FISCAL NOTE



FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

A New Program



Fiscal Note Summary


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


The stated purpose of this bill is to provide a one-time supplement of $500 for annuitants and survivor beneficiaries after being retired five consecutive years. The supplement is exempt from State income tax. As written, this bill proposes that a one-time supplement of $500 be paid to annuitants of the Teachers Retirement System who have been retired five consecutive years. The supplemental payments, to be made in November 2008, would not be subject to the West Virginia Personal Income Tax. According to our interpretation and assuming that annuitants retired five consecutive years or longer would receive the supplement and that the supplemental payments would be paid from the General Revenue Fund, there would be a one-time reduction in the General Revenue Fund of roughly $10.4 million in FY 2009. The West Virginia Personal Income Tax foregone as a result of exempting the supplemental payments from the tax would be roughly $0.4 million. There would be a minimal increase in administrative costs to the State Tax Department associated with the administration of the proposed income exclusion. However, the Consolidated Public Retirement Board may experience an increase in 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 -10,400,000 0


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


Passage of this bill would provide a one-time supplement of $500 to annuitants of the Teachers Retirement System who have been retired five consecutive years. The supplemental payments, to be made in November 2008, would not be subject to the West Virginia Personal Income Tax. According to our interpretation and assuming that annuitants retired five consecutive years or longer would receive the supplement and that the supplemental payments would be paid from the General Revenue Fund, there would be a one-time reduction in the General Revenue Fund of roughly $10.4 million in FY 2009. The West Virginia Personal Income Tax foregone as a result of exempting the supplemental payments from the tax would be roughly $0.4 million. There would be a minimal increase in administrative costs to the State Tax Department associated with the administration of the proposed income exclusion. However, the Consolidated Public Retirement Board may experience an increase in administrative costs associated with this bill.



Memorandum


The stated purpose of this bill is to provide a one-time supplement of $500 for annuitants and survivor beneficiaries after being retired five consecutive years. The supplement is exempt from State income tax. The bill, as written, provides for the favored treatment of the potential beneficiaries in relation to other public employees. This favored status may result in litigation where other retired public employees will seek to be treated in the same manner. Also, the bill proposes to provide the supplement to retirees “who have been retired five consecutive years.” A literal interpretation of the statement would exclude those retires who have been retired more than five years from the supplement.



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