FISCAL NOTE

Date Requested: January 13, 2020
Time Requested: 01:06 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
1454 Introduced SB315
CBD Subject: Roads and Transportation


FUND(S):

General Revenue Fund, Oil and Gas Reserve Fund, All Counties & Municipalities Fund

Sources of Revenue:

Special Fund

Legislation creates:

Decreases Existing Revenue, Increases Existing Expenses, Creates New Fund: Special Road Repair Fund



Fiscal Note Summary


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


The stated purpose of this bill is to create the Special Road Repair Fund for the maintenance and repair of the state’s roads and highways. The bill provides for a two percent of the severance tax of natural gas and oil and coal and other mining to the transferred to the new fund. The bill also requires a one-time transfer of $200 million dollars from the Rainy Day Fund. The bill requires a think tank be formed and to develop new rules and criteria for identifying counties with the most critical need. The bill requires rule making. The bill also creates a new article that establishes a procedure for contracting road maintenance work. According to our interpretation, passage of the bill would result in reallocating 2 percent of the net Severance Tax revenue from oil, natural gas, and coal along with other mineable commodities into the Special Road Repair Fund. The bill would make a one-time transfer of $200 million for the Rainy Day Fund into the Special Road Repair Fund. It is estimated that the Special Road Repair Fund would gain roughly $6 million to $7 million per year in reallocated severance tax collections. There would be a 2 percent diversion of net Severance Tax collections from the State General Revenue Fund at the cost of $5.7 million to $6.7 million per year. In addition, the provisions of the bill would provide a diversion of 2 percent of the Severance Tax from the 0.35 percent local coal Severance Tax at the cost of roughly $0.3 million per year to local governments. Currently, the total amount of amount of funds in the Rainy Day Fund is $843 million with $364 million in the Revenue Shortfall Reserve Fund – Part- A and $479 million in Fund B. Current legislation requires any transfer or expenditure of revenue saved in the Revenue Shortfall Reserve Fund – Part- A to be utilized before tapping the saved revenue in the Revenue Shortfall Reserve Fund – Part- B. Based upon the provisions of this bill, $200 million would be transferred to the Special Road Repair Fund from the Rainy Day Fund on July 1, 2020, leaving roughly $643 million in the Rainy Day Fund. Approximately, $164 million would be left in Revenue Shortfall Reserve Fund – Part- A and $479 in Revenue Shortfall Reserve Fund – Part- B. A large withdraw of funds from the Revenue Shortfall Reserve Fund could result in negative reaction from bond rating agencies and unintended consequences for future road bonds. Additional administrative costs to the Tax Department would be $15,000, in FY 2021 and $5,000 in subsequent fiscal years.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2020
Increase/Decrease
(use"-")
2021
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 15,000 5,000
Personal Services 0 5,000 5,000
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 10,000 0
2. Estimated Total Revenues 0 -7,000,000 -7,000,000


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


According to our interpretation, passage of the bill would result in reallocating 2 percent of the net Severance Tax revenue from oil, natural gas, and coal along with other mineable commodities into the Special Road Repair Fund. The bill would make a one-time transfer of $200 million for the Rainy-Day Fund into the Special Road Repair Fund. It is estimated that the Special Road Repair Fund would gain roughly $6 million to $7 million per year in reallocated severance tax collections. There would be a 2 percent diversion of net Severance Tax collections from the State General Revenue Fund at the cost of $5.7 million to $6.7 million per year. In addition, the provisions of the bill would provide a diversion of 2 percent of the Severance Tax from the 0.35 percent local coal Severance Tax at the cost of roughly $0.3 million per year to local governments. Currently, the total amount of amount of funds in the Rainy Day Fund is $843 million with $364 million in the Revenue Shortfall Reserve Fund – Part- A and $479 million in Fund B. Current legislation requires any transfer or expenditure of revenue saved in the Revenue Shortfall Reserve Fund – Part- A to be utilized before tapping the saved revenue in the Revenue Shortfall Reserve Fund – Part- B. Based upon the provisions of this bill, $200 million would be transferred to the Special Road Repair Fund from the Rainy Day Fund on July 1, 2020, leaving roughly $643 million in the Rainy Day Fund. Approximately, $164 million would be left in Revenue Shortfall Reserve Fund – Part- A and $479 in Revenue Shortfall Reserve Fund – Part- B. A large withdraw of funds from the Revenue Shortfall Reserve Fund could result in negative reaction from bond rating agencies and unintended consequences for future road bonds. Additional administrative costs to the Tax Department would be $15,000 in FY 2021 and $5,000 in subsequent fiscal years.



Memorandum


The stated purpose of this bill is to create the Special Road Repair Fund for the maintenance and repair of the state’s roads and highways. The bill provides for a two percent of the severance tax of natural gas and oil and coal and other mining to the transferred to the new fund. The bill also requires a one-time transfer of $200 million dollars from the Rainy Day Fund. The bill requires a think tank be formed and to develop new rules and criteria for identifying counties with the most critical need. The bill requires rule making. The bill also creates a new article that establishes a procedure for contracting road maintenance work. The placement of these dedications is interesting because of other sections of this article specifically address the dedication of a portion of this tax to local governments. Language addressing potential conflicts would be helpful. Further, in the new section, the bill states that new fund is funded by two percent of the severance tax for the privilege of severing coal, limestone, or sandstone but the severance tax on limestone and sandstone was terminated effective July 1, 2019. The bill purports to create a new section 17-3-12, but the current Article 3 of Chapter 17 stops at section 10, which means the next section should be 17-3-11.



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