FISCAL NOTE
Date Requested: March 01, 2021
Time Requested: 11:41 AM |
| Agency: |
Legislative Services - Joint Committee |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2440 |
Introduced |
SB505 |
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| CBD Subject: |
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FUND(S):
General
Sources of Revenue:
General Fund
Legislation creates:
Increases Existing Expenses
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
The Joint Committee on Government & Finance has already established and is operating the Division of Regulatory & Fiscal Affairs. This Division was established by the Legislature prior to the commencement of the 2021 Regular Session. Based on the provisions set forth in this bill, which is similar to HB4645 introduced in the 2020 Regular Session, this fiscal note will again present the fiscal analysis from the prior bill and update the areas where specific fiscal impact is now known. In the memorandum portion of this fiscal note, we will also describe any potential issues that this bill may present.
This bill codifies the already established Division of Regulatory and Fiscal Affairs (the Division) within the Joint Committee on Government and Finance. The Division currently employs 1 Director with a PhD in Economics and 2 Fiscal Analysts. The language of this bill requires the Division to conduct fiscal impact analysis for proposed legislation (fiscal notes) affecting the revenues or expenditures of state government by $1 million or more during session or that change a tax or tax rate.
Further, the bill provides for initial economic analysis for any agency approved legislative rule submitted to the Legislature pursuant to §29A-3-9. If such rules are determined to have an economic impact of $1 million or greater, the division would conduct a full economic impact study of the rule.
Additionally, the bill also allows 6 member of the Legislature to request up to 3 studies per calendar year for any existing or proposed legislative rule, totaling up to 18 studies per year. The bill further stipulates that such studies will be conducted by an economist under the employment of the Joint Committee on Government and Finance.
Based on fiscal note data for three recently completed years (2017-2019), there were on average 112 bills with fiscal notes that had an effect on state government of $1 million or greater. This is broken down as follows:
2017 - 988 Fiscal Notes Requested - 789 Submitted – 149 Fiscal Notes of $1 million or more
2018 - 677 Fiscal Notes Requested – 533 Submitted – 78 Fiscal Notes of $1 million or more
2019 – 859 Fiscal Notes Requested – 672 Submitted – 108 Fiscal Notes of $ 1 million or more
Also, there were on average 167 fiscal notes dealing with taxation in some form, some of which are also included in the number of fiscal notes in excess of $1 million. The yearly numbers for fiscal notes dealing with taxes are as follows:
2017 – 198 Fiscal Notes for Department of Tax & Revenue
2018 – 120 Fiscal Notes for Department of Tax & Revenue
2019 - 182 Fiscal Notes for Department of Tax & Revenue
As a note, the bill stipulates a fiscal note analysis be performed for any floor amendments resulting in an impact on state government of $1 million or greater. The amount of work required through this provision is difficult to estimate but would require an additional indeterminable number of fiscal note analyses for those amendments.
For the same three-year period, there were an average of 102 rules proposed each year meeting the stipulations of this bill, broken down as follows:
2017 – 88 Proposed Legislative Rules
2018 – 74 Proposed Legislative Rules
2019 – 145 Proposed Legislative Rules
Per the language of this bill, initial economic analysis would need to be performed on all proposed rules, on average for 102 rules per year. These rules on their own do not include a fiscal impact analysis as they are often rules that are proposed to effectuate the change resulting from completed legislation. Therefore, it is difficult to estimate the number of these bills that would require a full economic impact study based on available information. However, a fair estimate of the number of proposed rules that would require a full economic impact analysis would be approximately 10% of all proposed rules, approximately 10 per year. This along with the potential 18 economic impact studies that can be requested per §4-2-6a(c)5.
In summary, annually the bill would require on average:
• 112 fiscal note reviews for legislation with $1 million or more of impact
• 167 fiscal note reviews for legislation with changes to tax rates or taxes
• 102 proposed legislative rule initial economic impact analyses
• 28 full economic impact studies for proposed legislative rules with $1 million or greater impact or by request
The amount of work required through this bill, particularly the full economic impact studies, would likely necessitate the full-time employment of the following staff:
• 1 Director/Economist
• 2 Fiscal Analyst Managers
• 8 Fiscal Analysts
• 1 Support Staff
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2021
Increase/Decrease
(use"-") |
2022
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
452,390 |
404,200 |
404,200 |
| Personal Services |
395,200 |
395,200 |
395,200 |
| Current Expenses |
17,190 |
9,000 |
9,000 |
| Repairs and Alterations |
40,000 |
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):
The most significant cost involved with the provisions of this bill are personal services, which represents over 90% of the total cost. Other costs depicted below are based on best estimates and could fluctuate higher or lower when actually incurred. Adjustments could be necessary, including increasing the staff size of the office, if the requirements of the bill cannot be met with the estimated staff size this fiscal note presents.
The following is the fiscal impact analysis applicable to the bill:
The Division is already established and employs 1 Director and 3 analysts with 1 additional analyst position already budgeted. The personal services cost already budgeted or incurred for these positions is approximately $323,700, resulting in $395,200 of new personal services expenses per the bill. The total staff breakdown required per the bill is as follows:
Personal Services (Salaries + Benefits Estimated @ 30% of Salary):
1 Director - $85,000 Salary + $25,500 Benefit Cost = $110,500
2 Managers - $55,000 Salary + $16,500 Benefit Cost = $143,000
8 Analysts - $41,000* Salary + $12,300 Benefit Cost = $426,400
1 Support Staff - $30,000 Salary + $9,000 Benefit Cost =$39,000
Total for all 12 FTEs = $718,900
Total increase in personal services expenses($718,900 - $323,700)= $395,200
This includes 2 Managers, 4 additional Fiscal Analysts, and 1 Support Staff
(* $41,000 salary is an estimate. Starting salary is $39,500 with an additional $3,000 to staff who have a recognized professional certification in a related field for a potential salary of $42,500. Currently the office employs only 2 analysts, one of which receives a $42,500 salary.)
Current Expenses:
The Division is already established and employs 1 Director and 3 analysts with an additional analyst position already budgeted. Equipment has already been purchased or budgeted for these staff and the bill will require the purchase of equipment for 7 more individuals as follows.
• Computer x 7 @ $900 (1st year, then again in 5-7 years when replacement is needed) = $6,300
• Computer Monitor x 7 @ $120 (1st year) = $840
• Phones x 7 @ $150 (1st Year)= $1,050
• Analyst Software License x 6 @ $600= $3,600 annually
• Office Supplies = $3,000 annually
• Leased Printer = $2,400 annually
Total 1st year Current Expenses Increase = $17,190
Other Years Increase = $9,000
Repairs and Alterations:
• Cubicles/Office Space Renovation w/ Furnishings = $40,000 estimated (1st year)
Memorandum
The bill codifies the already established Division of Regulatory & Fiscal Affairs under the Joint Committee on Government & Finance.
The bill stipulates that in the case of a floor amendment which may have a fiscal impact of $1 million or greater, consideration of the bill may be postponed for one day until a fiscal note is completed by the Division of Regulatory and Fiscal Affairs. The bill also states that to the extent additional information is needed from an agency to conduct such an analysis; the agency has 24 hours to provide the needed information. If a bill were held for consideration for one day and an agency is in turn required to provide information within 24 hours to allow the Office of Regulatory and Fiscal Affairs to conduct its analysis, the one-day window for consideration will have passed, creating a potential conflict within the bill itself. Further, the 24 hour requirement to produce a fiscal analysis performed by the Division is somewhat impractical and does not provide adequate time to produce a sound fiscal impact analysis, especially if determining such impact requires complex analysis and input from the agency or other external sources.
Typically, fiscal notes are requested to be submitted within three working days, which would be a fairer consideration for such instances given an agency may not supply the needed information in time to meet a one-day turnaround. Allowance of three days for the Division of Regulatory and Fiscal Affairs to conduct its analysis would result in more accurate and relevant results and given the complexity of the legislation, more time may be warranted to provide truly accurate fiscal impact analysis.
The language of this bill refers to the "Office" of Regulatory and Fiscal Affairs, however this has already been established under the Joint Committee on Government & Finance as the "Division" of Regulatory and Fiscal Affairs so the bill could be modified to reflect the already established Division name.
Also, this analysis assumes the Office of Regulatory and Fiscal Affairs would be located in the Capitol building given the nature of the work to be performed and its relation to the Legislature. If office space would be required outside of the main Capitol building, but still within the Capitol complex, rent expenses would be incurred. If the office space would be required outside of the Capitol complex, rent expenses would be incurred at a minimum of $25,000 per year, based on current lease costs for other offices operating outside of the Capitol complex. An offsite location would also require wiring of the office and connection to broadband services that could connect with the Legislature’s servers, which would incur a significant one-time cost for setup and a monthly service cost for broadband that currently runs at approximately $900 per month to be connected securely to the Legislature's network. These costs are not included in the fiscal impact analysis or the explanation as they are not yet known to be applicable. However should the Division require a location outside of the Capitol, these would be additional annual costs incurred.
Person submitting Fiscal Note: Justin Robinson
Email Address: justin.robinson@wvlegislature.gov