WEST VIRGINIA LEGISLATURE
2023 REGULAR SESSION
Introduced House Bill 3206 FISCAL
NOTE
By Delegate Westfall [By Request of the Auditor’s Office]
[Introduced February 02, 2023; Referred to the Committee on Political Subdivisions then the Judiciary]
 Intr HB 2023R3356
1 A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article,
2 designated §6-9C-1, §6-9C-2, §6-9C-2A, §6-9C-3, §6-9C-4, §6-9C-5, §6-9C-6, §6-9C-7,
3 §6-9C-8, §6-9C-9, §6-9C-10, and §6-9C-11; to amend and reenact §8-35-1 and §8-35-2 of
4 said code; and to amend said code by adding thereto by adding four new sections,
5 designated §8-35-3, §8-35-4, §8-35-5, and §8-35-6, all relating generally to fiscal
6 emergencies of local governments; establishing a system to remediate those
7 emergencies; requiring certain action be taken by the State Auditor or a designee; and
8 modernizing the process for the dissolution of municipalities.
Be it enacted by the Legislature of West Virginia:
CHAPTER 6. GENERAL PROVISIONS RESPECTING OFFICERS.
ARTICLE 9C. LOCAL FISCAL EMERGENCIES.
§6-9C-1. Legislative findings.
1 (a) The Legislature finds:
2 (1) That local governments are instrumentalities of this state, and the Legislature must act
3 for the public health, safety and welfare of its citizens to promote fiscal integrity of local
4 governments to prevent future emergencies;
5 (2) That negative economic changes, waste, fraud or abuse by public officials, or a
6 combination thereof, necessarily result in a significant impact on the revenues and effectiveness of
7 local governments, and cause significant indebtedness without any current possibility for
8 recovery; and
9 (3) That the failure of a local government to take actions on its own to address such a
10 condition will adversely affect the health, safety and welfare not only of the residents of the local
11 government, but also of other people of the state.
12 (b) It is the intent of the Legislature to direct the State Auditor or a designee to:
13 (1) Take necessary and appropriate actions to limit and restrict the powers of local
1
 Intr HB 2023R3356
14 governments to prevent the abuse of statutory powers;
15 (2) Require reports and examinations of their financial condition, transactions, operations
16 and undertakings;
17 (3) Ensure the fiscal integrity of local governments so that they may provide for the health,
18 safety and welfare of their citizens; and
19 (4) Determine if local governments have paid due principal and interest on their debt
20 obligations, meet financial obligations to their employees, vendors and suppliers, and provide for
21 proper financial accounting procedures, budgeting and taxing practices.
22 (c) The Legislature further finds that the fiscal emergency conditions described in this
23 article result from and constitute abuses of the powers of a local government to borrow money,
24 contract debts and levy taxes, and that those conditions impair and threaten the health, safety and
25 welfare of the people of the state within and beyond the local government.
§6-9C-2. Definitions.
1 As used in this article:
2 "Committee" means a financial planning and supervision group officially created under this
3 article.
4 "Debt obligations" means bonds, notes, certificates of indebtedness, bond anticipation
5 notes, current revenue notes, local government fund notes, leases or other obligations issued or
6 incurred in borrowing money, or to renew, refund, fund or refinance, or issued in exchange for,
7 such obligations, and any interest coupons pertaining thereto.
8 "Default" means failure to pay the principal of or the interest on a debt obligation, or failure
9 to make other payment to be made to the holder or owner of a debt obligation, in the full amount
10 and at the time provided for in the contractual commitment with respect thereto, unless the time for
11 such payment has been extended by the owner or holder of the debt obligation without penalty or
12 premium and without the effect of subjecting the local government to the initiation of remedies
13 pertaining to such debt obligation or other debt obligations.
2
 Intr HB 2023R3356
14 "Deficit fund" means the general fund or any other fund that, as at the time indicated, has a
15 deficit balance or a balance that is less than the amount required to be in such fund pursuant to law
16 or pursuant to contractual requirements, demonstrating that over a period of time expenditures
17 charged or chargeable to the fund have exceeded moneys credited to the fund, or that moneys
18 credited to the fund have not been in the amounts required by law or contractual requirements.
19 "Effective financial accounting and reporting system" means an accounting and reporting
20 system as prescribed by the West Virginia State Auditor’s Office.
21 "Employee benefits" means expenditures for goods and services furnished to local
22 government officers or employees by the local government, including, but not limited to, such
23 benefits as food, temporary housing and clothing, and the provision of pension, retirement,
24 disability, hospitalization, health care, insurance or other benefits to employees requiring the
25 advance payment of money other than directly to employees or other beneficiaries, or the deposit
26 or reservation of money for such purpose.
27 "Estimated revenues" means the aggregate estimates of revenue receipts in the budget of
28 the general fund and other funds as estimated and supplemented, modified, or amended by the
29 local government, as approved by the West Virginia State Auditor’s Office or other regulatory
30 agency.
31 "Financial recovery plan" means the financial plan approved by the committee in
32 accordance with §6-9C-6 of this code, as it may from time to time be amended in accordance with
33 this article.
34 "Fiscal emergency" means the existence of fiscal emergency conditions.
35 "Fiscal emergency period" means the period of time commencing on the date when the
36 determination of a fiscal emergency is made by the State Auditor or a designee and ending when
37 the determination of termination is made and certified.
38 "Fiscal watch" means the existence of fiscal watch conditions as provided in this article.
39 "General fund" means the fund used to account for and report the primary operating
3
 Intr HB 2023R3356
40 activities of the local government.
41 "General fund budget" means the estimates of revenue and expenditure as a plan of
42 financial operation of the general fund during the applicable fiscal year as approved by the West
43 Virginia State Auditor’s Office or other regulatory agency.
44 "Local government" means any unit of local government within the state, including a
45 county, municipality, and any other authority, board, commission, district, office, public authority,
46 public corporation, or other instrumentality of a county, municipality, or any combination of two or
47 more local governments.
48 "Other funds" means funds other than the general fund, including, but not limited to, special
49 revenue funds, capital project funds, debt service funds, permanent funds, enterprise funds,
50 internal service funds, pension trust funds, custodial funds, investment trust funds, and private
51 purpose trust funds.
52 "Payroll" means compensation due and payable to employees of local government other
53 than employee benefits.
§6-9C-2A. Auditable Condition of Local Governments.
1 The State Auditor or designee may determine that a local government’s accounts, records,
2 files, or reports have not been maintained in accordance with §6-9-2 of this code. The State
3 Auditor or designee shall notify the local government, in writing, of the deficiencies present and the
4 action necessary to present the accounts, records, files, or reports in an auditable condition.
5 Furthermore, the State Auditor or designee may prescribe the deadline for the local government in
6 completing the necessary action and institute a fiscal monitoring plan to improve the local
7 government’s financial records.
§6-9C-3. Initiating fiscal watch review.
1 A local government may undergo a fiscal watch review to determine whether it is
2 approaching a state of fiscal emergency. A fiscal watch review shall be initiated by a written
3 request to the State Auditor or a designee from the governing body when duly authorized by a
4
 Intr HB 2023R3356
4 majority of the legislative authority; or may be initiated by the State Auditor or a designee if
5 conditions for a fiscal watch have been determined to exist. Fiscal watch conditions include but are
6 not limited to (a) the inability of a local government to meet financial obligations (b) the lack of
7 adequate financial records necessary to conduct an examination pursuant to §6-9-1 et seq. of this
8 code (c) an examination pursuant to §6-9-1 et seq. of this code would cause an undue financial
9 burden to the local government. The State Auditor or a designee will notify the local government
10 when a fiscal watch review will or will not be conducted. The State Auditor’s Office will perform the
11 fiscal watch review, which may be substituted for an examination, as required by §6-9-1 et seq. of
12 this code at the discretion of the State Auditor or a designee. Furthermore, all working papers
13 acquired or created to produce the fiscal watch review shall be considered confidential pursuant to
14 §6-9-9b of this code.
§6-9C-4. Guidelines for identifying potential for declarations of fiscal watch or fiscal emergency; rulemaking authority.
1 (a) The State Auditor or a designee shall propose rules for legislative approval in
2 accordance with the provisions of §29A-3-1 et seq. of this code, setting forth guidelines for
3 identifying fiscal practices and budgetary conditions of local government that, if uncorrected, could
4 result in declaration of a fiscal watch or fiscal emergency.
5 (b) If the State Auditor or a designee determines that a local government is engaging in any
6 of those practices or that any of those conditions exist, the State Auditor or a designee may
7 declare the local government to be under a fiscal watch.
8 (c) The State Auditor or a designee, may visit and inspect any local government that is
9 declared to be under a fiscal watch. The State Auditor or a designee may provide technical
10 assistance to the local government in implementing proposals to eliminate the practices or
11 budgetary conditions that prompted the declaration of fiscal watch and may make
12 recommendations concerning those proposals.
13 (d) If the State Auditor or a designee finds that a local government declared to be under a
5
 Intr HB 2023R3356
14 fiscal watch has not made reasonable proposals or otherwise taken action to discontinue or
15 correct the fiscal practices or budgetary conditions that prompted the declaration of fiscal watch,
16 and if the State Auditor or a designee considers it necessary to prevent further fiscal decline, the
17 State Auditor or a designee may determine that the local government should be in a state of fiscal
18 emergency.
§6-9C-5. Conditions constituting grounds for fiscal watch.
1 The conditions constituting grounds for a fiscal watch may include, but are not limited to:
2 (1) Accounts have been due and payable for more than 30 days or for which a penalty was
3 added for failure to pay. Accounts include, but are not limited to, final judgments, employee
4 benefits payments due and payable, and amounts due and payable to persons and other
5 governmental entities and including any interest and penalties thereon. Accounts that are due and
6 payable do not include any account, or portion of any account, that is being contested in good
7 faith.
8 (2) The deficit amount within the general fund for the preceding fiscal year exceed the
9 estimated revenues made in the general fund budget of the current fiscal year.
10 (3) The local government has failed to comply with debt covenants as required by the
11 issuer of any debt with such requirement.
12 (4) Any such rule, as proposed by the State Auditor or a designee for legislative approval in
13 accordance with the provisions of §29A-3-1 et seq. of this code, identified as indicators of financial
14 watch condition.
§6-9C-6. Declaring existence of fiscal watch; financial recovery plan.
1 (a) Upon determining that one or more of the conditions constituting grounds for a fiscal
2 watch are present, the State Auditor or a designee shall issue a written declaration of the
3 existence of a fiscal watch to the governing body of the local government. The fiscal watch shall be
4 in effect until the State Auditor or a designee determines that the conditions have been
5 satisfactorily addressed, cancels the watch, or until the State Auditor or a designee determines
6
 Intr HB 2023R3356
6 that a state of fiscal emergency exists. The State Auditor or a designee, shall provide such
7 technical and support services to the municipal corporation, county or political subdivision after a
8 fiscal watch has been declared to exist as the State Auditor or a designee considers necessary
9 and provide mandatory recommendations to address the fiscal watch conditions.
10 (b) Within 90 days after the day a written declaration of the existence of a fiscal watch is
11 issued under this section, the governing body of the local government for which a fiscal watch was
12 declared shall submit to the State Auditor or a designee a financial recovery plan that shall identify
13 actions to be taken to eliminate all of the conditions described in §6-9C-5 of this code, and shall
14 include a schedule detailing the approximate dates for beginning and completing the actions and a
15 five-year forecast reflecting the effects of the actions. The financial recovery plan also shall
16 evaluate the feasibility of entering into shared services agreements with other political
17 subdivisions for the joint exercise of any power, performance of any function, or rendering of any
18 service, if so authorized by statute. The financial recovery plan is subject to review and approval
19 by the State Auditor or a designee. The State Auditor or a designee may extend the amount of time
20 by which a financial recovery plan is required to be filed, for good cause shown.
21 (c) The State Auditor or a designee may declare that a fiscal emergency condition exists
22 under this article in the municipal corporation, county or political subdivision if either of the
23 following applies:
24 (1) A feasible financial recovery plan for a local government or which a fiscal watch was
25 declared is not submitted within the time period prescribed by subsection (b) of this section, or
26 within any extension of time thereof; or
27 (2) The State Auditor or a designee finds that a local government for which a fiscal watch
28 has been declared has not made reasonable proposals or otherwise taken action to discontinue or
29 correct the fiscal practices or budgetary conditions that prompted the declaration of fiscal watch,
30 and the State Auditor or a designee determines a fiscal emergency declaration is necessary to
31 prevent further decline.
7
 Intr HB 2023R3356
§6-9C-7. Fiscal emergency conditions.
1 (a) The conditions constituting a fiscal emergency of a local government may include, but
2 are not limited to:
3 (1) The existence, of a default on any debt obligation for more than 30 days;
4 (2) The failure to make payment of all payroll to employees of the local government in the
5 amounts and at the times required by law, ordinances, resolutions, or agreements;
6 (3) The failure to make payment of all employee benefits of the local government in the
7 amounts and at the times required by law, ordinances, resolutions, or agreements;
8 (4) The existence of a condition in which accounts were due and payable from the general
9 fund and that either had been due and payable for at least 30 days or to which a penalty has been
10 added for failure to pay, including, but not limited to, final judgments, employee benefits payments
11 due and payable, and amounts due and payable to persons and other governmental entities and
12 including any interest and penalties thereon. Accounts due and payable do not include any
13 account, or portion of any account, that is being contested in good faith;
14 (5) The deficit amount within the gene