FISCAL NOTE

Date Requested: February 15, 2016
Time Requested: 02:57 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
2705 Introduced SB604
CBD Subject:


FUND(S):

West Virginia University Schools of Medicine, Dentistry and Nursing Fund, Joan C. Edwards School of Medicine of Marshall University Fund, West Virginia School of Osteopathic Medicine Fund and the West Virginia DHHR Medicaid Expansion Fund

Sources of Revenue:

Special Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    The stated purpose of this bill is to increase the excise tax on bottled soft drinks, syrups and dry mixtures; and dedicate the proceeds to the benefit of the four-year school of medicine, dentistry and nursing of West Virginia University, the Joan C. Edwards School of Medicine of Marshall University, the West Virginia School of Osteopathic Medicine and the West Virginia Department of Health and Human Resources to be used for the expansion of Medicaid beginning in the year 2017. The increase is from one cent to five cents in the bottled soft drinks and proportionally on syrups and dry mixtures.
    
    According to our interpretation, passage of this bill would increase the West Virginia Soft Drink Excise Tax by five times its original amount beginning on July 1, 2016. The net revenue gain to the State would be $50.5 million in FY2017 and $51.0 million per year in fiscal years thereafter. Of the $51.0 million gain, 40 percent, or $20.4 million, would be used for the continued maintenance and operation of WVU Medical, Dental and Nursing Schools. The Joan C. Edwards School of Medicine of Marshall University and West Virginia School of Osteopathic Medicine will each receive 20 percent, or $10.2 million. The remaining 20 percent, or $10.2 million, would be dedicated to the West Virginia Department of Health and Human Resources to fund Medicaid Expansion beginning in 2017. Revenues dedicated to these funds would be expected to decrease slightly as a result of an anticipated small decline in soft drink consumption related to the imposition of additional tax. The allocation to WVU Medical, Dental and Nursing Schools would be reduced from 100 percent of the original 1 cent tax to 40 percent of the 5 cent tax, resulting in a net gain of $6.4 million for the WVU Medical, Dental and Nursing Schools.
    
    Additional administrative costs to State Tax Department would be $97,000 in FY2016, $47,000 in FY2017 and $41,500 thereafter. 
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2016
Increase/Decrease
(use"-")
2017
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 97,000 47,000 41,500
Personal Services 0 41,500 41,500
Current Expenses 450 0 0
Repairs and Alterations 0 0 0
Assets 0 5,500 0
Other 96,550 0 0
2. Estimated Total Revenues 0 0 0


Explanation of above estimates (including long-range effect):


    According to our interpretation, passage of this bill would increase the West Virginia Soft Drink Excise Tax by five times its original amount beginning on July 1, 2016. The net revenue gain to the State would be $50.5 million in FY2017 and $51.0 million per year in fiscal years thereafter. Of the $51.0 million gain, 40 percent, or $20.4 million, would be used for the continued maintenance and operation of WVU Medical, Dental and Nursing Schools. The Joan C. Edwards School of Medicine of Marshall University and West Virginia School of Osteopathic Medicine will each receive 20 percent, or $10.2 million. The remaining 20 percent, or $10.2 million, would be dedicated to the West Virginia Department of Health and Human Resources to fund Medicaid Expansion beginning in 2017. Revenues dedicated to these funds would be expected to decrease slightly as a result of an anticipated small decline in soft drink consumption related to the imposition of additional tax. The allocation to WVU Medical, Dental and Nursing Schools would be reduced from 100 percent of the original 1 cent tax to 40 percent of the 5 cent tax, resulting in a net gain of $6.4 million for the WVU Medical, Dental and Nursing Schools.
    
    The tax rates in the proposed bill would increase by five times its original amount as follows:
    • Tax on liquids increases by five times its original amount from 1 cent per liter (16.9 fluid ounces) container or fraction thereof to 5 cents.
    • Tax on syrup would increase by five times its original amount from 80 cents per gallon to $4.00 per gallon.
    • Tax on dry mixture would increase by five times its original amount from 1 cent per 28.35 grams to 5 cents per 28.35 grams.
    
    Additional administrative costs to State Tax Department would be $97,000 in FY2016, $47,000 in FY2017 and $41,500 thereafter. 
    



Memorandum


    The stated purpose of this bill is to increase the excise tax on bottled soft drinks, syrups and dry mixtures; and dedicate the proceeds to the benefit of the four-year school of medicine, dentistry and nursing of West Virginia University, the Joan C. Edwards School of Medicine of Marshall University, the West Virginia School of Osteopathic Medicine and the West Virginia Department of Health and Human Resources to be used for the expansion of Medicaid beginning in the year 2017. The increase is from one cent to five cents in the bottled soft drinks and proportionally on syrups and dry mixtures.
    
    There is a technical error in the imposition of the increased tax on gallons of syrups and liters. It should read as follows - “On each gallon of soft drink syrup, a tax of $4 and in like ratio on each part gallon thereof, or on each four liters of soft drink syrup a tax of $4, and in like ratio on each part four liters thereof.”
    
    Joan C. Edwards has a typographical error, namely, a comma after the “C” rather than a period.
    
    The special Medical School Fund already in the State Treasury will now be used for the maintenance and operation of all medical schools in the State, not just West Virginia University. The proposed bill also creates a special Medicaid fund in the State Treasury to be used solely to fund Medicaid expansion beginning in 2017. Presumably, the revenues received from July 1, 2016 to January 2017 will be deposited for use beginning in 2017.
    



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov