FISCAL NOTE
FUND(S):
Medicaid State Share Fund
Sources of Revenue:
Other Fund Medicaid State Share 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 reduce and ultimately eliminate the severance tax imposed on behavioral health care providers.
As written, this bill would reduce the Severance Tax rate on gross receipts attributable to the provision of behavioral health services from 5 percent to 2.5 percent effective July 1, 2008 and the rate would further be reduced each succeeding July 1 by 0.5 percentage points until the tax rate is zero, and the tax effectively eliminated, as of July 1, 2013. According to our interpretation, passage of the bill will result in a reduction in the Medicaid State Share Fund of roughly $5.2 million in Fiscal Year 2009 and of roughly $7.2 million in Fiscal Year 2010 with the reduction in revenue increasing throughout the tax rate phase-out period. Additionally, unless alternative matching funds are secured, the reduction in the Medicaid State Share Fund will result in a reduction in Federal Funds of roughly three times the tax reduction (i.e., a reduction of roughly $15.6 million in Fiscal Year 2009 and roughly $21.6 million in Fiscal Year 2010).
Additional administrative costs for the State Tax Department associated with this bill would be minimal.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2008
Increase/Decrease
(use"-") |
2009
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 |
-5,200,000 |
-7,200,000 |
Explanation of above estimates (including long-range effect):
As written, this bill would reduce the Severance Tax rate on gross receipts attributable to the provision of behavioral health services from 5 percent to 2.5 percent effective July 1, 2008 and the rate would further be reduced each succeeding July 1 by 0.5 percentage points until the tax rate is zero, and the tax effectively eliminated, as of July 1, 2013. According to our interpretation, passage of the bill will result in a reduction in the Medicaid State Share Fund of roughly $5.2 million in Fiscal Year 2009 and of roughly $7.2 million in Fiscal Year 2010 with the reduction in revenue increasing throughout the tax rate phase-out period. Additionally, unless alternative matching funds are secured, the reduction in the Medicaid State Share Fund will result in a reduction in Federal Funds of roughly three times the tax reduction (i.e., a reduction of roughly $15.6 million in Fiscal Year 2009 and roughly $21.6 million in Fiscal Year 2010).
Additional administrative costs for the State Tax Department associated with this bill would be minimal.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us