FISCAL NOTE

Date Requested: March 30, 2017
Time Requested: 10:15 AM
Agency: Education, WV Department of
CBD Number: Version: Bill Number: Resolution Number:
2714 Comm. Sub2. Eng. SB409
CBD Subject: Taxation


FUND(S):



Sources of Revenue:

General Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


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


    The purpose of this bill is to make various tax reform changes including: the repeal of certain procedures related to increased tax assessments; to the prospective balancing of the rate of the severance tax on the production of coal; to increase the rate of the consumers sales and service tax; to the elimination of certain exemptions from the consumers sales and service tax; to increase the rate of the use tax; to the reduction of the rate of the personal income tax and establishing effective dates with respect thereto. The proposed changes to WVC 11-8-6f are the only changes in the legislation that apply directly to the WV Department of Education, so the fiscal note provided only applies to that particular aspect of SB409. The financial implications of the proposed changes to WVC 11-8-6f are unclear.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 0


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


    



Memorandum


    WVC 11-8-6f applies to the establishment of the regular levy rate for county boards of education.
    
    Subsections (a) and (b) that are being deleted currently indicate that the levy rates for the regular levy are to be set by Legislature uniformly statewide and proportionally for all classes of property so that the total statewide property tax revenues to be realized from the regular levy tax collections for the forthcoming year will not increase by more than two percent of the current year's projected property tax revenues, exclusive of increases due to new construction, improvements to existing real property, or newly acquired personal property, unless a public hearing is held. Subsection (c) that is being eliminated removes the requirement of a report by the State Tax Commissioner to the Joint Committee on Government and Finance and the Legislative Oversight Commission on Education Accountability regarding the effects of increasing the limit on the increase in total regular levy revenues to 2% and on the progress of the county assessors in assessing the properties at the constitutionally required sixty percent of market value.
    
    Removal of these provisions could create confusion regarding who establishes the regular levy rate for the county boards of education moving forward since many of the references to the statewide levy rate are being removed. There is still a provision under the Public School Support Plan (PSSP) in WVC 18-9A-2(n) which refers to the regular levy rate that is calculated or set by the Legislature pursuant to WVC 11-8-6f. However, all that will remain in 11-8-6f if SB409 is passed is language regarding the Growth County School Facilities Act. In the remaining Growth County School Facilities Act language under SB409, there is still a reference to the "statewide regular school board levy rate as established by the Legislature."
    
    After consultation with the State Tax Commissioner, it would be his interpretation that the removal of provisions (a) and (b) of WVC 11-8-6f removes the mechanism for the establishment of a statewide levy rate and that any remaining references to the statewide levy rate would no longer be applicable. This would result in each county board of education establishing their own regular levy rate for future years.
    
    The existing local share calculation under the PSSP would no longer be applicable for future years due to the elimination of the statewide levy rate currently utilized in the calculation. The language in WVC 18-9A-2(n) would need to be updated to remove the reference to the statewide rate and indicate what regular levy rate should be used for the calculation of local share under 18-9A-11 (ex: the actual rate levied by each county, an assumed rate for all counties, etc.). Assuming the passage of SB409 without regard to other potential legislation, there would be no estimated cost to the State for the 2017-18 year under PSSP because all county boards of education have already proposed regular levy rates at the current statewide rate of 19.40 cents (class I) at their March statutorily required meeting. We are unable to estimate the cost to the State or the county boards of education in future years because we cannot predict the regular levy rate that each county board of education will establish or how the Legislature would choose to modify the local share calculation of PSSP moving forward.
    
    Allowing county boards of education to establish their own levy rates creates a potential Recht decision concern. While we are unable to predict how a judge would rule regarding this issue, varying regular levy rates among the county boards of education could potentially be deemed to create funding inequities that could lead to reduced educational outcomes in certain counties, which would violate the Constitutional requirement to provide a thorough and efficient education for all students in West Virginia.
    
    In addition, creating a system whereby county boards of education establish their own regular levy rates raises concerns regarding the impact on future elections to be a member of the board. It is feared that individuals may begin running for local boards of education on tax relief platforms instead of focusing on educational issues that impact students. There are also concerns that this could make it more difficult for county boards of education to pass future excess and bond levies.
    
    Further, the changes being made to WVC 11-8-6f under SB409 do not match the changes to that same code section under SB609. SB609 also strikes subsections (a) and (b), but inserts a new subsection (a) which changes the regular levy rate for the county boards of education to the maximum rates under 11-8-6c for the 2017-18 year but provides language allowing county boards of education to decrease their levy rates to no lower than the existing statewide levy rates. Current subsection (c) remains in SB609 but is renumbered and the reference to the statewide levy rate is removed under the provisions of the Growth County School Facilities Act. SB609 also changes 18-9A-2(n) and 18-9A-11 so that the local share calculation under PSSP is based on the maximum levy rates for county boards of education even if a local county board of education opts to decrease their levy rate below the maximum rate established by the legislature. SB609 also provides a mechanism to change the previously proposed regular levy rate for 2017-18 from the March meeting at the statutorily required meeting on the third Tuesday in April in response to the changes made by SB609.
    
    Because both SB409 and SB609 modify WVC 11-8-6f in different manners, it would be unclear how the provisions would be applied. The SB609 proposed changes to 11-8-6f are an integral part of that overall proposed legislation due to the related changes that are being made to the local share calculation of the PSSP.
    
    



    Person submitting Fiscal Note: Brenda Freed
    Email Address: bfreed@k12.wv.us