State Lawmakers Consider Tax Trust Fund

- State Lawmakers Consider Tax Trust Fund

Tuesday, June 14, 2011
Knight Ridder/Tribune Business News
by David Beard, The Dominion Post, Morgantown, W.Va.

Could a severance tax trust fund build a hefty savings account for West Virginia as it has for Alaska, Wyoming and a handful of other states?

Jill Kriesky, an economist with the West Virginia Center on Budget and Policy, thinks it could and brought the idea before the Legislature's Joint Commission on Economic Development, on Monday morning -- the first day of the June interim meetings.

Kriesky's proposal projects that a 1 percent severance tax hike on coal, oil and gas extraction and production could raise $100 million in its first year. A "Severance Tax Permanent Fund" could have a principal balance of $612 million by 2015, $1.18 billion by 2020 and $3.77 billon by 2035.

The state's entire general fund is just over $4 billion now.

The current severance tax is 5 percent and raised $400.5 million in fiscal year 2010, according to Revenue Department figures.

Kriesky told the joint House-Senate commission that six states and the Navajo Nation have such trust funds. They're all western states with relatively undiversified economies heavily dependent on nonrenewable natural resources.

They use the money for such things as boosting their general funds, inflation-proofing, enhanc- ing education, infrastructure and distribution to the public.

Alaska's fund was created in 1976 and has a balance of $40.3 billion. Wyoming's 1974 fund has $4.5 billion. North Dakota has three funds. Its newest, the 2010 Legacy Fund, already has $619 million.

Two unsuccessful Democratic gubernatorial candidates raised similar ideas in their primary election campaigns. Both proposals were more limited -- focused on increased revenues from Marcellus shale gas extraction.

Secretary of State Natalie Tennant proposed the Innovation 2020 Fund to benefit education, local economic development and several other areas.

Acting Senate President Jeff Kessler proposed the West Virginia Future Fund, using 25 percent of the severance tax collected from natural gas extraction and production. The fund would go untouched for 20 years, and would then be used for tax relief, education and economic diversification.

Kriesky noted several advantages to a severance tax trust fund: Nonrenewable resources can produce sustainable wealth. It can stabilize boomand-bust economic turbulence. It can build assets to pay off unfunded liabilities -- such as the OPEB debt.

Kriesky's presentation, which she didn't get to complete Monday, also touched on jobs. She noted that 87 percent of coal produced in West Virginia is exported -- so out-of-state interests would be paying the tax with little effect on in-state jobs.

Sen. Richard Browning, DWyoming and commission co-chair, had questions about that. "How many jobs would it kill?" he asked. Kriesky didn't know. Browning suggested the commission have her back later to complete her presentation and answer questions.

Referring just to coal, Delegate Kevin Craig, D-Cabell, said mining in West Virginia is already more costly than in surrounding states. "If we layer another burden on mining we won't be nearly as competitive as we need to be."

Kessler also was skeptical about Kriesky's more expansive proposal, partly because it raises taxes.

"When you talk about raising a tax," he said, "that's going to make everyone scream. If you take an existing tax and reapportion it, it's going to make everyone scream."

His Future Fund does neither, he said. It uses a new pool of money derived from anticipated expanded Marcellus production.

"No one actually owns it at this point," he said, so the Legislature could set a portion aside to save for future generations.

Copyright (c) 2011, The Dominion Post, Morgantown, W.Va.

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U.S. Retail Sales Fall 0.2% In May, Smaller Drop Than Expected

- U.S. Retail Sales Fall 0.2% In May, Smaller Drop Than Expected



Jun 14, 2011

The U.S. Census Bureau estimated retail and food services sales for May at $387.1 billion today, down 0.2% from April, but up 7.7% from May of 2010.

Economists had expected a drop of 0.7% for May. The increase from March 2011 to April 2011 was revised down from 0.5% increase to a 0.3% increase.

Excluding slumping motor vehicle sales, which fell 2.9% from April, total retail sales rose 0.3%.

Core sales, which exclude automobiles, gasoline, and building materials, increased 0.2% in May from April.

For the first five months of the year, retail sales have totaled $1.87 trillion, an 8% increase over the same period in 2010.

Sales at gasoline stations, up 17.5%, lead the pack, followed by sales of motor vehicles, which despite slumping in April and May due to the Japanese earthquake, are still up 13.3% so far this year.

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Toyota Launches Prius Minivan, Orders Above Target

- Toyota Launches Prius Minivan, Orders Above Target



Jun 14, 2011

Toyota Motor Corp (NYSE:TM) has received 52,000 orders for the new Prius hybrid minivan in Japan, only one month after its launch. The new model, called the Prius Alpha had an initial sales target of 3,000, set by the company.

The original Prius hybrid model received 180,000 orders after its June 2009 relsease in Japan. The Prius also had a monthly sales goal at launch of around 10,000.

Toyota Motor has a potential upside of 15.9% based on a current price of $79.72 and an average consensus analyst price target of $92.4.

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Philippines Welcomes US Help to Contain China

- Philippines Welcomes US Help to Contain China

Tuesday, June 14, 2011
Dow Jones Newswires
MANILA

Philippine President Benigno Aquino said Tuesday his country needed help from longtime ally the United States in its increasingly tense dispute with China over rival claims in the South China Sea.

Aquino accused China of breaking international law by sending vessels into waters claimed by the Philippines and close to its landmass, while portraying his country as weak compared with its militarily superior Asian neighbor.

"Of course they (China) are a superpower, they have more than 10 times our population. We do not want any hostilities to break out," Aquino told reporters when asked about recent Chinese actions in the disputed area.

"Perhaps the presence of our treaty partners, the United States of America, ensures that all of us will have freedom of navigation (and) will conform to international law."

The U.S. and the Philippines are bound by a 1951 Mutual Defense Treaty that calls on both parties to come to one another's aid if either were to be attacked by an external party.

Aquino's comments came after the U.S. ambassador to the Philippines, Harry Thomas, Tuesday said the U.S. remained committed to helping its former colony in any dispute over the South China Sea.

Thomas emphasized at a public forum in Manila that the Philippines and the U.S. were "longstanding treaty allies" and "strategic partners".

"We will continue to consult each other closely on all issues, including the South China Sea and Spratly Islands," Thomas said.

Aquino welcomed Thomas's comments, which are likely to irk China as it has long insisted that the U.S. has no role to play in resolving its territorial disputes with Asian countries.

"We are pleased by that, especially the reiteration that we are a strategic partner," Aquino said when asked to respond to Thomas's comments.

Aquino's remarks continued an escalation in tensions between China, the Philippines and other rival claimants to the strategically vital and resource-rich South China Sea over recent months.

The Philippines and Vietnam, in particular, have expressed alarm at what they say are increasingly aggressive actions by China in the disputed waters.

The Philippines has accused China of putting up posts and a buoy in Philippines-claimed areas of the Spratlys, an archipelago of more than 100 islands and reefs in the South China Sea.

It also accused China of sending naval vessels to intimidate Filipino fishermen and the crew of an oil exploration ship near an atoll called Reed Bank.

Aquino on Tuesday specifically highlighted recent "incidents" at Reed Bank, pointing out it was well within the Philippines' exclusive economic zone of 200 nautical miles.

He said the Reed Bank was just 80 miles from the nearest major Philippine landmass, but 576 miles from Chinese territory.

"Five-hundred-and-seventy-six miles is obviously greater than 200 miles, so why is there suddenly a dispute if we are all conforming to international law," he said.

Under the United Nations Convention on the Law of the Sea, a country's exclusive economic zone extends to 200 miles from its continental shelf.

In response to earlier complaints from the Philippines, China has denied taking any aggressive actions and insisted it remained committed to resolving territorial disputes with its neighbors peacefully.

Aside from China, the Philippines and Vietnam, Taiwan, Brunei and Malaysia have overlapping claims to sections of the South China Sea.

The area is believed to hold major oil and gas deposits, and has commercial shipping lanes that are vital for global trade.

Copyright (c) 2011 Dow Jones & Company, Inc.

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