Date Requested: February 10, 2015
Time Requested: 12:23 PM
Agency: Tax Department, State
CBD Number: Version: Bill Number: Resolution Number:
2871 Introduced HB2675
CBD Subject: Tax


FUND(S):

Workers Compensation Debt Reduction Fund

Sources of Revenue:

Special 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 reduce the severance taxes imposed on coal, natural gas, and timber for Workers’ Compensation debt reduction purposes, beginning July 1, 2015.
    
    According to our interpretation, the Workers’ Compensation Debt Reduction Fund will lose $10.8 million in FY2016 and $11.8 million in each subsequent fiscal year that the temporary tax may remain in place. Under the assumption that the debt is fully paid midway through FY2017, the second year loss would be almost $5.9 million.
    
    In FY2014, the Workers’ Compensation Debt Reduction Fund received approximately $3 million of Timber Severance tax revenue, approximately $64 million from the coal severance tax revenue, and approximately $43 million was from natural gas severance tax revenue. Severance revenue sources are highly volatile, particularly natural gas.
    
    According to W.Va. Code §11-13V-4, an independent certified actuary has to determine that the unfunded liability of the Workers’ Compensation Debt Reduction Fund has been paid or provided for in its entirety. The Governor also has to certify that the payment of the debt service has been provided. According to the Office of the Insurance Commissioner, the Workers’ Compensation Debt should be paid off by the end of calendar year 2016. This bill could delay that payoff date, thereby extending other temporary revenue dedications and temporary taxes on employers and others for a longer period of time.
    
    Additional administrative costs to the State Tax Department will be $60,000 in the current fiscal year.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2015
Increase/Decrease
(use"-")
2016
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 60,000 0 0
Personal Services 60,000 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 -10,800,000 -5,900,000


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


    According to our interpretation, the Workers' Compensation Debt Reduction Fund will lose $10.8 million in FY2016 and $11.8 million in each subsequent fiscal year that the temporary tax may remain in place. In FY2017, approximately halfway through the year the Workers' Compensation Debt Reduction Fund will lose $5.65 million from Coal and Natural Gas. The Fund will also lose about $200,000 for the first half of the calendar year from the reduction of the W.Va. Code §11-13V-4 timber tax. This is when the Workers' Compensation Debt is expected to be paid.
    
    In FY2014, the Workers' Compensation Debt Reduction Fund received approximately $3 million of Timber Severance tax revenue, approximately $64 million from the coal severance tax revenue, and approximately $43 million was from natural gas severance tax revenue. Severance revenue sources are highly volatile, particularly natural gas.
    
    According to W.Va. Code §11-13V-4, an independent certified actuary has to determine that the unfunded liability of the Workers’ Compensation Debt Reduction Fund has been paid or provided for in its entirety. The Governor also has to certify that the payment of the debt service has been provided. According to the Office of the Insurance Commissioner, the Workers’ Compensation Debt should be paid off by the end of calendar year 2016. This bill could delay that payoff date, thereby extending other temporary revenue dedications and temporary taxes on employers and others for a longer period of time.
    
    Additional administrative costs to the State Tax Department will be $60,000 in the current fiscal year.
    



Memorandum


    



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