Section 25
Section 25 of the State Finance Act provides that the state’s fiscal year lasts from July 1 through June 30 and that expenditures for liabilities incurred within a given fiscal year be paid from that year’s appropriation, with certain exceptions. These exceptions include liabilities for Medicaid, state employee and retiree health insurance and certain spending by the Department of Public Health.
Payments made under these exceptions to Section 25 are similar to normal lapse period (the sixty days following the end of the state’s fiscal year) spending in that both sets of payments are for liabilities incurred before the end of the fiscal year, but paid after June 30th. For reporting in accordance with Generally Accepted Accounting Principals (GAAP), both types of payments are considered to be part of that year’s spending. On a cash basis, however, the difference between these two types of expenditures is which fiscal year’s appropriation is charged. Normal lapse period spending is charged to an appropriation from the fiscal year in which the liability arose. Payments made for items covered by the exceptions to Section 25 are made from a subsequent year’s appropriation, and so are not counted as lapse period spending.