Monday, March 10, 2014

West Virginia Legislature Enacts Future Fund

The 2014 regular session of the West Virginia Legislature completed its work this past weekend with enactment of S.B. SB 461 — Creating the Future Fund. This legislation was the pet project of Senate President Kessler, who sought for the last two legislative sessions to create a future reserve fund based on the anticipated growth in oil and natural gas severance tax revenues and modeled after a similar reserve fund operated by North Dakota.  While some in the Senate had questions about the advisability of the strict reserve fund standards sought by Kessler, the bill passed the Senate nearly unanimously.  However, House leaders from both parties took a much dimmer view of the proposal because of their belief that the law would place significant constraints on future governors and legislators in meeting the ongoing and capital needs of the state.  Republicans believed that a strict requirement to place a specific proportion of oil and natural gas severance tax revenues into the protected fund could even result in pressures to increase severance taxes if budget priorities could not be met without having access to tax revenues that were diverted into the reserve fund.

The final version of SB 461, which passed through both houses late Saturday, embodies the protections that were demanded by the House.  As such, the bill was broadened to include all forms of natural resources severance taxes in the Fund, and was also amended to establish a variety of complex mechanisms that would allow the Legislature to avoid making contributions into the Fund if the state’s revenues were in decline or if other critical priorities needed funding.  SB 461 will now go to Governor Tomblin for his review.