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 provide a tax of five percent of the gross receipts of a behavioral health service provider until July 1, 2010; and to allow certain providers to reduce gross receipts by contractual allowances.
While the stated purpose of this bill appears to indicate that the Severance Tax on behavioral health services is to be eliminated, according to our interpretation the bill may also eliminate some taxes on coal, limestone, and sandstone. The elimination of the Severance Tax on behavioral health services will result in a reduction in the Medicaid State Share Fund of roughly $9.7 million per year. Additionally, unless alternative matching funds are secured, the reduction in the Medicaid State Share Fund attributable to the elimination of the Severance Tax on behavioral health services will result in a reduction in Federal Funds of roughly four times the tax reduction ($38.8 million) during the first two years of effect and roughly three times the tax reduction (i.e., a reduction of roughly $29.1 million per year) in each year thereafter. The federal matching share temporarily rises by 6.2 percentage points over the next two years. If the tax elimination provisions of this bill extend to coal, limestone, and sandstone, the potential revenue impact of this bill would be even more significant.
Additional administrative costs for the State Tax Department associated with this bill would be minimal.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2009
Increase/Decrease
(use"-") |
2010
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 |
Explanation of above estimates (including long-range effect):
While the stated purpose of this bill appears to indicate that the Severance Tax on behavioral health services is to be eliminated, according to our interpretation the bill may also eliminate some taxes on coal, limestone, and sandstone. The elimination of the Severance Tax on behavioral health services will result in a reduction in the Medicaid State Share Fund of roughly $9.7 million per year. Additionally, unless alternative matching funds are secured, the reduction in the Medicaid State Share Fund attributable to the elimination of the Severance Tax on behavioral health services will result in a reduction in Federal Funds of roughly four times the tax reduction ($38.8 million) during the first two years of effect and roughly three times the tax reduction (i.e., a reduction of roughly $29.1 million per year) in each year thereafter. The federal matching share temporarily rises by 6.2 percentage points over the next two years. If the tax elimination provisions of this bill extend to coal, limestone, and sandstone, the potential revenue impact of this bill would be even more significant.
Additional administrative costs for the State Tax Department associated with this bill would be minimal.
Memorandum
The stated purpose of this bill is to provide a tax of five percent of the gross receipts of a behavioral health service provider until July 1, 2010; and to allow certain providers to reduce gross receipts by contractual allowances.
While the stated purpose of this bill appears to indicate that the Severance Tax on behavioral health services is to be eliminated, according to our interpretation the bill may also eliminate some taxes on coal, limestone, and sandstone. Proposed W. Va. Code §11-13A-3(b)(2) states “The tax imposed by subsection (a) of this section shall be five percent of the gross value of the health care service provided by the provider of the of the health care service.” Currently W. Va. Code §11-13A-3, levies the Severance Tax “Upon every person exercising the privilege of engaging or continuing within this state in the business of severing, extracting, reducing to possession and producing for sale, profit or commercial use coal, limestone or sandstone, or in the business of furnishing certain health care service, there is hereby levied and shall be collected from every person exercising such privilege an annual privilege tax.” The proposed change could possibly be interpreted to eliminate the tax on coal, limestone, and sandstone. Also, the change proposed in W. Va. Code §11-27-36(j) adds the tax levied by W. Va. Code §11-13A-3(a)(2) to the taxes to be eliminated as of July 1, 2010. The reference to W. Va. Code §11-13A-3(a)(2) does not appear to be correct, thus, it is unclear what the result of the change would be. Also, the stated purpose of the bill contains a reference to allowing certain providers to reduce gross receipts by contractual allowances. However, the language to accomplish that purpose could not be located in the bill.
Person submitting Fiscal Note: Mark Muchow
Email Address: kpetry@tax.state.wv.us