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F I S C A L I M P A C T R E P O R T

SPONSOR Fox-Young

DATE TYPED 01/25/05 HB 81

SHORT TITLE Emergency Taxpayer Relief Initiative

SB

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($1,600.0 to

$2,000.0)

Similar Recurring Taxation & Reve-

nue Dept (W-D Tax

Id Permit)

1

($1,100.0) ($1,900.0)

Approx ($2,900) Recurring Hazardous Waste

Fund

2

(*) ($147,000.0)

Recurring

General Fund

3

(*) ($19,500.0)

Recurring

General Fund

4

(*) ($2,000.0)

Recurring

General Fund

4

($33,500.0)

Recurring

General Fund

5

($13,500.0)

Recurring Other State Funds

5

($51,500.0)

Recurring

General Fund

6

(Parenthesis ( ) Indicate Revenue Decreases)

(*) FY 2005 impacts are uncertain because the bill does not contain an effective date and because

of the difficulty of implementing so many changes in a short period of time. (See discussion un-

der TECHNICAL ISSUES and ADMINISTRATIVE IMPACTS).

1.

Applies to Sections 3, 4, 5, 6, 9 through 17, and 23 (Estimates provided by DOT)

2.

Applies to Section 18 (Estimates provided by NMED)

3.

Applies to Section 1, reinstatement of municipal tax credit (Estimates provided by TRD)

4.

Applies to Section 21, repeal of daily bed surcharge and weight-distance ID card (TRD)

5.

Applies to Section 2, cigarette tax (LFC estimates)

6.

Applies to Section 7, premium tax (LFC estimates)

Duplicates: Senate Bill 50

House Bill 81 -- Page 2

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Transportation (DOT)

New Mexico Environment Department (NMED)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

House Bill 81 repeals or reduces various tax and fee increases that raised FY05 state revenues by

more than $1 million. The bill only applies to tax or fee increases passed and signed during 2003

and 2004. The following table provides a brief summary of each of the proposed changes.

Section Tax Description

Prior Tax Rate New Tax Rate Total Revenue Fund Impact Notes

1 Gross Receipts Tax Credit

0.5%

Reinstate tax credit where muni has imposed

grt of at least 0.5%

0.25% -$147,000.00 General Fund

Reinstate tax credit where muni has imposed

grt of at least 0.25%

2 Cigarette Tax

$0.0455 $0.0105 -$33,500.00 General Fund Per cigarette or from $0.91 to $0.21 per pack

-$13,500.00 Other State Funds

3 Gasoline Tax

$0.17

16.0%

Per gallon

4 Motor Vehicle Weight Distance Tax See page 3

Reverse weight distance tax increase adopted

in 2003

5 Bus Tax Rate

See page 5

Mills per mile

6 Special Fuel Excise Tax

$0.21

$0.18

Per gallon

7 Premium Tax

1%

0% -$51,500.00 General Fund

On gross health insurance premiums and

membership and policy fees rec eived on

health insurance and or contracts

8 Pharmacy Licensure Fee Revocation

Repeals fee for issuance or annual renewal for

wholesale drug distributor, drug manufacturer,

or drug warehouse

9 Motorcycle Registration Fees

15

11

Motorc ycle with less than two wheels

15

11

Motorc ycle with three wheels

10 Passenger Vehicle Registration Fees

27

20

< 2,000 pounds

21

16

< 2,000 pounds -- after 5-years of registration

39

29

< 2,000 pounds

31

23

> 2,000 pounds -- after 5 years of registration

56

42

> 3,000 pounds

45

34

> 3,000 pounds -- after 5 years of registration

11 Trailer Registration Fees

13

10

Permanent registration of freight trailers

7 + 1

5 + 1

Annual registration of each utility trailer

32 + 7 25 + 5

Permament registration of utility trailers not

used in commerc e, < 6001 pounds

12 Registration Fees--Trucks , etc. See page 18

13 Bus Registration Fees

7

5

Annual

14 Bus Registration - Agricultural Labor Fees

33

25

15 Fertilizer Trailer Fee

7

5

Trailers used by commercial fertilizer company

to deliver liquid fertilizer to a farmer (less than

3,500 pounds )

16 Registration Fees -- Manufactured Homes

7

5

17 School Bus Fees

7

5

18

Repeals language to allow Environmental

Improvement Board to adopt rules setting

fees for businesses conducting permitted

hazardous waste activities

-$1,900.00

Hazardous Waste

Fund

Repeals language allowing EIB to s et fees

for a hazardous waste permit management

fee

19 Livestock Code Fees

<=$100 <=$50

Fee for recording a transfer of a brand

<=$100 <=$50

Fee for recording or researching a brand

<=$10

<=$5

Fee for additional certified copies of brands

<=$100 <=$50

Fee for recording of brands

<=$100 <=$50

Fee for issuing a certificate of brand

20 Butcher Fees

<=$100 <=$25

Annual license fee

<=$100 <=$10

Annual lic ense fee - Butcher Manufacturer

21

Repeal Sections 1 and 2 of Laws 2004,

Chapter 4, Section 5, which previously were

delayed repeal effective June 30, 2007

-$21,500.00 State Road Fund

Repeal daily bed surcharge and weight-

distance tax identification card requirements

passed in 2003

22 Temporary Provision -- No bond impairment

23 Declare Emergency

Note: Fiscal impact may be conservative as good information on certain smaller taxes and fees was not readily available

House Bill 81 -- Page 3

Significant Issues

According the New Mexico Environment Department, House Bill 81 limits the Environmental

Improvement Board’s (EIB) authority under the Hazardous Waste Act (HWA) established in the

late 1980’s, when the operation of facilities that treat, store, or dispose of hazardous waste

(TSDFs) was beginning to be regulated. Since then, cleanup of legacy contamination, especially

at federal facilities, has become an equal priority of the hazardous waste regulatory program.

This issue is particularly important in New Mexico, where nearly half of all TSDF’s are federal

facilities, most of which have significant clean up requirements. Federal TSDF’s comprise

nearly 85 per cent of the Environment Department’s Hazardous Waste Bureau’s permitting and

corrective action workload. HB81 would eliminate the opportunity for facilities with significant

clean-up requirements to pay the Department’s costs of overseeing cleanup.

FISCAL IMPLICATIONS

Total fiscal impact, summing each of the various estimates provided by TRD, DOT, NMED, and

LFC for FY06 is approximately $270 million. Though, the LFC cautions that this estimate may

be conservative as information on certain smaller taxes and fees was not readily available.

No impacts were provided for the following revenues collected by TRD because – according to

information provided to the Tax Department – the revenues affected by the bill have been

pledged to debt service on bonds that will not be defeased for a number of years: Cigarette Tax,

Gasoline tax, Weight-Distance Tax, Special Fuels Tax, Motor Vehicle Registration Fees and

Hazardous Waste Permit Fees. See other substantive issues below.

Environment

Demands on the EIB to provide more regulatory oversight have increased at a time when sources

of revenue (i.e., the general fund and federal funds) have declined or remained flat. According

NMED, EIB has turned to permit fees to augment the revenue stream. House Bill 81 eliminates

the primary mechanism to fund oversight of permits. If House Bill 81 passed, NMED believes

that revenues would stay at current or lower levels, inhibiting EIB from effectively overseeing

corrective action and permitted activities at TSDFs.

Transportation

According to the DOT, beneficiaries of Sections 3, 4, 5, 6, 9 through 17, and 23 of the bill’s tax

relief accrues almost entirely to out-of-state trucking companies transporting goods in interstate

commerce.

ADMINISTRATIVE IMPLICATIONS

It was reported that TRD would face a significant short-term impact to make all of the system

and processing changes required in the bill. According to TRD, the required changes could not

possibly be made in time for the emergency clause effective date of the bill.

TECHNICAL ISSUES

House Bill 81 does not provide an effective date for the various tax rate changes, but instead em-

ploys an emergency clause. According to the TRD and DOT, changes to tax rates or fees or dis-

tribution changes should come with an effective date (generally the first day of the month) to al-

House Bill 81 -- Page 4

low for fair and predictable administration (the changes could occur in the middle of a tax pay-

ment period, generating confusion over how to assess tax within the period).

According to the DOT, House Bill 81 ignores the revenue distribution provisions that were asso-

ciated with certain of the past tax increases proposed to be rolled-back. The bill should “roll-

back” those revenue distribution provisions in conjunction with the roll-back of the tax rates.

OTHER SUBSTANTIVE ISSUES

The Department of Transportation expressed concerns regarding taxes and fees that have been

previously pledged toward bonds and make up a part of the state’s contract with bondholders.

DOT cites both the New Mexico Constitution, Article IX, Section 16, which states in part that

“The legislature shall not enact any law which will decrease the amount of annual revenues

pledged for the payment of state highway debentures or which will divert any of such revenues

to any other purpose so long as any of said debentures issued to anticipate the collection thereof

remain unpaid.” Similarly, DOT noted that Section 22 of House Bill 81 provides that “If any

provision of this act or any lower tax or fee provided for in this act would have the effect of im-

pairing any revenue bonds outstanding on the effective date of this act, then the provision, lower

tax or lower fee shall not take effect until the affected outstanding bonds are defeased.”

According to the Department of Transportation, “virtually all of the State Road Fund tax and fee

sources are pledged toward bonds through the year 2024…any legislated tax rate decrease would

be considered an impairment to the bonds.” DOT asserts that the tax rate changes proposed in

Sections 3, 4, 5, 6, and 9 through 17 could not go into effect until the year 2025 when the bonds

are fully defeased”.

Lastly, DOT cautioned that Section 23 of the bill repeals prior law that was recently revised in

connection with Weight Distance Tax Identification Permits. According to DOT, most of the

repealed language is necessary for tax administration and pre-dated the recent change to that Tax

Identification Permit Fee.

APPROPRIATION IMPACTS

According to information provided by HSD, approximately 90 percent of the facilities affected

by the bed surcharge, accounting for about $17.6 million of the total revenue, are reimbursed

through the Medicaid program. Elimination of the surcharge would reduce these reimburse-

ments. New Mexico Medicaid is funded 75 percent by the federal government and 25 percent by

the state.

OPJ/yr