FISCAL NOTE
FUND(S):
General Revenue Fund, State Road Fund, Motor Fuel Excise Tax Shortfall Reserve Fund
Sources of Revenue:
General Fund,Special Fund,Other Fund State Road 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 eliminate the prospective reduction of the flat rate portion of the motor fuel excise tax in 2013 so that the flat rate will continue to be assessed at the current rate of $.201, increase the minimum average wholesale price computation of the variable rate portion of the motor fuel excise tax, establish a variable rate limitation on the average wholesale price computation, terminate the Motor Fuel Excise Tax Shortfall State Road Fund and transfer all moneys remaining in the fund to the State Road Fund for the purpose of paving secondary roads.
The provisions of this bill would remove the expiration date of the “temporary” 5 cent per gallon tax component that has been in effect continuously since May 1, 1993; raise the floor price of the 5 percent wholesale gasoline and special fuel sales tax from 97 cents per gallon to $2.34 per gallon; restrict the level of change in the calculated wholesale price of gasoline and special fuel to no more than 10 percent in any year beginning in 2011; terminate the Motor Fuel Excise Tax Shortfall Reserve Fund effective December 1, 2009; and transfer the $27,319,224.03 remaining balance in the Motor Fuel Excise Tax Shortfall Reserve Fund to the State Road Fund for the purpose of reconstruction, maintenance and repair of secondary roads.
According to our interpretation, passage of this bill would provide a one-time $27.3 million enhancement to the State Road Fund in FY2010 to help offset a significant recessionary revenue decrease largely associated with declining motor vehicle sales. After decreasing by more than $35.5 million in FY2009, cumulative State Road Fund collections through the thirteenth day of November were nearly $8.7 million lower than the collections of the prior year. The cumulative decrease in collections will likely more than double by year end. The one-time funds in the expiring Motor Fuel Excise Tax Shortfall Reserve Fund will help to stabilize funding for roads over the next year.
The provisions of the bill also provide a greater degree of revenue stability for the State Road Fund while providing West Virginia consumers with a degree of protection against significant increases in future per gallon state fuel taxes during periods of rapidly rising fuel prices. Special legislation was previously required in FY2009 to prevent a price related 3.7 cent increase in the total state fuel tax rate to 35.9 cents per gallon from becoming effective on January 1, 2009. The wholesale price freeze saved consumers more than $50 million at the expense of the State Road Fund. One of the provisions of this bill would raise the floor price for the calculation of the 5 percent sales tax from 97 cents per gallon to the current frozen wholesale price of $2.34 per gallon. Absent this change, the current wholesale price would fall to slightly more than $2.00 per gallon and the variable sales tax would decrease from 11.7 cents per gallon to slightly more than 10.0 cents per gallon as of January 1, 2010. The State Road Fund would lose an additional $20 million or more in revenue for the following year in addition to the $50 million forgone this year. In addition to raising the current floor price, the bill offers some permanent protection for consumers from huge tax adjustments associated with rapidly rising fuel prices. Beginning in 2011, the wholesale price of fuel and the associated variable 5 percent sales tax may not increase or decrease by more than 10 percent from the prior year. Assuming significantly higher fuel prices, the maximum increase would initially be limited to 1.17 cents per gallon in 2011 or no more than 3.6 percent of the total base fuel tax rate of 32.2 cents per gallon. Motor fuel taxes would be allowed to grow at levels more closely tied to long-term general inflation rates.
The final provision of this bill would eliminate the expiration date of the “temporary” 5 cent tax component that has been in place continuously since May 1, 1993. Absent this change, the “temporary” 5 cent tax would next come up for renewal on August 1, 2013 or more than 20 years since the tax was initially tagged as “temporary”. According to the American Petroleum Institute, West Virginia’s current fuel tax rate is roughly 3.3 cents per gallon higher than the national average. However, the total yield of the fuel tax comes up short in West Virginia. West Virginia currently collects roughly $11,900 in motor fuel taxes per mile of non-tolled State owned highway. These collections are much lower than the national average of closer to $46,900 per mile of non-tolled state owned highway. Nationally, states own less than 20 percent of total non-tolled secondary roads versus more than 90 percent ownership in West Virginia. Absent significantly higher local government financial participation in the funding of roads in West Virginia, it would be extremely difficult to ever remove the “temporary” tax from the current road funding program.
There would be no additional administrative costs to the State Tax Department from the passage of this bill.
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):
The provisions of this bill would remove the expiration date of the “temporary” 5 cent per gallon tax component that has been in effect continuously since May 1, 1993; raise the floor price of the 5 percent wholesale gasoline and special fuel sales tax from 97 cents per gallon to $2.34 per gallon; restrict the level of change in the calculated wholesale price of gasoline and special fuel to no more than 10 percent in any year beginning in 2011; terminate the Motor Fuel Excise Tax Shortfall Reserve Fund effective December 1, 2009; and transfer the $27,319,224.03 remaining balance in the Motor Fuel Excise Tax Shortfall Reserve Fund to the State Road Fund for the purpose of reconstruction, maintenance and repair of secondary roads.
According to our interpretation, passage of this bill would provide a one-time $27.3 million enhancement to the State Road Fund in FY2010 to help offset a significant recessionary revenue decrease largely associated with declining motor vehicle sales. After decreasing by more than $35.5 million in FY2009, cumulative State Road Fund collections through the thirteenth day of November were nearly $8.7 million lower than the collections of the prior year. The cumulative decrease in collections will likely more than double by year end. The one-time funds in the expiring Motor Fuel Excise Tax Shortfall Reserve Fund will help to stabilize funding for roads over the next year.
The provisions of the bill also provide a greater degree of revenue stability for the State Road Fund while providing West Virginia consumers with a degree of protection against significant increases in future per gallon state fuel taxes during periods of rapidly rising fuel prices. Special legislation was previously required in FY2009 to prevent a price related 3.7 cent increase in the total state fuel tax rate to 35.9 cents per gallon from becoming effective on January 1, 2009. The wholesale price freeze saved consumers more than $50 million at the expense of the State Road Fund. One of the provisions of this bill would raise the floor price for the calculation of the 5 percent sales tax from 97 cents per gallon to the current frozen wholesale price of $2.34 per gallon. Absent this change, the current wholesale price would fall to slightly more than $2.00 per gallon and the variable sales tax would decrease from 11.7 cents per gallon to slightly more than 10.0 cents per gallon as of January 1, 2010. The State Road Fund would lose an additional $20 million or more in revenue for the following year in addition to the $50 million forgone this year. In addition to raising the current floor price, the bill offers some permanent protection for consumers from huge tax adjustments associated with rapidly rising fuel prices. Beginning in 2011, the wholesale price of fuel and the associated variable 5 percent sales tax may not increase or decrease by more than 10 percent from the prior year. Assuming significantly higher fuel prices, the maximum increase would initially be limited to 1.17 cents per gallon in 2011 or no more than 3.6 percent of the total base fuel tax rate of 32.2 cents per gallon. Motor fuel taxes would be allowed to grow at levels more closely tied to long-term general inflation rates.
The final provision of this bill would eliminate the expiration date of the “temporary” 5 cent tax component that has been in place continuously since May 1, 1993. Absent this change, the “temporary” 5 cent tax would next come up for renewal on August 1, 2013 or more than 20 years since the tax was initially tagged as “temporary”. According to the American Petroleum Institute, West Virginia’s current fuel tax rate is roughly 3.3 cents per gallon higher than the national average. However, the total yield of the fuel tax comes up short in West Virginia. West Virginia currently collects roughly $11,900 in motor fuel taxes per mile of non-tolled State owned highway. These collections are much lower than the national average of closer to $46,900 per mile of non-tolled state owned highway. Nationally, states own less than 20 percent of total non-tolled secondary roads versus more than 90 percent ownership in West Virginia. Absent significantly higher local government financial participation in the funding of roads in West Virginia, it would be extremely difficult to ever remove the “temporary” tax from the current road funding program.
There would be no additional administrative costs to the State Tax Department from the passage of this bill.
Memorandum
Person submitting Fiscal Note: Mark Muchow
Email Address: kerri.r.petry@wv.gov