1. 1 LEGISLATIVE SESSION PREPARATION Preparing Fiscal Notes Pam Davidson | OFM Senior Budget Assistant | 360-902-0550 Monica Jenkins | OFM Fiscal Note Coordinator | 360-902-0561

2. 2 What is a Fiscal Note? Purpose Process History Priorities

3. 3 Purpose of a Fiscal Note To provide the best possible estimate of the expenditure and revenue impacts of proposed legislation. To be as objective as possible: factual, informative and concise.

4. 4 Fiscal Note Process Adopted RCW 43.88A directs OFM to establish fiscal note procedures that: Evaluate expected impacts of bills Include fiscal impact for the first biennium plus the succeeding four fiscal years Coordinate fiscal impact development for all state agencies affected by the legislation Provide fiscal notes for any legislative proposal Approve the form, accuracy and completeness of the note

5. 5 Fiscal Note History Started in 1977 1980s/1990s improved technology –WORD/Excel document –Email documents 2001 OFM established a web-based internet system for agencies, the legislature, and OFM

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7. 7 The Team Players Legislative members and staff OFM Budget Division staff State Agencies—budget and program staff

8. 8 2007 Session Cutoff Calendar— (estimated dates) April 22 First Day of Session Policy Comm. Cutoff Fiscal Comm. Cutoff Last day to consider in house of origin Out of opposite house Opposite house policy committee cutoff Opposite house fiscal committees cutoff End of session JanuaryFebruaryMarchApril April 13 April 2 March 30 March 14 March 5 February 28 January 8

9. 9 Fiscal Note Priorities In a past fiscal note study (1995) legislators identified these as priorities: Assumptions should be clearly identified Avoid using “indeterminate” whenever, but if necessary, also use cost ranges to communicate the potential costs Form work groups including agency, OFM, and legislative staff for major issues Maintain timeliness—being on time for the hearing is imperative

10. 10 Tips for Success Prepare Early Know your process Anticipate topics Gather information now Connect with legislative committee staff about forthcoming issues Be ready on the first day (including knowing how to use the fiscal note system)

11. 11 Overview: Preparing Fiscal Notes Read and understand the bill Decide how the bill might be implemented Collect data Convert concepts to costs Draft narrative Coordinate/communicate with other state agencies Develop assumptions if lead agency and enter into the system (so other agencies can see the assumptions) Send fiscal note through a review process Incorporate comments Final review and signoff—and release to OFM Agencies usually have 3 days* to: *There may be less time due to hearing dates

12. 12 Key Features of a Good Fiscal Note Clearly written to show how the bill will change current practices and costs—in a way that anyone can understand it Cost estimates are based on data Assumptions are clear and reasonable, and include an implementation date Assumptions are coordinated with other agencies Calculations are clear and can be easily duplicated Objective – Avoid discussing merits of the bill, pro or con

13. 13 Creating a Fiscal Note Individual Components of a Fiscal Note

14. 14 Anatomy of a Fiscal Note Part I: Estimates Part II: Narratives –Description –Cash Receipts –Expenditures Part III: Expenditure Detail Part IV: Capital Budget Impact Part V: New Rule Making

15. 15 Part I: Estimates Most important page! How much does the legislation cost? Starting point is the last enacted budget Not Zero but Indeterminate

16. 16 Definition: Indeterminate Difficult or impossible to accurately quantify Preferable to show options and range of scenarios—pick one most likely to occur If no one scenario fits, pick middle of range Risk: if no range is provided, the agency may receive ZERO funding Discuss with OFM budget analyst before releasing

17. 17 Part II: Narrative Heart of the fiscal note: explains how the bill changes business practices and costs of the agency Credible: clear methodology, clear assumptions, cited data, avoids jargon, is consistent Objective: nothing is stated or computed in a way that indicates support or opposition

18. 18 Part IIA: Brief Description Section–by–section analysis, but only for those sections that have a fiscal impact on your agency State implementation methodology that will drive cost If no fiscal impact, clearly explain why If a substitute bill, note the differences between the bills

19. 19 Part IIB: Cash Receipts In a fiscal note, Revenue and Cash Receipts are the same thing Reported by the agency that will collect the money If federal or private/local, then the amount is expected to match the federal or local expenditures. For other revenue sources, a difference between revenues and expenditures is acceptable.

20. 20 Part IIC: Expenditures What are your assumptions? What will it cost? What is that based on? How did you compute the cost? What were your sources? Compute expenditures independent of cash receipts

21. 21 Absorbing Cost If the effort is very small, absorb it If the agency is either willing or required to absorb, clearly state what, if anything, will not get done that the agency is currently doing If the bill relates to something the agency already does, and the agency cannot absorb the additional cost, it should be prepared to explain why the requirements of the bill cannot be absorbed

22. 22 Part IV: Capital Impact Include description in Part IIA, Brief Narrative, but not in Parts I, IIC or III Expenditures Everything else applies! State methods and assumptions, show calculations, identify FTE costs, compute expenditures independent of cash receipts, cite data and sources

23. 23 Part V: New Rule Making State the part of the bill that will require new rules or changing existing rules State in general what the new rules or changes will be Make a statement if no rulemaking is required

24. 24 Special Circumstances I-601 Impacts (related accounts: PSEA, Equal Justice Account, Water Quality Account, VRDEA, Student Achievement Account, Health Services Account) Vague Bill Language: Get clarification from legislative staff Repealers: Look up sections, indicate the state cost or savings Contains an Appropriation Clause: Disregard Errors in Fiscal Notes: Contact OFM, prepare a revised note ASAP No Request: Contact OFM for a formal request OFM can add a Clarification Note

25. 25 OFM Lookout – Technical Review Intent of Legislation Objectivity “Guy on the street” Comprehension Acronyms and Grammar All Sections Completed Costs Begin on/after Effective Date Calculations Data Sources FTEs and Salaries Who collects the cash receipts? Expenditure estimates and expenditure detail are in balance

26. 26 What OFM Reviews For: Interagency Coordination Objective analysis of the impact of proposed legislation Clear analysis of legislative intent Clear and consistent assumptions Use of data – cite sources

27. 27 Got questions? For more information or consultation, contact your agency’s fiscal note coordinator or your assigned OFM analyst.

28. 28 C.A.S.H. C—Coordination and Credibility A—Assumptions S—Show Your Work H—Hearings on Time