FISCAL NOTE



FUND(S):

General Revenue Fund, County Severance Revenue Fund

Sources of Revenue:

General Fund,Other Fund see above

Legislation creates:

A New Fund



Fiscal Note Summary


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


The stated purpose of this bill is to dedicate five percent of the coal severance tax to the counties where the coal was located at time it was removed from the ground, upon which the coal severance tax is based. The amount dedicated to these counties will be phased in over five years in one percent increments. The bill also provides that the dedicated moneys will go to the county commissions, and provides specific uses for the moneys. As written, this bill would require that 5 percent of the Severance Tax on coal be dedicated for the benefit of counties from which the tax was generated. The amount dedicated July 1, 2011 is one percent and will increase by one percent each succeeding July 1 until capping at five percent. The dedicated revenue is to be distributed by the State Treasurer to the various counties in which the coal upon which “this additional tax” is imposed was located at the time it was removed from the ground. The money is to be distributed to the county commissions and may only be used for economic development, infrastructure, job creation, and road repair. The bill also provides that the moneys resulting from the 5 percent calculation are to be deposited into the “County Severance Revenue Fund,” as established, and that the moneys in the fund are to be distributed to the respective counties entitled to the money at the discretion of the Legislature. According to our interpretation and assuming that the bill does not create an additional tax, passage of this bill will not result in any change in total revenue, but a reallocation of revenue. While the County Severance Revenue Fund will receive $4 million in FY2012, with annual increases of $4 million to a total of $20 million in FY2016 and each year thereafter (based upon current production and price values), the General Revenue Fund would be reduced by corresponding amounts. As written, the bill requires that the moneys dedicated by the proposal are to be distributed to the respective counties entitled to the money. If the distribution of the dedicated revenue is determined via the same method as the distribution specified in West Virginia Code §11-13A-6, additional administrative costs to the State Tax Department would be minimal. However, if some other revenue distribution methodology is required, additional administrative costs to the State Tax Department could be substantial.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2011
Increase/Decrease
(use"-")
2012
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):


As written, this bill would require that 5 percent of the Severance Tax on coal be dedicated for the benefit of counties from which the tax was generated. The amount dedicated July 1, 2011 is one percent and will increase by one percent each succeeding July 1 until capping at five percent. The dedicated revenue is to be distributed by the State Treasurer to the various counties in which the coal upon which “this additional tax” is imposed was located at the time it was removed from the ground. The money is to be distributed to the county commissions and may only be used for economic development, infrastructure, job creation, and road repair. The bill also provides that the moneys resulting from the 5 percent calculation are to be deposited into the “County Severance Revenue Fund,” as established, and that the moneys in the fund are to be distributed to the respective counties entitled to the money at the discretion of the Legislature. According to our interpretation and assuming that the bill does not create an additional tax, passage of this bill will not result in any change in total revenue, but a reallocation of revenue. While the County Severance Revenue Fund will receive $4 million in FY2012, with annual increases of $4 million to a total of $20 million in FY2016 and each year thereafter (based upon current production and price values), the General Revenue Fund would be reduced by corresponding amounts. There is some volatility in coal markets over time. Future revenue reallocations could be lower or higher depending on the health of the coal industry. As written, the bill requires that the moneys dedicated by the proposal are to be distributed to the respective counties entitled to the money. If the distribution of the dedicated revenue is determined via the same method as the distribution specified in West Virginia Code §11-13A-6, additional administrative costs to the State Tax Department would be minimal. However, if some other revenue distribution methodology is required, additional administrative costs to the State Tax Department could be substantial.



Memorandum


The stated purpose of this bill is to dedicate five percent of the coal severance tax to the counties where the coal was located at time it was removed from the ground, upon which the coal severance tax is based. The amount dedicated to these counties will be phased in over five years in one percent increments. The bill also provides that the dedicated moneys will go to the county commissions, and provides specific uses for the moneys. The bill also provides that the money is to be distributed to the county commissions and may only be used for economic development, infrastructure, job creation, and road repair. However, the bill does not provide definitions of these terms.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov