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January 15, 2010

The 2010 Regular Session Underway!

On Wednesday evening Governor Manchin delivered his sixth State of the State address. The Governor reviewed the significant progress the State has made in recent years, and outlined a relatively limited number of programs and initiatives.

Noting the relatively strong position of West Virginia compared to other states around the nation, Governor Manchin urged the Legislature to stick to the path of responsible government. To this end, the Governor announced that pay raises for public employees were not prudent or possible; called upon community and technical colleges to freeze tuition rates; and articulated a very modest legislative agenda.

Banks received prominent – and positive – mention in the Governor’s State of the State. In identifying various indicators of the strength and stability of West Virginia in tough times, Governor Manchin had this to say about West Virginia banks: “Although our financial institutions were not immune from this recession, all 61 commercial banks headquartered in West Virginia are sound and well-capitalized.”

On the legislative policy front, highlights of the speech included the Governor’s intention to move forward with several recommendations of the Judicial Reform Commission, and legislation that would provide greater flexibility to the School Building Authority regarding debt financing.

Following is a link to the complete text of the Governor’s 2010 State of the State address: http://www.wvgov.org/SoS2010/2010SoS.pdf

Governor Manchin’s proposed general revenue budget for FY 2010-11 is $4.16 billion, which represents a slight increase over the $4.04 billion budget of the current fiscal year.

Unlike virtually every other state, West Virginia remains financially sound. Through the first six months of FY 2010, West Virginia is $19 million ahead of budget, following strong collection months in November and December.

Nevertheless, Governor Manchin has called for a 3.4% spending reduction by state agencies by the end of the fiscal year (June 30, 2010). The Budget Office anticipates erosion of revenues in the second half of the current fiscal year. Additionally, Governor Manchin and legislative leaders anticipate tough budget years in 2012 and 2013, and are accordingly laying the groundwork for those budgets by maintaining a conservative spending budget this year and next. This conservative approach to state spending enjoys broad support at the statehouse.

Other evidence of West Virginia’s relative fiscal strength is found in a consideration of the State’s current cash reserves. The state’s official emergency reserves, or “Rainy Day Fund,” totals approximately $580 million. There is also another $165 million in unappropriated surplus from the fiscal year that ended June 30, 2009.

Speaker Rick Thompson indicated in comments earlier this week that the Governor and legislative leaders contemplate appropriating some $70 million of the unappropriated surplus in the current budget year, which would leave approximately $95 million that can be carried over into the 2010-11 budget. There is also agreement among the Governor and legislative leaders to not tap the Rainy Day Fund in order to meet any present or future operating budget deficit, but rather to address any such casual deficits in operating budgets through spending reductions.

A persistent and serious issue facing West Virginia (and every other state) is the so-called OPEB (“Other Post-Employment Benefits”) liabilities of the State in respect of public employees. West Virginia faces $8 billion in such liabilities.

Just as the state has systematically addressed long-term, public pension and workers’ compensation deficits in recent years, the Governor and Legislature are now committed to addressing the OPEB liabilities. To this end, Senator Brooks McCabe is leading a group in the Senate that has been working hard on a solution. Although there was no announcement in the State of the State address regarding the OPEB issue, look for legislation to be introduced by the Senate leadership during the session to address this serious, long-term issue. The OPEB issue is likely to be a major focus of energy and discussion in the 2010 Regular Session.

On the Banking Front

One bill of note at this early date is SB 87 (by Senators Kessler, Edgell, Foster and Laird) and SB 97 (which is identical to SB 87, but is introduced by a different sponsor, Senator White). The bill would add a new section to the Consumer Credit Protection Act imposing several restrictions on the ability of lenders to take interests in real property as security for loans in a variety of circumstances. We will be actively working on these bills in the weeks ahead.

Banks have been alerted by the House Banking Committee Chairman, Delegate Clif Moore, that he intends to introduce a bill that would impose material restrictions on the ability of banks to charge overdraft fees. Bank representatives will be meeting with Chairman Moore on February 2nd to discuss this issue in depth with the Chairman. Addressing the Chairman’s concerns and opposing any such overdraft legislation will be a priority issue for banks in the 2010 session.

As in the past, bankers will be working closely with Banking Commissioner Sally Cline on her 2010 legislative agenda. Initiatives identified by Commissioner Cline in advance of the Regular Session include proposed bills which would:

• effect various clean up items to the 2009 SAFE Act provisions passed in 2009;
• modify reporting procedures in respect of foreclosure filings;
• modify bonding requirements on county deposits, to bring the current statutory provisions regarding county and local governments into line with West Virginia Code provisions regarding state deposits;
• fine-tune existing conflict on interest restrictions applicable to borrwoing by West Virginia Division of Banking employees;
• provide an option to eliminate duplicative background checks by law enforcement agencies; and
• subject regulated consumer lenders to the same notice requirements imposed on banks and others, regarding change of control events involving out of state acquisitions by West Virginia-based RCL's.

Bills of Interest

As of Friday morning, a total of 266 bills have been introduced in the 2010 Regular Session. Below is a brief listing of bills of interest to bankers:

Senate Bills

 

House Bills

Bill	Title	Status
HB 2351	Prohibiting the placement of automated teller machines (ATM) in establishments that contain video lottery terminals	Judiciary then Finance
HB 2896	Requiring banks to show good cause for calling a business loan due before maturity	Banking and Insurance then Judiciary
HB 2937	Allowing members of the board of banking and financial institutions to receive compensation for travel expenses	Banking and Insurance then Finance
HB 2938	Relating to the conversion of other financial institutions to state-chartered banks	Banking and Insurance then Judiciary
HB 2996	Requiring bank transactions involving savings and checking accounts to be posted at the time of the transaction and not the next day	Introduced 1/13/2010; to Banking and Insurance then Finance
HB 3114	Mandating that state-chartered banks provide loans for consumers purchasing solar energy panels	Introduced 1/13/2010; to Banking and Insurance then Judiciary
HB 3332	Allowing the Division of Banking to participate in the Nationwide Mortgage Licensing System and Registry	Introduced 1/13/2010; to Banking and Insurance then Judiciary
HB 4010	Providing that all employees have the right to review and copy the contents of their personnel file	Introduced 1/13/2010; to Energy, Industry and Labor, Economic Development and Small Business then Judiciary