FISCAL NOTE

Date Requested: January 30, 2019
Time Requested: 02:44 PM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
2616 Introduced HB2748
CBD Subject: Public Employees, Retirement


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Decreases Existing Revenue, Increases Existing Expenses



Fiscal Note Summary


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


    The stated purpose of this bill is to increase the modification reducing income for personal income tax purposes for retired state teachers and retired state employees.
    
    The bill, as written, increases the decreasing modification from $2,000 to $20,000 for benefits received under PERS and the Teachers Retirement System beginning with Tax Year 2019. The benefits for federal retirees shall not be more than $2,000. The proposal appears to be in direct conflict with the U.S. Supreme Court ruling in Davis v. Michigan (1989). The increase in the decreasing modification for Teachers Retirement and PERS would reduce General Revenue Fund collections by roughly $72.2 million in FY2020. Even though the provisions of the bill state that the decreasing modification would remain at $2,000 for federal retirees, based on Davis v. Michigan decision, the decreasing modification for federal retirees would also be increased to $20,000. bringing the total costs to $93.2 million. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time.
    
    Additional administrative costs incurred by the State Tax Department would be $51,000 in FY2021 and $40,000 in each of the fiscal years thereafter.
    



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 40,000
Personal Services 0 0 40,000
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 bill, as written, increases the decreasing modification from $2,000 to $20,000 for benefits received under PERS and the Teachers Retirement System beginning with Tax Year 2019. The benefits for federal retirees shall not be more than $2,000. The proposal appears to be in direct conflict with the U.S. Supreme Court ruling in Davis v. Michigan (1989). The increase in the decreasing modification for Teachers Retirement and PERS would reduce General Revenue Fund collections by roughly $72.2 million in FY2020. Even though the provisions of the bill state that the decreasing modification would remain at $2,000 for federal retirees, based on Davis v. Michigan decision, the decreasing modification for federal retirees would also be increased to $20,000. bringing the total costs to $93.2 million. The anticipated retirements of members of the baby-boom generation will result in additional escalation of costs over time.
    
    Additional administrative costs incurred by the State Tax Department would be $51,000 in FY2021 and $40,000 in each of the fiscal years thereafter.
    



Memorandum


    The stated purpose of this bill is to increase the modification reducing income for personal income tax purposes for retired state teachers and retired state employees.
    
    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 Muchow
    Email Address: kerri.r.petry@wv.gov