The Legislature should change the way fiscal notes are prepared for legislation because these cost estimates are often inaccurate, biased and lacking in details, the West Virginia Center on Budget and Policy said in a report.
These flaws stem from West Virginia’s lack of a formal process that includes defined criteria and proper oversight to ensure that fiscal notes are accurate and uniform, the report said.
Fiscal notes are estimates of the costs of legislation that are prepared by the state agencies responsible for carrying out the policies or programs created by the bills. There is no mechanism for the Legislature to independently verify cost estimates provided by agencies, the report said.
“Legislators have voiced concerns that agencies may be ‘gaming’ the fiscal note process either by inflating or underestimating the cost of legislation, which, in turn, can undermine or help the legislation’s chances of being approved,” the report’s author, Sean O’Leary, wrote.
The report recommends that a neutral and independent entity review and finalize fiscal notes. It proposes establishing an independent Legislative Fiscal Office, or allowing the Joint Committee on Government and Finance’s budget divisions to oversee or prepare fiscal notes.
Another recommendation calls for creating and enforcing written criteria and standards for fiscal notes.
“It is hard for legislators to make good, fiscally sound decisions when they do not have the information to do so. And the state agencies tasked with providing that information often do not have the resources to give them that information. Right now, bills are introduced and passed without realistic cost estimates, and little is being done about it,” O’Leary wrote.
The report cited several examples of what it said were flawed fiscal notes, including one prepared by the Department of Education for a bill requiring daily physical education classes. The department estimated the bill’s cost to be $1.5 billion, which would be nearly the equivalent of the state’s total education spending.
“According to legislators, the department inflated its analysis by including the costs of building new gymnasiums and athletic facilities around the state,” the report said.
In another example, the report said the cost of a tax reform bill passed in 2008 was more than double the estimate of a fiscal note prepared by the Tax Department. The fiscal note was prepared for an early version of the bill, and did not include a phase-out of the business franchise tax that was added later, the report said.
The report noted earlier reports by the Legislative Auditor’s Office that found the fiscal note estimates for 32 of 143 bills passed during the 2007 and 2008 legislative sessions were off by more than 10 percent.
Forty-three of the Legislature’s 134 members responded to a survey for the center’s report. Thirty-seven percent of the respondents said fiscal notes accurately determine the costs of legislation less than half the time. Forty percent said fiscal notes are prepared objectively less than half the time.