Sources of Revenue:

Other Fund Excess Lottery Rev Fund

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

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

As a general premise, the committee substitute for HB4333 diverts certain monies that had been transferred by statute and outside of the budget process into the State Excess Lottery Revenue Fund. City and county governments and commissions to racetrack licensees are exempted from the diversion. Once those funds are in the State Excess Lottery Revenue Fund, the bill further distributes them to the majority of entities who would otherwise have received funds, except for several accounts belonging to state government. Some entities will receive a full distribution while others will receive 90% of what would have been received under current law. The bill is effective for only one fiscal year. The bill also reduces the distribution to the Infrastructure Council for Fiscal Year 2015 only from $40 million to $20 million and provides that certain moneys disbursed from the Infrastructure Fund in the form of grants should not exceed fifty percent of the total funds available. The bill does not result in the generation of additional sales or revenue, but it does redirectly approximately $14.5 million to the State that was formerly not available for appropriation as well as the reduction of $20 million from the Infrastructure Council for a total of $34.5 milion for expenditure through the appropriation process.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	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	0

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

There is no anticipated additional cost or revenue associated with this bill. It is a mechanism to redistribute revenue through the budgetary process where in prior years the distributions were made according to statute and outside of the budgetary process.

Memorandum

The bill provides a secondary benefit to the state as it relates to bond coverages. As Lottery revenues have declined, the debt service coverage ratio, which measures annual debt service as compared to annual revenue, has also declined. To compound the situation, additional bonds have been authorized but not issued. If the new bonds are issued, the coverage ratio is projected to drop below 4 times coverage. In December 2013, Standard and Poor's downgraded its outlook for School Building Authority Excess Lottery Revenue Bonds from "stable" to "negative." This means that S&P could lower the bonds' rating from AAA within two years. To help avoid a downgrade, this bill redirects certain revenues to the Excess Lottery Revenue Fund for FY2015. This additional revenue will enable the Excess Fund to meet at least the 4 times debt service coverage for FY2015 that S&P expects even with the additional debt service of the bonds authorized but not issued. To ensure continued positive bond ratings, an effective term for more than one fiscal year would be necessary.

Person submitting Fiscal Note: Kathy Lawson
Email Address: klawson@wvlottery.com