§ 12. Except the debts or refunding debts specified in sections 9, 10
and 13 of this article, all debts contracted by the state and each
portion of any such debt from time to time so contracted shall be
subject to the following rules:

1. The principal of each debt or any portion thereof shall either be
paid in equal annual installments or in installments that result in
substantially level or declining debt service payments such as shall be
authorized by law, or, in the alternative, contributions of principal in
the amount that would otherwise be required to be paid annually shall be
made to a sinking fund.

2. When some portions of the same debt are payable annually while
other portions require contributions to a sinking fund, the entire debt
shall be structured so that the combined amount of annual installments
of principal paid and/or annual contributions of principal made in each
year shall be equal to the amount that would be required to be paid if
the entire debt were payable in annual installments.

3. When interest on state obligations is not paid at least annually,
there shall also be contributed to a sinking fund at least annually, the
amount necessary to bring the balance thereof, including income earned
on contributions, to the accreted value of the obligations to be paid
therefrom on the date such contribution is made, less the sum of all
required future contributions of principal, in the case of sinking fund
obligations, or payments of principal, in the case of serial
obligations. Notwithstanding the foregoing, nothing contained in this
subdivision shall be deemed to require contributions for interest to
sinking funds if total debt service due on the debt or portion thereof
in the year such interest is due will be substantially the same as the
total debt service due on such debt or portion thereof in each other
year or if the total amount of debt service due in each subsequent year
on such debt or portion thereof shall be less than the total debt
service due in each prior year.

4. The first annual installment on such debt shall be paid, or the
first annual contribution shall be made to a sinking fund, not more than
one year, and the last installment shall be paid, or contribution made
not more than forty years, after such debt or portion thereof shall have
been contracted, provided, however, that in contracting any such debt
the privilege of paying all or any part of such debt prior to the date
on which the same shall be due may be reserved to the state in such
manner as may be provided by law.

5. No such debt shall be contracted for a period longer than that of
the probable life of the work or purpose for which the debt is to be
contracted, or in the alternative, the weighted average period of
probable life of the works or purposes for which such indebtedness is to
be contracted. The probable lives of such works or purposes shall be
determined by general laws, which determination shall be conclusive.

6. The money arising from any loan creating such debt or liability
shall be applied only to the work or purpose specified in the act
authorizing such debt or liability, or for the payment of such debt or
liability, including any notes or obligations issued in anticipation of
the sale of bonds evidencing such debt or liability.

7. Any sinking funds created pursuant to this section shall be
maintained and managed by the state comptroller or an agent or trustee
designated by the state comptroller, and amounts in sinking funds
created pursuant to this section, and earnings thereon, shall be used
solely for the purpose of retiring the obligations secured thereby
except that amounts in excess of the required balance on any
contribution date and amounts remaining in such funds after all of the
obligations secured thereby have been retired shall be deposited in the
general fund.

8. No appropriation shall be required for disbursement of money, or
income earned thereon, from any sinking fund created pursuant to this
section for the purpose of paying principal of and interest on the
obligations for which such fund was created, except that interest shall
be paid from any such fund only if, and to the extent that, it is not
payable annually and contributions on account of such interest were made
thereto.

9. The provisions of section 15 of this article shall not apply to
sinking funds created pursuant to this section.

10. When state obligations are sold at a discount, the debt incurred
for purposes of determining the amount of debt issued or outstanding
pursuant to a voter approved bond referendum or other limitation on the
amount of debt that may be issued or outstanding for a work or purpose
shall be deemed to include only the amount of money actually received by
the state notwithstanding the face amount of such obligations.