FISCAL NOTE
Date Requested: January 29, 2018
Time Requested: 01:41 PM |
| Agency: |
Tax & Revenue Department, WV State |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2123 |
Introduced |
HB4341 |
|
|---|
| CBD Subject: |
Taxation |
|---|
|
FUND(S):
General Revenue Fund, PEIA Fund
Sources of Revenue:
General Fund PEIA Fund
Legislation creates:
Decreases Existing Revenue, Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The stated purpose of this bill is to dedicate certain severance taxes to fund PEIA.
According to our interpretation, the proposed bill would dedicate 33 percent of State Severance Tax revenues collected on natural gas production to the Public Employees Insurance Agency (PEIA) effective July 1, 2018. As written, the bill refers to the “severed tax” on natural gas, which is presumed to mean the Severance Tax. In addition, the proposed bill includes language dedicating “35 percent of the [2] percent severed tax on natural gas imposed by §11-13A-3a” and “[33] percent of the [7.5] percent severed tax” to funding PEIA and to benefit the PEIA Fund, respectively. As it is unclear to what the 2 percent and 7.5 percent provisions are referring, this portion of the proposed bill is disregarded for purposes of this fiscal note.
Under current natural gas Severance Tax projections, the proposed bill would result in General Revenue Fund losses of roughly $54.3 million in FY2019, $63.1 million in FY2020, and $68.2 million in FY2021, with greater losses expected in out years. This benefit to PEIA comes at the expense of the General Revenue Fund and would necessitate budgetary considerations to shift funding from other purposes to fill the gap. In addition, the proposed bill relies on an historically volatile industry to fund PEIA. The extraction industry is sensitive to a variety of economic factors, which could lead to dedications of less than those currently projected if the economy slows.
Additional costs incurred by the State Tax Department would be $25,000 in FY2018 and $25,000 in FY2019.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2018
Increase/Decrease
(use"-") |
2019
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
25,000 |
25,000 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
25,000 |
25,000 |
0 |
| 2. Estimated Total Revenues |
0 |
-54,300,000 |
-63,100,000 |
Explanation of above estimates (including long-range effect):
According to our interpretation, the proposed bill would dedicate 33 percent of State Severance Tax revenues collected on natural gas production to the Public Employees Insurance Agency (PEIA) effective July 1, 2018. As written, the bill refers to the “severed tax” on natural gas, which is presumed to mean the Severance Tax. In addition, the proposed bill includes language dedicating “35 percent of the [2] percent severed tax on natural gas imposed by §11-13A-3a” and “[33] percent of the [7.5] percent severed tax” to funding PEIA and to benefit the PEIA Fund, respectively. As it is unclear to what the 2 percent and 7.5 percent provisions are referring, this portion of the proposed bill is disregarded for purposes of this fiscal note.
Under current natural gas Severance Tax projections, the proposed bill would result in General Revenue Fund losses of roughly $54.3 million in FY2019, $63.1 million in FY2020, and $68.2 million in FY2021, with greater losses expected in out years. This benefit to PEIA comes at the expense of the General Revenue Fund and would necessitate budgetary considerations to shift funding from other purposes to fill the gap. In addition, the proposed bill relies on an historically volatile industry to fund PEIA. The extraction industry is sensitive to a variety of economic factors, which could lead to dedications of less than those currently projected if the economy slows.
Additional costs incurred by the State Tax Department would be $25,000 in FY2018 and $25,000 in FY2019.
Memorandum
The stated purpose of this bill is to dedicate certain severance taxes to fund PEIA.
This bill does not accomplish its purpose. There is a title defect in this bill as it alludes to dedicating a percentage of the severance tax on natural gas and oil to PEIA, but the bill only mentions the severance tax on natural gas.
The bill does not specify that it is dedicating 33 percent of the annual collections of the severance tax imposed under W.Va. Code §11-13A-3a(a), less the amount of allowable refunds. If the bill is attempting to take 33 percent of the 5 percent of the gross value of natural gas, as opposed to taking 33 percent of the annual collections of the tax, this bill would be difficult to administer, since it does not take into consideration transportation or transmission costs that a taxpayer may later claim that may reduce the gross value, or refund claims that the taxpayer may later make.
The proposed language added to W.Va. Code §11-13A-5a(a) is too ambiguous to be administered. It is unclear to what the 35 percent of 2 percent and 33 percent of 7.5 percent provisions are referring.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov