FISCAL NOTE
Date Requested: February 03, 2026
Time Requested: 04:23 PM |
| Agency: |
Auditor, State of WV |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3500 |
Introduced |
HB5064 |
|
|---|
| CBD Subject: |
Municipalities |
|---|
|
FUND(S):
State Funds
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 purpose of proposed House Bill 5064 relates to municipalities that have failed to complete required financial audits for multiple years; modifies definitions; clarifies fiscal emergency conditions; authorizes the State Auditor to evaluate a municipality’s likelihood of financial recovery; allows for the transition to dissolution; provides notice to municipalities; clarifies duties of the receiver upon dissolution; and confirms the effect of municipal dissolution on utilities governed by the West Virginia Public Service Commission.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2026
Increase/Decrease
(use"-") |
2027
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
0 |
2,522,000 |
1,261,000 |
| Personal Services |
0 |
2,522,000 |
1,261,000 |
| 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):
We have examined the provisions of the proposed legislation and we believe the expectations of the Bill with respect to identifying and evaluating the presence of and the appropriate resolution of the various local fiscal emergencies defined in the Bill would require significant efforts by the State Auditor’s Office. In order to determine the probable immediate impacts of the legislation assuming adoption thereof, we determined according to our records that 30 municipalities currently meet the definition of being in a state of “chronic audit noncompliance” as set out in the Bill. In addition, there could potentially be other municipalities who have circumstances which would constitute a “local fiscal emergency” as defined in the Bill; however, we are not aware of any such issues at this time. Accordingly, we have restricted our projection of implementation costs to the costs which the State Auditor would incur in order to complete an audit of each of the aforementioned 30 municipalities. We believe an audit would be necessary for the State Auditor to make an informed decision as to whether or not the affected municipality had the capability to continue as a going concern or, in the alternate, a recommendation for dissolution should be rendered and a plan to effectuate such dissolution should be developed. Based on our projections of the efforts required, we believe the required audits would cost $2,522,000 to conduct in the initial year of implementation of the provisions of the Bill. Since historically, a number of the municipalities of the State have generally experienced difficulty in setting aside the necessary funding to provide for audits, we believe additional municipalities would come to fall under the definition of being in chronic audit noncompliance in future years. Since, we have no ability to determine with accuracy in advance how many such municipalities might meet that definition in future years, we have projected future annual audit costs at 50% of the amount in the initial year of implementation of the Bill or $1,261,000 annually.
Memorandum
As stated earlier, the vast majority of State municipalities who fall into chronic audit noncompliance generally claim to do so as a result of having insufficient revenues to fund the costs of their audits while maintaining citizen services. Accordingly, in order to implement the legislation should it be adopted, the State Auditor would need an appropriation from the State General Revenue Fund equal to the costs reflected in this Fiscal Note in order to implement the provisions of the proposed Bill.
Person submitting Fiscal Note: Michael E. Sizemore, CPA
Email Address: Mike.Sizemore@wvsao.gov