FISCAL NOTE



FUND(S):

General Revenue Fund

Sources of Revenue:

General 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 authorize a tax credit for new teachers in critical needs areas. It requires the State Board of Education to determine standards defining “critical needs areas” in both subject areas and geographic areas. The tax credit for the first three years of employment in such an area shall equal the teachers’ liability for personal income taxes. If the teacher continues to teach in a critical needs area for another five years, the tax credit is equal to fifty percent of the tax liability. Based on our interpretation of the proposed bill, the General Revenue Fund would see a loss of approximately $660,000 in the first year with some upward adjustment over the following two years to account for salary increases. The credit would be equal to 100% of salary for the first three years of employment, but the credit would be reduced to only 50% of salary for the next five years of employment. Therefore, after the initial three-year period the General Revenue Fund loss would begin to decrease slightly due to the reduction in the amount of credit allowed. Assuming that all Personal Income Tax returns claiming the credit would be accepted as filed, additional administrative costs for the State Tax Department would be minimal. The State Board of Education may also incur additional administrative costs associated with this bill.



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 -660,000 0


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


The stated purpose of this bill is to authorize a tax credit for new teachers in critical needs areas. It requires the State Board of Education to determine standards defining “critical needs areas” in both subject areas and geographic areas. The tax credit for the first three years of employment in such an area shall equal the teachers’ liability for personal income taxes. If the teacher continues to teach in a critical needs area for another five years, the tax credit is equal to fifty percent of the tax liability. Based on our interpretation of the proposed bill, the General Revenue Fund would see a loss of approximately $660,000 in the first year with some upward adjustment over the following two years to account for salary increases. The estimate is based upon a current Department of Education assessment that there are 658 critical need teaching positions in the State. The credit would be equal to 100% of salary for the first three years of employment, but the credit would be reduced to only 50% of salary for the next five years of employment. Therefore, after the initial three-year period the General Revenue Fund loss would begin to decrease slightly due to the reduction in the amount of credit allowed. Assuming that all Personal Income Tax returns claiming the credit would be accepted as filed, additional administrative costs for the State Tax Department would be minimal. The State Board of Education may also incur additional administrative costs associated with this bill.



Memorandum


The stated purpose of this bill is to authorize a tax credit for new teachers in critical needs areas. It requires the State Board of Education to determine standards defining “critical needs areas” in both subject areas and geographic areas. The tax credit for the first three years of employment in such an area shall equal the teachers’ liability for personal income taxes. If the teacher continues to teach in a critical needs area for another five years, the tax credit is equal to fifty percent of the tax liability. The proposed bill has several concerns. First, the bill uses the term “new teacher” without a clear definition. Second, the proposed bill does not restrict the amount of the credit to income from teaching. Lastly, the proposed bill requires the State Board of Education to “develop standards applicable to defining critical needs areas” but does not provide any guidelines and/or restrictions on the Board in providing such a definition.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kpetry@tax.state.wv.us