General Fund revenues received over accepted estimates in that fiscal year and transfer that amount to the Maine Rainy Day Fund at the beginning of the next fiscal year. Accepted revenue estimates may not be increased after adjournment of each First Regular Session of the Legislature except as provided. For the first year of the biennium, revenue estimates for the 2nd year of the biennium may be adjusted once during the Second Regular Session of the Legislature. Accepted revenue estimates may be increased for other fiscal periods only if an amount not to exceed 1/2 of the increase is transferred by the State Controller to the Rainy Day Fund at the same time from the unappropriated surplus of the General Fund. The fund may not exceed 6% of the total General Fund revenues received in the immediately preceding fiscal year and may not lapse, but remains in a continuing carrying account to carry out the purposes of this section. A reduction in the fund is not necessary in the event the total General Fund revenues received in the immediately preceding fiscal year are less than the total General Fund revenues received in the fiscal year 2 years previous and if the fund is at its 6% limit.

Sec. 2. 5 MRSA §1514-A is enacted to read:

§1514-A.__Income Tax Rate Management Fund

1.__Fund established.__For the purposes of reducing the volatility of state tax revenues, improving the predictability of state and local budgeting efforts and managing the State's overall tax burden, there is established the Income Tax Rate Management Fund, referred to in this section as "the fund."__ The fund may be used to alleviate only the characteristics of the State's income tax rate structure that concentrate the individual income tax rates within a narrow range of taxable incomes and apply the highest marginal rate to a relatively low level of taxable income.__Money in the fund does not lapse, but is carried forward for the purposes of this section.

2.__Revenues reserved.__Beginning with fiscal year 2004-05, and notwithstanding section 1513, if the tax revenues generated by the individual income tax for any fiscal year, as determined by the State Controller at the close of the fiscal year, exceed