FISCAL NOTE

Date Requested: March 05, 2021
Time Requested: 11:12 AM
Agency: Treasury Investments, WV Board of
CBD Number: Version: Bill Number: Resolution Number:
3218 Introduced HB2936
CBD Subject: Finance and Administration


FUND(S):

BOARD OF TREASURY INVESTMENTS FEE FUND

Sources of Revenue:

Special Fund

Legislation creates:

Increases Revenue From Existing Sources, Increases Existing Expenses



Fiscal Note Summary


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


The bill adds a new provision permitting compensation to the two appointed board members of up to $500 per meeting attended and modifying permissible security restrictions for the Consolidated Fund. The increase in expenditures in personal services will not require an increase in the BTI's overall appropriation. If the personal services appropriation needs increased in future budget years, this will be offset by a decrease in the current expense appropriation. The changes to permissible investments will result in increases in investment earnings for certain pools within the consolidated fund. Participants in these pools, including the general revenue fund, special revenue funds with investment authority and local governments, may receive higher earnings on their investments in these pools. Revenues for the Board of Treasury Investments Fee Fund (fund 9152) will not be affected by these changes.



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 0 4,000 4,000
Personal Services 0 4,000 4,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 100,000 601,000 1,570,000


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


There will be no increase in expenses in fiscal year 2021. In fiscal year 2022 and later years, expenses will increase by a maximum of $4,000 per year (2 appointed members X 4 meetings per year X $500 per member per meeting). No increase in appropriations will be needed in fiscal year 2022. In fiscal year 2023 and later the BTI may need to increase the personal service appropriation by $4,000. Any increase in the personal service appropriation will be offset by a decrease of $4,000 in the current expense appropriation. The increase in estimated revenues is based on the proposed changes to permissible investments being applied to the WV Money Market Pool and the WV Short Term Bond Pool starting in May 2021. In fiscal year 2021, removal of minimum Treasury requirement may result in an increase in overall annual pool yields by approximately 1 basis point (0.01%). In the current low rate environment, this is also the expected increase in annual yields during fiscal year 2022. If the interest rate environment begins to normalize during fiscal year 2023 the effect is expected to grow to approximately 3 basis points (0.03%) per year. An average increase in municipal security yields of 15 basis points (0.15%) is expected. This will only benefit the WV Short Term Bond Pool as the WV Money Market Pool does not typically invest in municipal securities. The change in commercial paper ratings would only apply to the WV Short Term Bond Pool and the effects on yield are expected to be minimal. The commercial paper ratings change is to permit the WV Short Term Bond Pool to invest in commercial paper issues of corporations with long-term investment grade ratings.



Memorandum


Estimates of increases in investment income are based on average pool balances over the past three years and average credit spreads in the current market environment. Increases or decreases in pool balances will have a significant positive or negative effect on actual revenues. Credit spreads will change over time and may be higher or lower than the spreads used in the revenue estimates. This can also result in actual revenues being higher or lower than estimated.



    Person submitting Fiscal Note: Karl Shanholtzer
    Email Address: karl.shanholtzer@wvsto.com