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 exempt all pensions and annuities from the State Public Employees Retirement System, the State Teachers Retirement System and military retirement from state income tax.
The bill, as written, increases the modification for retirement income received in pensions and annuities from the Public Employees Retirement System or the West Virginia Teachers Retirement System to include all retirement income received from those sources. In addition, the bill increases the modification for military retirees to include all military pension income. These changes are effective beginning with the 2015 tax year. Passage of this bill would result in a decrease in General Revenue Fund collections of $28.9 million beginning in FY2016. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time.
Additional litigation by less favored groups may result in some increase in costs to the State Tax Department. In particular, additional preferential treatment for a large group of state and local government retirees relative to federal civil service retirees would conflict with the U.S. Supreme Court ruling in Davis v. Michigan. The situation could be remedied by increasing the modification for federal retirees to include all federal retirement income at an additional cost to the State of $11.0 million.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2014
Increase/Decrease
(use"-") |
2015
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 |
-28,900,000 |
Explanation of above estimates (including long-range effect):
The bill, as written, increases the modification for retirement income received in pensions and annuities from the Public Employees Retirement System or the West Virginia Teachers Retirement System to include all retirement income received from those sources. In addition, the bill increases the modification for military retirees to include all military pension income. These changes are effective beginning with the 2015 tax year. Passage of this bill would result in a decrease in General Revenue Fund collections of $28.9 million beginning in FY2016. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time.
Additional litigation by less favored groups may result in some increase in costs to the State Tax Department. In particular, additional preferential treatment for a large group of state and local government retirees relative to federal civil service retirees would conflict with the U.S. Supreme Court ruling in Davis v. Michigan. The situation could be remedied by increasing the modification for federal retirees to include all federal retirement income at an additional cost to the State of $11.0 million.
Memorandum
The stated purpose of this bill is to exempt all pensions and annuities from the State Public Employees Retirement System, the State Teachers Retirement System and military retirement from state income tax.
The bill is silent as to the present limitation of $2,000 in W. Va. Code ยง11-21-12(c)(5) of the same monies.
The provisions of this bill create significant disparity between retirees based on the source of pension income. There is concern that additional preferential treatment for a large group of state and local government retirees relative to federal civil service retirees would conflict with the U.S. Supreme Court ruling in Davis v. Michigan.
Person submitting Fiscal Note: Mark B. Muchow
Email Address: Roger.D.Cox@wv.gov