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

SPONSOR Sandoval

DATE TYPED 01/25/05 HB 305

SHORT TITLE Cigarette Taxes to Behavioral Health Fund

SB

ANALYST Kehoe

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$7,000.0

Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates Senate Bill 52.

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($1,183.0)

Recurring

General Fund

$1,183.0

Recurring Behavioral Health

Capital Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation & Revenue Department (TRD)

Department of Health (DOH)

New Mexico Finance Authority (NMFA)

House Bill 305 -- Page 2

SUMMARY

Synopsis of Bill

House Bill 305 appropriates $7 million from the general fund and authorizes an annual distribu-

tion of the cigarette tax to the behavioral health capital fund for the purpose of making loans to

eligible entities for capital projects.

Significant Issues

The 2004 Legislature created the behavioral health capital fund within the Behavioral Health

Capital Funding Act as a revolving fund to provide for low-cost financing to non-profit organiza-

tions for the acquisition, repair, alteration and construction of infrastructure and capital equip-

ment. The revolving fund was created within the New Mexico Finance Authority (NMFA) for

the purpose of making loans to eligible entities, provided the Department of Health (DOH) finds

the project will provide behavioral health services to sick and indigent persons; and that the New

Mexico Finance Authority (NMFA) finds there is adequate protection, including loan guarantees,

real property liens, title insurance, security interests, assets, etc., for repayment of the loan. DOH

and NMFA are required to develop and adopt rules to administer and implement the provisions

of the Act. However, no funding was provided for the fund.

House Bill 305 creates a financing mechanism for the revolving loan fund by appropriating an

annual appropriation of $7 million from the general fund combined with a distribution of 2 per-

cent of net cigarette tax revenues to the fund effective July 1, 2005.

FISCAL IMPLICATIONS

The appropriation of $7 million contained in this bill is a recurring expense to the general fund in

fiscal year 2006 and succeeding years. Any unexpended or unencumbered balance remaining at

the end of the fiscal year shall not revert to the general fund.

According to the Consensus Revenue Estimating Group of the Taxation and Revenue Depart-

ment, it is projected “taxable cigarette sales will be 64.9 million packs for fiscal year 2006. At

$0.91 per pack, total revenues will be $59.1 million. A distribution of 2 percent, or $1.18 mil-

lion, of net cigarette tax receipts will be made to the behavioral health capital fund. The distribu-

tion amount may decline in future years because of the decline in cigarette consumption. The

distribution will reduce the general fund distribution of net cigarette receipts by 3.6 percent.”

Current distributions of the cigarette tax to NMFA, UNM Cancer Center, counties and munici-

palities will not be affected.

Continuing Appropriations

This bill provides for continuing appropriations. The LFC objects to including continuing ap-

propriation language in the statutory provisions for newly created funds. Earmarking reduces the

ability of the legislature to establish spending priorities.

House Bill 305 -- Page 3

ADMINISTRATIVE IMPLICATIONS

The Behavioral Health Capital Funding Act provides that DOH and NMFA enter into joint pow-

ers agreements with each other or other appropriate public agencies to carry out the provisions of

the Act. The Act defines the powers and duties of both DOH and NMFA.

The Taxation and Revenue Department will have to make one-time changes in its computer sys-

tems at a modest cost, and modify its recurring processes for distributing the net cigarette tax

revenue at a modest cost.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

House Bill 305 duplicates Senate Bill 52 in its entirety.

LMK/lg