COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:4303S.01I Bill No.:SB 724 Subject:Auditor, State; Attorney General; Counties; County Government; County
Officials; Political Subdivisions; Department of Revenue
Type:Original Date:January 25, 2022Bill Summary:This proposal modifies provisions relating to financial statements of political
subdivisions.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2023FY 2024FY 2025
General Revenue*
$0 or up to
($1,834,605)$0 to (Unknown)$0 to (Unknown)
Total Estimated Net
Effect on General
Revenue*
$0 or up to
($1,834,605)$0 to (Unknown)$0 to (Unknown)
* The fiscal impact to the state is the potential loss of the Department of Revenue’s 2%
collection fee. Oversight has ranged the impact from $0 (debt is already considered
uncollectible and DOR would not have received the 2% fee even without this proposal) to
$1,834,605 (which represents if DOR would have collected 100% of the $91 million of
outstanding debt allowed to be reduced by this proposal). Oversight assumes the actual
loss to the state is on the very low end of this range.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Total Estimated Net
Effect on Other State
Funds $0$0$0
Numbers within parentheses: () indicate costs or losses. L.R. No. 4303S.01I
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2023FY 2024FY 2025Total Estimated Net
Effect on FTE 000
☒ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☐ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2023FY 2024FY 2025
Local Government*
Unknown, less than
$1,834,605$0 to Unknown$0 to Unknown
* The net fiscal impact to the local political subdivision is the potential loss of the
Department of Revenue’s 2% collection fee. Oversight has ranged the impact from $0
(debt is already considered uncollectible and DOR would not have received the 2% fee even
without this proposal) to $1,834,605 (which represents if DOR would have collected 100%
of the $91 million of outstanding debt allowed to be reduced by this proposal). Oversight
assumes the actual impact is on the very low end of this range. L.R. No. 4303S.01I
Bill No. SB 724
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FISCAL ANALYSIS
ASSUMPTION
§105.145 – Financial statements of political subdivisions
Officials from the Office of Administration - Budget and Planning (B&P) state §105.145 of
the proposal excludes the fine for failure to submit annual financial statements for political
subdivisions with gross revenues of less than $5,000, or for political subdivisions that have not
levied or collected sales or use taxes in the fiscal year. This may result in a revenue loss for both
the state and schools.
It also provides grace from fines if the failure to timely submit the annual financial statement is
the result of fraud or other illegal conduct and allows a refund by the Department of Revenue
(DOR) of any fines already paid under these circumstances. The 90% downward adjustment
DOR is allowed to make on outstanding fine or penalty balances after August 28, 2022 results in
the amount of collections being reduced for both the state and DOR collection fees. A similar
downward adjustment may be made by DOR if the outstanding fines are deemed uncollectable.
These downward adjustments will likewise result in a revenue loss for both the state and schools.
Based on information from DOR, the department started imposing this fine in August 2017. This
proposal directs that the DOR Director shall notify the Attorney General who will initiate a
ballot measure that could dissolve political subdivisions that fail to timely submit annual
financial statements after August 28, 2022. B&P defers to DOR for more specific estimates of
fines and actual collection costs.
Officials from the Department of Revenue (DOR) state §105.145- Annual Financial Statement
(Effective August 28, 2021) provides that currently local political subdivisions are required to
file annual financial statements with the State Auditor’s Office. Failure to file those statements
results in the political subdivision being assessed a fine of $500 per day per statutes, which is
deposited into local school district funds. DOR notes that the Department started imposing this
fine in August 2017. DOR receives notice from the State Auditor’s Office if a political
subdivision does not file their annual financial statement. At that time, the DOR sends a notice to
the political subdivision and thirty days later the fee starts to accumulate.
DOR collects the fine by offsetting any sales or use tax distributions due to the political
subdivisions. In essence, the DOR only gets to collect the fee if the political subdivision has a
sales or use tax. Most of these political subdivisions do not have a sales or use tax for the
Department to collect, so the DOR assumes much of what is owed is uncollectable. This is not
state money but local political subdivision funds.
Currently, a transportation development district that has gross revenues of less than $5,000 in a
fiscal year is not subject to this fine. This proposal adds language that any political subdivision L.R. No. 4303S.01I
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with less than $5,000 in revenue or has not levied or collected sales or use taxes in the fiscal year
in which the report is due is not subject to the fine. This will change how the DOR determines
the fine.
This proposal also adds a provision that if failure to file the report is a result of fraud or other
illegal conduct by an employee of the political subdivision, they will not be subject to the fine.
The DOR notes that per statute, the Department is allowed to retain 2% of the amount collected
for administration. Since the program began, DOR has collected $66,621 (rounded) which has
been deposited into General Revenue. All DOR collection fees are deposited into General
Revenue and are not retained by the Department.
Current records of the Department show total fines assessed of $105,253,522 and that
$3,331,032 (rounded) has been collected. The DOR is showing the assessment of the fines by the
county in which the district that owes the fine is located. L.R. No. 4303S.01I
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County
Total Fine
Imposed
Total Fine
Collected
Adair$751,000.00$1,500.00Andrew$63,500.00$0.00Atchison$855,000.00$0.00Audrain$1,014,500.00$0.00Barry$1,863,500.00$16,202.57Barton $0.00$0.00Bates$944,000.00$30,500.00Benton$236,500.00$0.00Bollinger$1,682,500.00$0.00Boone$259,000.00$24,588.62Buchanan$1,100,000.00$53,342.38Butler$1,624,000.00$35,414.25Caldwell$100,000.00$15,312.17Callaway$493,000.00$2,635.05Camden$1,002,000.00$22,360.55Cape Girardeau$280,000.00$0.00Carroll$3,127,000.00$0.00Carter$1,908,000.00$103,500.00Cass$4,128,500.00$5,184.54Cedar$221,000.00$28,500.00Chariton$659,500.00$39,500.00Christian$2,219,500.00$0.00Clark$652,000.00$37,500.00Clay$1,211,000.00$14,500.00Clinton$982,000.00$16,500.00Cole$633,000.00$5,097.95Cooper$1,220,000.00$17,500.00Crawford$1,335,500.00$15,500.00Dade$211,500.00$0.00Dallas$1,202,500.00$0.00Daviess$623,500.00$0.00DeKalb$643,500.00$0.00Dent$194,500.00$0.00Douglas$0.00$0.00Dunklin$1,790,000.00$14,131.34Franklin$1,357,000.00$1,064.01 L.R. No. 4303S.01I
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Gasconade$65,500.00$5,036.88Gentry$1,372,000.00$26.98Greene$705,500.00$0.00Grundy$847,500.00$0.00Harrison$588,000.00$0.00Henry$786,000.00$77,296.43Hickory$614,500.00$0.00Holt$1,701,000.00$10,500.00Howard$888,000.00$147,500.00Howell$642,500.00$11,000.00Iron$29,500.00$12,000.00Jackson$2,060,500.00$297,846.94Jasper$327,500.00$101,100.62Jefferson$1,203,000.00$19,301.01Johnson$589,500.00$1,500.00Knox$1,168,500.00$0.00Laclede$240,000.00$12,000.00Lafayette$283,500.00$34,028.54Lawrence$2,699,500.00$0.00Lewis$1,583,000.00$0.00Lincoln$1,051,500.00$31,000.00Linn$795,500.00$15,000.00Livingston$1,158,000.00$0.00Macon$236,500.00$0.00Madison$1,777,500.00$79,389.02Maries$118,000.00$0.00Marion$55,500.00$0.00McDonald$161,500.00$0.00Mercer$439,000.00$0.00Miller$801,500.00$4,598.44Mississippi$101,000.00$4,977.98Moniteau$0.00$0.00Monroe$42,000.00$10,000.00Montgomery$311,000.00$3,500.00Morgan $0.00$0.00New Madrid$1,631,500.00$122,693.96Newton$440,500.00$25,500.00 L.R. No. 4303S.01I
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Nodaway$2,637,000.00$19,500.00Oregon $0.00$0.00Osage$610,500.00$12,104.21Ozark$43,000.00$43,000.00Pemiscot$2,513,000.00$6,500.00Perry$1,613,500.00$0.00Pettis$599,000.00$0.00Phelps$333,500.00$50,000.00Pike$19,500.00$0.00Platte$890,000.00$22,500.00Polk$507,500.00$0.00Pulaski$1,327,500.00$17,000.00Putnam$3,000.00$0.00Ralls$177,500.00$38,326.99Randolph$1,177,000.00$10,500.00Ray$2,211,500.00$0.00Reynolds$595,500.00$1,184.60Ripley$342,500.00$0.00Saline$849,500.00$0.00Schuyler$449,000.00$18,500.00Scotland$757,500.00$0.00Scott$1,853,000.00$620.44Shannon$287,000.00$135,998.71Shelby$6,500.00$6,500.00St. Charles$1,361,500.00$67,084.06St. Clair$2,012,500.00$265.88St. Francois$294,000.00$0.00St. Louis$3,260,500.00$895,058.73St. Louis City$5,548,000.00$149,299.59Ste. Genevieve$0.00$0.00Stoddard$1,346,500.00$136,084.38Stone$886,022.00$88,521.99Sullivan$695,500.00$0.00Taney$1,453,500.00$8,500.00Texas$1,096,500.00$42,500.00Vernon$1,227,000.00$12,000.00Warren$10,500.00$10,500.00 L.R. No. 4303S.01I
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Washington$680,500.00$12,000.00Wayne$1,026,000.00$852.29Webster$429,000.00$0.00Worth$19,000.00$0.00Wright $0.00$0.00Grand Total$105,253,522.00$3,331,032.10
This proposal would result in fewer fines being assessed in the future. As stated previously,
many of these current political subdivisions do not have any sales or use tax collected, so they
may be able to avoid future penalties.
This proposal also allows for a one-time reduction of a political subdivisions current outstanding
balance. Should a political subdivision file its reports by August 28, 2022, they will be entitled to
a one-time downward adjustment of their existing fine by 90%.
The current outstanding balance is $101,922,490 ($105,253,522 owed - $3,331,032.10 collected,
rounded). This is money the Department notes is owed, but most likely uncollectable. Should it
be collected, it would be forwarded to the local school district funds. If all the fine money is
eligible for the one-time reduction, this would result in $94,728,170 ($105,253,522 * .90,
rounded) no longer being owed.
Oversight notes if all political subdivisions file their report and receive the reduction, it would
be a loss of $89,895,636 to the local school districts from not receiving the fine money, a loss to
the state of $1,834,605 in collection fees and a gain to the local political subdivisions of
$91,730,241($101,922,490 * 90%).
Reducing the future fines would help save the local political subdivisions money; however, due
to the uncollectability of most of this money, the DOR assumes no additional impact to the state.
Additionally, the statutes require that the late notice sent by DOR be certified to the district.
This proposal will require the certified notice to be sent to both the chief executive and chief
financial officer of the district. This is expected to increase DOR’s annual mailing costs by an
unknown amount.
Oversight assumes the annual mailing costs of the certified notices to the districts can be
absorbed by DOR.
Oversight does not have any information to the contrary. Therefore, Oversight will reflect a
potential loss of fine revenue stated by DOR to the general revenue fund for this proposal. Also,
Oversight notes that because of the new language for certain local political subdivisions who
have gross revenues of less than $5,000 or who have not levied or collected a sales and use tax in
the fiscal year or if the failure to file a financial statement is the result of fraud or illegal conduct
by an employee or officer of the political subdivision and the political subdivision complies with L.R. No. 4303S.01I
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filing the financial statement within thirty days of the discovery of the fraud or illegal conduct,
then the fine shall not be assessed and could result in a savings to local political subdivisions on
fine fees. Therefore, Oversight will also reflect a savings to local political subdivisions of $0 to
unknown for this proposal.
Oversight also notes this proposal is allowing a political subdivision that files its financial
statement after August 28, 2022 to receive a one-time 90% reduction of their outstanding balance
of their fines owed.
Oversight also notes that the loss in fine revenue collected by DOR would result in a savings to
the local political subdivisions who would no longer need to pay the fine revenue. It would also
result in a loss of revenue to School Districts on these fines no longer being collected.
Therefore, Oversight will reflect a savings to local political subdivisions on the fines no longer
being collected and a loss of 98% of the fine revenue no longer going to the school districts for
this proposal. Oversight notes that the Department of Revenue is allowed to retain two percent of
the fine revenue collected (per §105.145.11). Oversight assumes a large majority of the
$101,922,490 of outstanding fines to be uncollectible. Therefore, Oversight will range the fiscal
impact from this proposal from $0 to DOR’s estimates.
Oversight notes 105.145.18(4) states any costs of submitting the question shall be paid by the
political subdivisions. Oversight will reflect a $0 or (Unknown) cost to local political
subdivisions for such election costs.
Officials from the Department of Commerce and Insurance, Cities of: Claycomo, Kansas
City, Springfield and the St. Louis Budget Division, the Greene County Clerk’s Office and
the Office of the State Auditor each assume the proposal will have no fiscal impact on their
respective organizations. Oversight does not have any information to the contrary. Therefore,
Oversight will reflect a zero impact in the fiscal note for these agencies.
In response to similar legislation from 2021, SB 547, officials from the Attorney General’s
OfficeOversight does not
have any information to the contrary. Therefore, Oversight will reflect a zero impact in the fiscal
note for this office.
Rule Promulgation
Officials from the Joint Committee on Administrative Rules assume this proposal is not
anticipated to cause a fiscal impact beyond its current appropriation.
Officials from the Office of the Secretary of State (SOS) note many bills considered by the
General Assembly include provisions allowing or requiring agencies to submit rules and
regulations to implement the act. The SOS is provided with core funding to handle a certain
amount of normal activity resulting from each year's legislative session. The fiscal impact for
this fiscal note to the SOS for Administrative Rules is less than $5,000. The SOS recognizes L.R. No. 4303S.01I
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that this is a small amount and does not expect that additional funding would be required
to meet these costs. However, the SOS also recognizes that many such bills may be passed by
the General Assembly in a given year and that collectively the costs may be in excess of what the
office can sustain with its core budget. Therefore, the SOS reserves the right to request
funding for the cost of supporting administrative rules requirements should the need arise
based on a review of the finally approved bills signed by the governor.
Oversight assumes the SOS could absorb the costs of printing and distributing regulations
related to this proposal. If multiple bills pass which require the printing and distribution of
regulations at substantial costs, the SOS could request funding through the appropriation process.
In response to similar legislation from 2021, SB 547, officials from the City of Corder, the City
of HughesvilleCity of O’Fallon each assumed the proposal will have no fiscal impact
on their organizations. Oversight does not have any information to the contrary. Therefore,
Oversight will reflect a zero impact in the fiscal note for these cities.
Oversight only reflects the responses received from state agencies and political subdivisions;
however, other cities and counties were requested to respond to this proposed legislation but did
not. A general listing of political subdivisions included in Oversight’s database is available upon
request. L.R. No. 4303S.01I
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FISCAL IMPACT – State GovernmentFY 2023
(10 Mo.)
FY 2024FY 2025GENERAL REVENUELoss – DOR – 2% of collection fee on
future potential fines no longer assessed
because LPS no longer required to file
due to changes in the bill (§105.145)
pg.8
$0 to
(Unknown)
$0 to
(Unknown)
$0 to
(Unknown)
Loss – DOR – 2% collection fee that
may have been collected if not for the
one-time decrease of 90% of the
outstanding balance from the local
political subdivision if they submit a
timely financial statement by 8/28/21
(§105.145) pg. 7
$0 or up to
($1,834,605)$0$0
ESTIMATED NET EFFECT ON
GENERAL REVENUE
$0 or up to
($1,834,605)
$0 to
(Unknown)
$0 to
(Unknown) L.R. No. 4303S.01I
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FISCAL IMPACT – Local GovernmentFY 2023
(10 Mo.)
FY 2024FY 2025LOCAL POLITICAL
SUBDIVISIONS
Savings – on potential fines for certain
LPS (§105.145) pg. 8$0 to Unknown$0 to Unknown$0 to Unknown
Loss – School districts receiving less
fine revenue (from savings above)
(§105.145) pg. 8
$0 to
(Unknown)
$0 to
(Unknown)
$0 to
(Unknown)
Costs – Election costs to
disincorporation (§105.145.18) pg. 8
$0 or
(Unknown)
$0 or
(Unknown)
$0 or
(Unknown)
Savings – on fine revenue that is
reduced with a one-time reduction of
90% on the outstanding balance due if
they submit a timely financial statement
by 8/28/22 (§105.145) pg. 7
$0 or up to
$91,730,241$0$0
Loss – School Districts – reduction in
fine revenue from one-time adjustment
of fine revenue (§105.145) pg. 7
$0 or up to
($89,895,636)$0$0
ESTIMATED NET EFFECT ON
LOCAL POLITICAL
SUBDIVISIONS
Unknown, less
than
$1,834,605
$0 to
Unknown
$0 to
Unknown
FISCAL IMPACT – Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
FISCAL DESCRIPTION
Under current law, any transportation development district having gross revenues of less than
$5,000 in a fiscal year for which an annual financial statement was not timely filed to the State
Auditor is not subject to a fine.
This act provides that any political subdivision that has gross revenues of less than $5,000 or that
has not levied or collected sales or use taxes in the fiscal year for which the annual financial
statement was not timely filed shall not be subject to a fine. L.R. No. 4303S.01I
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Additionally, if failure to timely submit the annual financial statement is the result of fraud or
other illegal conduct by an employee or officer of the political subdivision, the political
subdivision shall not be subject to a fine if the statement is filed within 30 days of discovery of
the fraud or illegal conduct.
If the political subdivision has an outstanding balance for fines at the time it files its first annual
financial statement after August 28, 2022, the Director of Revenue shall make a one-time
downward adjustment to such outstanding balance in an amount that reduces the outstanding
balance by 90%. If the Director of Revenue determines a fine is uncollectable, the Director shall
have the authority to make a one-time downward adjustment to any outstanding penalty.
This act provides that if a political subdivision with outstanding fines or penalties fails to file a
financial statement after August 28, 2022 and before January 31, 2023 or fails to file any
financial statement after January 31, 2023, the Director of Revenue shall notify the Attorney
General who shall initiate the process to disincorporate the political subdivision.
Additionally, a resident of a political subdivision may file an affidavit with the Attorney General
with information regarding the political subdivision's failure to report. The Attorney General
shall evaluate the allegation and, if true, notify the political subdivision it has 30 days to comply
with the reporting requirements of this act. If the political subdivision fails to comply within the
30 days, the Attorney General shall initiate the process to disincorporate a political subdivision
as provided in the act.
The question of whether a political subdivision may be subject to disincorporation shall be
submitted to the voters of the political subdivision as provided in the act. Upon the affirmative
vote of a majority of voters in the political subdivision, the Attorney General shall file an action
to disincorporate the political subdivision in the circuit court with jurisdiction over the political
subdivision. The circuit court shall enforce such orders and carry out remedies as provided in the
act.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space.
SOURCES OF INFORMATION
Office of Administration – Budget and Planning
Department of Commerce and Insurance
Department of Revenue
Attorney General’s Office
Office of the Secretary of State
City of Claycomo
City of Kansas City
City of Springfield
City of St. Louis Budget Division L.R. No. 4303S.01I
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Greene County Clerk’s Office
Office of the State Auditor
Joint Committee on Administrative Rules
City of Corder
City of Hughesville
City of O’Fallon
Julie MorffRoss StropeDirectorAssistant DirectorJanuary 25, 2022January 25, 2022