Date Requested:January 19, 2012
Time Requested:04:38 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2012R1477 Introduced HB4129
CBD Subject: COUNTIES OF ORIGIN
FUND(S)
General Revenue Fund, Oil and Gas County and Municipality Reallocated Severance Tax Fund
Sources of Revenue
General Fund,Special Fund
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 reallocate and dedicate three percent of oil and gas severance tax revenues up to $20 million annually to the oil and gas producing counties of origin and their respective municipalities. The bill establishes State and Local Oil and Gas County Reallocated Severance Tax Funds and provides for the distribution of the moneys to the county commissions and governing bodies of the municipalities by the State Treasurer. The bill establishes the amount each oil and gas producing county and their respective municipalities are to receive and requires the creation of local funds into which moneys are to be deposited. The bill requires the funds to be used solely for economic development projects and infrastructure projects. The bill also provides restrictions on fund expenditures. The bill sets forth the duties of the State Tax Commissioner. The bill requires a report of expenditures to the Joint Committee on Government and Finance. The bill also provides for audits of distributed funds when authorized by the Joint Committee on Government and Finance and authorizes legislative emergency rules.
    
    As written the bill would allocate 3% of severance taxes collected on oil and gas to oil and gas producing counties and municipalities therein. The bill establishes special accounts into which the funds would be deposited. Under the bill’s provisions, 1% of the revenue would go to the counties and 2% would go to the municipalities within those counties. The distribution to the counties is proportional to each county’s oil or gas production. The distribution to the municipalities within the oil and gas producing counties is based on population. The funds may only be used for economic development projects.
    
    According to our interpretation, passage of this bill will not result in any change in total revenue but will result in a reallocation of revenue. Beginning in FY2014 the Oil and Gas County and Municipality Reallocation Fund will receive $3.0 million and the State General Revenue Fund will be reduced by a corresponding amount. Based upon current projections for the oil and natural gas Severance Tax, the amount redistributed from the State’s General Revenue Fund to producing counties and their municipalities would rise to roughly $4.5 million per year by FY2017.
    
    The administration costs associated with this distribution could be large relative to its benefits. The bill would create a second distribution that would be quarterly in addition to the yearly oil and gas distribution already in place. The cost of administration and the cost of taxpayer compliance could be excessive if the Tax Department were required to collect production data on oil and gas by county on a quarterly basis from up to 5,000 taxpayers.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2012
Increase/Decrease
(use"-")
2013
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 the bill would allocate 3% of severance taxes collected on oil and gas to oil and gas producing counties and municipalities therein. The bill establishes special accounts into which the funds would be deposited. Under the bill’s provisions, 1% of the revenue would go to the counties and 2% would go to the municipalities within those counties. The distribution to the counties is proportional to each county’s oil or gas production. Moreover, the distribution to the municipalities within the oil and gas producing counties is based on population. The funds may only be used for economic development projects.
    
    According to our interpretation, passage of this bill will not result in any change in total revenue but will result in a reallocation of revenue. Beginning in FY 2014 the Oil and Gas County and Municipality Reallocation Fund will receive roughly $3.0 million and the State General Revenue Fund will be reduced by a corresponding amount. Furthermore, the current 46 producing counties would see an average increase of approximately $22,000 while the municipalities would gain an average of just $10,000 in FY 2014. The number of producing counties will fluctuate over time from a low of roughly 45 to a high of roughly 52.
    
    The administration costs associated with this distribution could be large relative to its benefits. The bill would create a second distribution that would be quarterly in addition to the yearly oil and gas distribution already in place. The cost of administration and the cost of taxpayer compliance could be excessive if the Tax Department were required to collect production data on oil and gas by county on a quarterly basis from up to 5,000 taxpayers.
    
    
    


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