February 6, 2012
BUDGET ISSUES CONTINUE TO DOMINATE DEBATE AT STATE CAPITOL
House and Senate Finance committees have been conducting hearings in preparation for crafting a budget for the upcoming year. School Building Authority Executive Director Dr. Mark Manchin presented his budget before the Senate Finance Committee. Department of Environmental Protection officials have been before the House and Senate committees and Department of Transportation Secretary Paul Mattox will be making presentations before both houses this week.
Governor Earl Ray Tomblin is following through on his promise to resolve a $5 billion funding shortfall in Other Post-Employment Benefits (OPEB), which is mostly health care benefits for retired state workers. The cost has ballooned to $10 billion and the governor’s plan is to dedicate $35 million in annual personal income tax revenues to close the funding gap. The governor wants a quick resolve to show companies that are considering West Virginia for one or more $2 billion cracker plants that the state is serious about putting its financial affairs in order. The liability should be eliminated by 2036. The Senate fast-tracked the governor’s bill, S.B. 469, passing it on February 1. The House is expected to follow close behind.
A major future budget item continues to be Medicaid payments. The state is currently allocating about $400 million annually. The figure will rise to $500 million next year and $600 million in 2013. This could affect the governor’s desire to dedicate surplus revenues to a new infrastructure fund that would be split 50-50 between highways and water and sewer projects. It is unclear what monies will be available in the future to go into an infrastructure fund. The Rainy Day Fund, which currently has a balance of $820 million, is 10 percent of the General Revenue Fund. The cap was increased last year and a surplus of about $250 million is needed to reach the 15 percent goal. In the past the state has run a surplus, but the budget outlook is not as promising as lottery revenues have been declining for the last three years. In developing this year’s budget, most every reserve account was drained in order to balance the budget. This budget also contains no teacher or public employee pay raises which will, in the future, require additional revenues. On the flip side, no one knows what future revenues will be derived from activities associated with Marcellus shale development. The governor said he is still hopeful that West Virginia will be chosen as the location for one or two cracker plants which each would be about $2 billion projects.
WV REVENUE OFFICIAL PAINTS FISCAL FORECAST FOR FY 2013
West Virginia Deputy Secretary of Revenue Mark Muchow presented to the State Chamber Legislative Briefing Breakfast an insightful fiscal forecast of FY 2013. Muchow’s top forecasts for West Virginia, which were printed in the February 1, 2012 Chamber Links, follows:
Economic growth will slow from the pace set in 2010
Weakness in foreign markets will slow state exports
Labor recovery in the state is expected to continue
Federal fiscal policy is a drag on the WV economy
State revenue growth will slow toward 1 percent
Expect increased volatility tied to energy
Muchow also provided some other interesting facts and figures:
- U.S. job recovery will be a "long road back" with 8.75 million jobs lost from 2008 - 2010, and only 2.65 million jobs gained.
- West Virginia coal production trends show 157.8 million tons produced in 2008 compared to 135.3 million tons in 2010. However, preliminary 2011 production numbers seem to indicate a 1 percent increase over 2010.
- West Virginia natural gas production is up 36 percent for the period 2004 - 2010.
- Nationally, coal is losing market share to natural gas. Net coal generation in 2005 was 49 percent compared to 43 percent in 2011 YTD. In that same period, gas generation increased from 19 percent to 24 percent.
- In the current year (July - December), West Virginia's collection of personal income tax is up 8 percent, severance tax is up 19.3 percent and overall total general revenue is up 2.2 percent.
- Base lottery revenue in West Virginia is expected to decrease 16.5 percent from 2012 – 2013.
S.B. 76 ESTABLISHES 2009 INTERNATIONAL ENERGY CONSERVATION CODE
S.B. 76, introduced by Sen. John Unger, D-Berkeley, requires new public facilities to be designed and constructed to comply with the International Energy Conservation Code and the ANSI / ASHREA / IESNA Standard 90.1 - 2007. The current IECC version is 2003. The CAWV worked with Senator Unger and his staff on the bill last year, but it died in the final days of the session. CAWV members provided input on what impact the 2009 version will have on construction costs, on contractors preparing bids, and on contractors performing the construction contract. CAWV contractor and architect members stated it appears that contractors would not see much change in bidding a project. The architect and/or engineer would prepare plans and documents based on the 2009 code and contractors would price their bid accordingly. It also appears there would be no additional administrative or hidden costs in constructing the project.
It was anticipated that the 2009 version would increase construction costs in the 5 percent range in the short term while manufacturers upgrade their production process. Some people noted this is common with previous code revisions and that costs should stabilize once manufacturers implement the new code version. Last year’s bill delayed the implementation date until July 1, 2012. This would have given everyone more time to implement the new version. S.B. 76 keeps the effective date July 1.
$52 MILLION BOND ISSUE FOR CACAPON AND BEECH FORK STATE PARKS
S.B. 362 provides $52.2 million in bonding authority for improvements to Beech Fork State Park and Cacapon Resort State Park. The bill passed the Senate Natural Resources Committee Wednesday. The bonds would be paid back over 30 years by adding $3 million a year to the State Park Improvement Plan.
Beech Fork would receive $23 million. Coupled with $7.5 million already allocated, the money would be used to construct a 75-room addition, restaurant, recreational center, indoor pool and trails. A conceptual plan has been developed, and that’s as far as the project has progressed. The remaining $29.2 million would go to Cacapon for an 85-room addition and a new conference center.
The bill now goes to the Senate Finance Committee. Even supporters of the legislation think this bill has a long way to go before it receives full House and Senate approval.
WEST VIRGINIA LEGISLATURE BILL INFORMATION
House and Senate bills can be accessed from the CAWV’s Legislative home page at www.cawv.org/legislative. Members can view status updates on bills of interest to the construction industry and see what legislation is introduced that affects the construction industry. A summary of each day’s activities will be uploaded each afternoon.
Below is a list of bills that have been introduced this week that have an impact on the construction industry or some CAWV members. Anyone needing further information can contact Mike Clowser at (304) 342-1166 or email email@example.com.
HB 4366 By Del. Morgan, Stephens, D. Poling, Hatfield and Butcher. Relating to safety and welfare of employees. To Government Organization then Judiciary.
HB 4368 By Del. Walker, D. Poling, Diserio, Butcher, Hamilton, Barill and Barker. Trafficking of illegal aliens (FN). To Judiciary then Finance.
HB 4372 By Del. Hartman, D. Campbell, Skaff, Perry and R. Phillips. Increasing the salary of public service district board members (FN). To Political Subdivisions then Finance.
HB 4410 By Del. Butcher, Stowers, Phillips, R. and Walker. Allowing the State Fire Marshal to be appointed by the Governor. To Government Organization.
HB 4415 By Del. Staggers, Perry, Sumner, Pino, O'Neal, Boggs, Moye and L. Phillips. Authorize a Prince Railroad Station Authority to acquire and maintain the railroad station building. To Political Subdivisions then Judiciary [Local Bill].
HB 4422 By Del. Butcher, Walker, D. Poling, Boggs, Caputo, Martin, Stephens, Diserio, Storch, Hamilton and Ellem. Relating to crane operator certification. To Government Organization.
SB 468 Sen. Kessler (Mr. President), Unger, Browning, Laird, Miller, Palumbo, Beach, Yost, Williams, Plymale, Klempa and McCabe. Allowing Courthouse Facilities Improvement Authority issue bonds. To Judiciary then Finance.
SB 492 Sen. Yost and Klempa. Relating to residential construction projects. To Judiciary.
SB 508 Sen. K. Facemyer. Relating to participation in labor organization as condition of employment prohibited. To Labor then Judiciary.