FISCAL NOTE

Date Requested: March 14, 2017
Time Requested: 01:23 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
3187 Introduced HB3045
CBD Subject:


FUND(S):

Medical School Fund, General Revenue Fund

Sources of Revenue:

General Fund,Special Fund

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


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


The stated purpose of this bill is to change the structure of the tax on bottled soft drinks and soft drink syrups and powders to only cover soft drinks with added caloric sweeteners, increase the rate to two cents per ounce, and to rededicate the proceeds to all three medical schools in the state. The proposed bill would alter the current structure of the Soft Drinks Tax effective July 1, 2017 such that the tax imposed will be 2 cents per ounce of bottled soft drinks or prepared ounce derived from syrups or powders. The new tax would exclude beverages sweetened with noncaloric sweeteners. Funds collected from the new tax, net any administrative costs, are dedicated to three schools of medicine in the State as follows: the West Virginia School of Medicine will receive the first $18.0 million; the Marshall University School of Medicine will receive the next $5.0 million; and the West Virginia Osteopathic School will receive the next $3.0 million. Up to $55.0 million of any remaining funds are dedicated by supplemental appropriation for teacher pay raises as described in West Virginia Code §18A-4-5C. After these conditions are met, any remaining revenues will be deposited into the General Revenue Fund. According to our interpretation, the proposed 2 cents per ounce tax on bottled soft drinks and sugary drinks prepared from syrups or powders is expected to result in a net revenue gain of roughly $105.2 million in FY2018. This estimate accounts for 11 months of collections following the change in tax reduced by anticipated FY2018 revenue collections from the current tax. A net revenue gain of approximately $111.5 million is expected in FY2019. As the bill does not define “noncaloric sweeteners,” we assume this would exclude artificially-sweetened beverages, such as diet sodas, from the tax. An alternate interpretation of this term could affect estimated revenues. Considering total collections, we anticipate revenues to be sufficient to fully fund the three schools of medicine and teacher pay raise appropriations. The General Revenue Fund could gain approximately $36.2 million in FY2018 and $43.2 million in FY2019 as a result of the proposed bill. Additional administrative costs incurred by the State Tax Department are expected to be $50,000 for the remainder of FY2017, $20,000 in FY2018, and $10,000 for each year thereafter.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 50,000 20,000 10,000
Personal Services 0 20,000 10,000
Current Expenses 5,000 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 45,000 0 0
2. Estimated Total Revenues 0 105,200,000 111,500,000


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


The proposed bill would alter the current structure of the Soft Drinks Tax effective July 1, 2017 such that the tax imposed will be 2 cents per ounce of bottled soft drinks or prepared ounce derived from syrups or powders. The new tax would exclude beverages sweetened with noncaloric sweeteners. Funds collected from the new tax, net any administrative costs, are dedicated to three schools of medicine in the State as follows: the West Virginia School of Medicine will receive the first $18.0 million; the Marshall University School of Medicine will receive the next $5.0 million; and the West Virginia Osteopathic School will receive the next $3.0 million. Up to $55.0 million of any remaining funds are dedicated by supplemental appropriation for teacher pay raises as described in West Virginia Code §18A-4-5C. After these conditions are met, any remaining revenues will be deposited into the General Revenue Fund. According to our interpretation, the proposed 2 cents per ounce tax on bottled soft drinks and sugary drinks prepared from syrups or powders is expected to result in a net revenue gain of roughly $105.2 million in FY2018. This estimate accounts for 11 months of collections following the change in tax reduced by anticipated FY2018 revenue collections from the current tax. A net revenue gain of approximately $111.5 million is expected in FY2019. As the bill does not define “noncaloric sweeteners,” we assume this would exclude artificially-sweetened beverages, such as diet sodas, from the tax. An alternate interpretation of this term could affect estimated revenues. Considering total collections, we anticipate revenues to be sufficient to fully fund the three schools of medicine and teacher pay raise appropriations. The General Revenue Fund could gain approximately $36.2 million in FY2018 and $43.2 million in FY2019 as a result of the proposed bill. Additional administrative costs incurred by the State Tax Department are expected to be $50,000 for the remainder of FY2017, $20,000 in FY2018, and $10,000 for each year thereafter.



Memorandum


The stated purpose of this bill is to change the structure of the tax on bottled soft drinks and soft drink syrups and powders to only cover soft drinks with added caloric sweeteners, increase the rate to one cent per ounce and directing the excess proceeds into the State General Revenue Fund. The proposed bill does not define “noncaloric sweeteners,” which could introduce difficulty in administering the tax. The effective date may not provide sufficient time for the Tax Department to make necessary form changes and notify vendors of the increase.



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