FISCAL NOTE
Date Requested: February 13, 2019
Time Requested: 10:03 AM |
| Agency: |
Tax & Revenue Department, WV State |
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| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2802 |
Introduced |
SB522 |
|
|---|
| CBD Subject: |
Roads and Transportation |
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|
FUND(S):
General Revenue Fund, Oil & Gas Revenue Fund, All Counties & Municipalities Fund
Sources of Revenue:
General Fund All Counties & Municipalities Fund, All Counties & Municipalities Fund
Legislation creates:
Creates New Expense, 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 road and highways. The bill provides for a two percent of the severance of natural gas and oil and coal and other mining to be transferred to the new fund. The bill also requires a one-time transfer of $200 million 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 this bill would result in reallocating 2 percent of the net Severance Tax revenue from oil, natural gas, coal, limestone, and sandstone along with other minable commodities into the Special Road Repair Fund. The bill would make a one-time transfer of $200 million from the Rainy-Day Fund to the Special Road Repair Fund.
It is estimated that the Special Road Repair Fund would also gain roughly $9.5 million to $10 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 $9.0 to $9.5 million per year. In addition, the provisions of the bill would provide a diversion of 2 percent of Severance Tax collections from the 0.35 percent local coal Severance Tax at the cost of roughly $0.5 million per year to local governments.
Currently, the total amount of funds in the Rainy-Day Fund is $719 million with $288 million in Revenue Shortfall Reserve Fund - Part A and $431 million in Fund B. Current legislation requires any transfer or expenditure of revenue saved in Revenue Shortfall Reserve Fund- Part A to be utilized before tapping the saved revenue in Revenue Shortfall Reserve Fund – Part B. Based upon this requirement, the immediate transfer of $200 million, on July 1, 2019, into the Special Road Repair Fund would leave approximately $519 million in the Rainy Day Fund. Approximately $88 million would be left in Revenue Shortfall Reserve Fund – Part A and approximately $431 million in Revenue Shortfall Reserve Fund B. A large withdrawal 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 $50,000 in FY2019, $15,000 in FY2020 and $15,000 in subsequent fiscal years
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2019
Increase/Decrease
(use"-") |
2020
Increase/Decrease
(use"-") |
Fiscal Year
(Upon Full
Implementation) |
| 1. Estmated Total Cost |
50,000 |
15,000 |
15,000 |
| Personal Services |
0 |
15,000 |
15,000 |
| Current Expenses |
0 |
0 |
0 |
| Repairs and Alterations |
0 |
0 |
0 |
| Assets |
0 |
0 |
0 |
| Other |
50,000 |
0 |
0 |
| 2. Estimated Total Revenues |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
According to our interpretation, passage of this bill would result in reallocating 2 percent of the net Severance Tax revenue from oil, natural gas, coal, limestone, and sandstone along with other minable commodities into the Special Road Repair Fund. The bill would make a one-time transfer of $200 million from the Rainy-Day Fund to the Special Road Repair Fund.
It is estimated that the Special Road Repair Fund would also gain roughly $9.5 million to $10 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 $9.0 to $9.5 million per year. In addition, the provisions of the bill would provide a diversion of 2 percent of severance tax collections from the 0.35 percent local coal severance tax at the cost of roughly $0.5 million per year to local governments.
Currently, the total amount of funds in the Rainy-Day Fund is $719 million with $288 million in Revenue Shortfall Reserve Fund - Part A and $431 million in Fund B. Current legislation requires any transfer or expenditure of revenue saved in Revenue Shortfall Reserve Fund- Part A to be utilized before tapping the saved revenue in Revenue Shortfall Reserve Fund – Part B. Based upon this requirement, the immediate transfer of $200 million, on July 1, 2019, into the Special Road Repair Fund would leave approximately $519 million in the Rainy Day Fund. Approximately $88 million would be left in Revenue Shortfall Reserve Fund – Part A and approximately $431 million in Revenue Shortfall Reserve Fund B. A large withdrawal 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 $50,000 in FY2019, $15,000 in FY2020 and $15,000 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 road and highways. The bill provides for a two percent of the severance of natural gas and oil and coal and other mining to be transferred to the new fund. The bill also requires a one-time transfer of $200 million 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 tax For example, 11-13A-3E(f) waste coal, 11-13A-5A oil and gas, 11-13A-6 and 6A coal, and 11-13A-20A healthcare/timber/coalbed methane. Language addressing potential conflicts would be helpful. Further, in the new section, 17-3-11, the bill states that the new fund is funded by two percent of the severance tax for the privilege of severing coal, limestone or sandstone. In 11-13A-3, only the severance tax for severing coal is mentioned. There is a high probability of confusion in administration and possible litigation with other dedicated beneficiaries due to this conflict.
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov