FISCAL NOTE

Date Requested: February 10, 2020
Time Requested: 12:51 PM
Agency: Legislative Auditor
CBD Number: Version: Bill Number: Resolution Number:
3163 Introduced SB743
CBD Subject: Legislature


FUND(S):

General

Sources of Revenue:

General Fund

Legislation creates:

Creates New Expense, Creates New Program



Fiscal Note Summary


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


     This bill establishes the Office of Regulatory and Fiscal Affairs within the Joint Committee on Government and Finance. The purpose of this division is to provide 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 individuals 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 the three most 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 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
2020
Increase/Decrease
(use"-")
2021
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 761,440 707,400 707,400
Personal Services 702,000 702,000 702,000
Current Expenses 19,440 5,400 5,400
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. However, these are the best estimates that could be made with the information and time available. 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.
    
     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. Also, an offsite location would 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.
    
     Personal Services (Salaries + Benefits Estimated @ 30% of Salary):
    
     1 Director - $80,000 Salary + $24,000 Benefit Cost = $104,000
     2 Managers - $55,000 Salary + $16,500 Benefit Cost = $143,000
     8 Analysts - $40,000 Salary + $12,000 Benefit Cost = $416,000
     1 Support Staff - $30,000 Salary + $9,000 Benefit Cost =$39,000
     Total for all 12 FTE = $702,000
    
    
     Current Expenses:
     • Computer x 12 @ $900 (1st year, then again in 5-7 years when replacement is needed) = $10,800
     • Computer Monitor x 12 @ $120 (1st year) = $1,440
     • Phones x 12 @ $150 = $1,800 (1st Year)
     • Office Supplies = $3,000 annually
     • Leased Printer = $2,400 annually
    
     Repairs and Alterations:
     • Cubicles/Office Space Renovation w/ Furnishings = $40,000 (1st year)
    



Memorandum


     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 Office 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. 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 Office 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 analysis.



    Person submitting Fiscal Note: Justin Robinson
    Email Address: justin.robinson@wvlegislature.gov