Date Requested:January 28, 2011
Time Requested:01:08 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2011R2167 Introduced HB2912
CBD Subject: 5% OF COAL SERVERANCE TAX
FUND(S)
General Revenue Fund, County Severance Revenue Fund
Sources of Revenue
General Fund,Other Fund see above
Legislation creates:
A New Fund

Fiscal Note Summary

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

    The stated purpose of this bill is to phase-in the dedication of five per cent of the revenues from the severance tax on coal for the use and benefit of counties from which those taxes were generated, and to limit the expenditure of those funds to projects through economic development authorities and redevelopment authorities; job creation; road repair; public health systems; and as pledge to the payment of bond indebtedness for projects related to those purposes.
    
    As written, this bill would require that 5 percent of the Severance Tax on coal be dedicated for the benefit of counties from which the tax was generated. The amount dedicated July 1, 2011 is 1 percent and will increase by 1 percent each succeeding July 1 until capping at 5 percent. The dedicated revenue is to be distributed by the State Treasurer to the various counties in which the coal upon which “this additional tax” is imposed was located at the time it was removed from the ground. The money is to be distributed to the county commissions and may only be used for projects through economic development authorities and redevelopment authorities, infrastructure, job creation, road repair, public health systems, and as a pledge to payment of bond indebtedness for projects related to the aforementioned areas. The bill also provides that the moneys resulting from the 5 percent calculation are to be deposited into the “County Severance Revenue Fund,” as established, and that each County Commission is to establish a special account to be named as “(name of county) 5 percent Special Coal Severance Account.” Additionally, the bill indicates that on or before October 1, 2012, and on October 1 of each year thereafter, the County Commission shall report to the Legislature on the use of the funds for the preceding fiscal year.
    
    According to our interpretation and assuming that the bill does not create an additional tax, passage of this bill will not result in any change in total revenue, but a reallocation of revenue. While the County Severance Revenue Fund will receive $4 million in FY2012, with annual increases of $4 million to a total of $20 million in FY2016 and each year thereafter (based upon current production and price values), the General Revenue Fund would be reduced by corresponding amounts.
    
    As written, the bill requires that the moneys dedicated by the proposal are to be distributed to the respective counties entitled to the money. If the distribution of the dedicated revenue is determined via the same method as the distribution specified in West Virginia Code §11-13A-6, additional administrative costs to the State Tax Department would be minimal. However, if some other revenue distribution methodology is required, additional administrative costs to the State Tax Department could be substantial.
    

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
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
3. Explanation of above estimates (including long-range effect):
    As written, this bill would require that 5 percent of the Severance Tax on coal be dedicated for the benefit of counties from which the tax was generated. The amount dedicated July 1, 2011 is 1 percent and will increase by 1 percent each succeeding July 1 until capping at 5 percent. The dedicated revenue is to be distributed by the State Treasurer to the various counties in which the coal upon which “this additional tax” is imposed was located at the time it was removed from the ground. The money is to be distributed to the county commissions and may only be used for projects through economic development authorities and redevelopment authorities, infrastructure, job creation, road repair, public health systems, and as a pledge to payment of bond indebtedness for projects related to the aforementioned areas. The bill also provides that the moneys resulting from the 5 percent calculation are to be deposited into the “County Severance Revenue Fund,” as established, and that each County Commission is to establish a special account to be named as “(name of county) 5 percent Special Coal Severance Account.” Additionally, the bill indicates that on or before October 1, 2012, and on October 1 of each year thereafter, the County Commission shall report to the Legislature on the use of the funds for the preceding fiscal year.
    
    According to our interpretation and assuming that the bill does not create an additional tax, passage of this bill will not result in any change in total revenue, but a reallocation of revenue. While the County Severance Revenue Fund will receive $4 million in FY2012, with annual increases of $4 million to a total of $20 million in FY2016 and each year thereafter (based upon current production and price values), the General Revenue Fund would be reduced by corresponding amounts. There is some volatility in coal markets over time. Future revenue reallocations could be lower or higher depending on the health of the coal industry.
    
    As written, the bill requires that the moneys dedicated by the proposal are to be distributed to the respective counties entitled to the money. If the distribution of the dedicated revenue is determined via the same method as the distribution specified in West Virginia Code §11-13A-6, additional administrative costs to the State Tax Department would be minimal. However, if some other revenue distribution methodology is required, additional administrative costs to the State Tax Department could be substantial.
    


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov
    The stated purpose of this bill is to phase-in the dedication of five per cent of the revenues from the severance tax on coal for the use and benefit of counties from which those taxes were generated, and to limit the expenditure of those funds to projects through economic development authorities and redevelopment authorities; job creation; road repair; public health systems; and as pledge to the payment of bond indebtedness for projects related to those purposes.
    
    The bill provides that the revenue is to be distributed to the county commissions and may only be used for projects through economic development authorities and redevelopment authorities, infrastructure, job creation, road repair, public health systems, and as a pledge to payment of bond indebtedness for projects related to the aforementioned areas. However, the bill does not provide definitions of these terms.