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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 02/23/05 HB 675
SHORT TITLE SOFT DRINK TAX ACT
SB
ANALYST Padilla-Jackson
APPROPRIATION
Appropriation Contained Estimated Additional Impact Recurring
or Non-Rec
Fund
Affected
FY05
FY06
FY05
FY06
$25,900.0
Recurring Soft Drink
Medicaid Fund
$1,150.0
Recurring
Taxation and
Revenue De-
partment
$860.0
Recurring Department of
Health
$880.0
Recurring Public Educa-
tion Department
(Parenthesis ( ) Indicate Expenditure Decreases)
REVENUE
Estimated Revenue
Subsequent
Years Impact
Recurring
or Non-Rec
Fund
Affected
FY05
FY06
$25,900.0
Similar Recurring
Soft Drink Medi-
caid Fund
$1,150.0
Similar Recurring Taxation and Reve-
nue Department
$860.0
Similar Recurring
Department of
Health
$880.0
Similar Recurring
Public Education
Department
$28,800
Similar Recurring
Total
(Parenthesis ( ) Indicate Revenue Decreases)
Duplicate to Senate Bill 283
SOURCES OF INFORMATION
LFC Files
pg_0002
House Bill 675 -- Page 2
Responses Received From
New Mexico Public Education Department (PED)
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of Bill
House Bill 675 would create an excise tax imposed on any wholesaler who sells soft drinks to
support various state health initiatives, including the Medicaid program. The tax would be set to
$0.03 for each twelve fluid ounces of soft drink sold in New Mexico; $1.92 per gallon of soft
drink syrup or soft drink concentrate sold in New Mexico; on the sale of a package or container
of soft drink powder or other base product, $0.32 per gallon of soft drink that may be produced
from each package. The wholesaler would not have to pay the tax on the value of soft drinks
sold and shipped out of state and exemptions are made for wholesalers of the United States
armed forces. The bill defines a soft drink as a nonalcoholic flavored beverage containing any
sweetener additive, such as corn fructose, sugar or aspartame.
The bill would also create the “Soft Drink Medicaid Fund” in the State Treasury. The fund and
income produced by the fund would be appropriated to the human services department for ex-
penditure in FY06 and subsequent fiscal years on the Medicaid program. The bill would also
support various other health-related state initiatives.
If the bill passed, the distributions of the soft drink tax would be as follows:
90% Soft Drink Medicaid Fund
4% Retained by TRD to defray the costs of adminstering the tax
3% Department of Health for state obesity prevention and awareness programs
2% Public Education Department (PED) for public school wellness education initiatives
1% PED for grants to public schools that do not permit the sale of soft drinks on campus
Soft Drink Tax Proceed Distributions
The effective date of the provisions of this bill is July 1, 2005.
Significant Issues
PED provided the following information:
•
As noted in the 2005 Dietary Guidelines for Americans, the numbers of overweight chil-
dren and adolescents of both sexes have increased, with approximately 16 percent of
children and adolescents ages six to 19 years considered to be overweight (1999-2002)
•
Based on data from the National Soft Drink Association, in New Mexico, the total con-
sumption was 90 million gallons of soft drinks
•
Eighty percent of school districts sell food that competes with school meal programs;
most of the food is low in nutrients and high in calories
pg_0003
House Bill 675 -- Page 3
PERFORMANCE IMPLICATIONS
PED notes that the availability of food and beverages sold outside of school meal programs can
decrease participation in programs that offer more nutritionally balanced foods and beverages.
This may be counterproductive to school financing as funding for school meals programs de-
clines with lower participation. And the district may lose money associated with free-and-
reduced students
FISCAL IMPLICATIONS
According to the analysis provided by TRD, the total fiscal impact in FY06 is $28,800.0. TRD
provided the following analysis:
The National Soft Drink Association reports that as of 1998, Americans consume fifty-four (54)
gallons of soft drinks per person per year. This estimate assumes more than 90 million gallons of
soft drink would be taxed at the rate of $0.32 per gallon, for total annual revenue of $28.8 mil-
lion.
Continuing Appropriations
This bill creates a new fund and provides for continuing appropriations. The LFC objects to in-
cluding continuing appropriation language in the statutory provisions for newly created funds.
Earmarking reduces the ability of the legislature to establish spending priorities.
ADMINISTRATIVE IMPLICATIONS
PED would require a 1.0 FTE, an Education Administrator with a total expected compensation of
$67.8 thousand, to monitor the PED portion of the dollars generated by the Soft Drink Medicaid
Fund for the wellness education initiative.
OPJ/lg