FISCAL NOTE
Date Requested: January 24, 2023
Time Requested: 11:35 AM |
| Agency: |
Treasurer's Office, WV |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3037 |
Introduced |
SB430 |
|
|---|
| CBD Subject: |
Finance and Administration |
|---|
|
FUND(S):
1322- Banking Services
Sources of Revenue:
Special Fund
Legislation creates:
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
With regard to the Department of Revenue, the proposed legislation simply codifies the State’s current banking practices and the State Treasurer's banking contract authority according to West Virginia Code §12-1-2, §12-1-7, and §12-3A-6, as that authority has been understood by this agency since the 1990s. The fiscal impact of this bill depends on how many Revenue agencies will pursue banking accounts outside of the State’s financial system if the bill is not adopted. If all agencies of the Department of Revenue were exempt from the State Treasurer's Office banking contract authority and pursued outside banking contracts, around $7.4 billion of Department of Revenue net annual monetary activity would occur outside of the State Treasury. This would result in the state losing approximately $333,780,570 annually in earned interest to the Consolidated Fund via investment by the Board of Treasury Investments. The Office can estimate the annual cost of our Banking Services contract would increase approximately $347,857 and the Office's ACH Processing contract would increase approximately $120,000 annually. Additionally, banking transactions occurring outside of the State Treasury would not be itemized in a detailed manner in wvOASIS; instead, either the entire revenue and disbursement process would occur outside of the state’s banking and financial system or summary totals would be entered into wvOASIS, both significantly decreasing transparency of individual transactions. Please note: The cost estimates provided herein are based on an assumption of similar banking activity levels for the Revenue departments going forward and an interest rate of 4.5%.
West Virginia Code §12-2-2 requires spending units to deposit moneys accepted on behalf of the State into the State Treasury within one business day (the “one-day rule”) and requires daily itemized records by spending units; however, that section of Code permits the Department of Revenue agencies to set their own procedures for collecting moneys due to the state. The bill clarifies that the Department of Revenue’s exemption from procedural oversight by the Treasurer’s Office does not equate to an exemption from the State Treasurer’s contract authority. This clarification is important, because a departure from this standard could severely damage the State’s short-term investment returns, economy of scale in its financial goods and services contracts, and transparency in State funds. Whenever the State Treasurer’s Office cannot provide a financial good or service needed by a state agency, the Office issues exemptions from the State Treasurer’s contract authority, as authorized by Code.
The definitions added to Chapter 12 in the bill are aimed at clarifying the Treasurer’s banking contract authority and to ensure that spending units do not contract with third parties to operate as “pass-through” entities, whereby the third-party contracts for banking processes that are within the State Treasurer’s purview. Additionally, entities not meeting the description of a traditional bank or financial institution must still contract through the Treasurer’s Office when providing banking functionality to state agencies. Like the amendments described above, these definitions would prevent negative fiscal impact to the State’s short-term investment returns and economies of scale in financial goods and services contracts, as well as preserve transparency in banking transactions across all spending units.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2023
Increase/Decrease
(use"-") |
2024
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
0 |
0 |
| Personal Services |
0 |
0 |
0 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
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):
Memorandum
Person submitting Fiscal Note: James Fuerhoff
Email Address: james.fuerhoff@wvsto.gov