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

SPONSOR Beffort

ORIGINAL DATE

LAST UPDATED

2-10-06

2-14-06 HB

SHORT TITLE Family Opportunity Accounts

SB 379/aSPAC/aSFC

ANALYST Lucero

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$2.000.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HB112, Relates to SB067,

Relates to Appropriation in the General Appropriation Act – Special Appropriations – Executive

recommends $2,000.0, HAFC recommends $500.0

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

$2,000.0

Recurring Family Oppor-

tunity Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Office of Workforce Training and Development (OWTD)

Children, Youth and Families Department (CYFD)

Human Services Department (HSD)

Senate Bill 379/aSPAC/SFC– Page

2

SUMMARY

Synopsis of SFC Amendments

The amendments adopted by the Senate Finance Committee strike Senate Public Affairs Com-

mittee Amendments 4 and 5, redefine “indigent” by deleting “who can normally support himself

and his dependents on present income and liquid assets available to him but,” and stipulate that,

in selecting program administrators, the director shall “ensure that a substantial number of fam-

ily opportunity accounts will serve.”

Synopsis of SPAC Amendment

This Senate Public Affairs Committee amendment allows other local governmental entities to

provide the matching funds, not just the federal or state government. This will allow local mu-

nicipalities and counties to provide matching funds. The amendment also makes one technical

correction for an item which was marked as new material incorrectly.

HB112 which is the duplicate of this bill has also been amended in this same manner.

Synopsis of Original Bill

Senate Bill 379 appropriates $2,000.0 from the general fund to the family opportunity fund for

the purpose of carrying out the provisions of the Family Opportunity Accounts Act

The bill amends the Individual Development Account Act to be entitled the Family Opportunity

Accounts Act, changes the eligibility requirements removing the earned income requirement be-

ing less than 200% of federal poverty and replaces it with a newly defined requirement of indi-

gence, establishes criteria for program administrators, creates the Family Opportunity Accounts

Council charged with the oversight administration of the Act, and adds language for approval of

the Family Opportunity Accounts Programs.

The bill creates the family opportunity fund in the state treasury. The provisions of the Individ-

ual Development Account Act currently are administered by the Office of Workforce Training

and Development, which would continue to administer the provisions of this bill.

FISCAL IMPLICATIONS

The appropriation of $2,000.0 contained in this bill is a recurring expense to the general fund.

The family opportunity fund. The family opportunity fund is non-reverting.

This bill creates a new fund and provides for continuing appropriations. The LFC has concerns

with including continuing appropriation language in the statutory provisions for newly created

funds, as earmarking reduces the ability of the legislature to establish spending priorities.

Funds used for allowable purposes do not impact Medicaid income eligibility.

The state matching funds have been capped at $2,000 per year per individual.

Senate Bill 379/aSPAC/SFC– Page

3

SIGNIFICANT ISSUES

The eligibility criterion is being changed significantly. The current statute uses an income stan-

dard of 200% of the federal poverty level (FPL). This proposes to change the eligibility re-

quirement to a definition of “indigent” mostly derived from a New Mexico Supreme Court ruling

in Humana of New Mexico, Inc vs. Board of County Commissioners of the County of Lea, New

Mexico.

1.

FPL is a cut and dry eligibility standard which works well for almost all social programs

2.

The definition of indigent is vague and may allow individuals with income levels higher

than 200% participate. An individual who earns an adequate living but is in debt and un-

able to pay the costs to purchase a home, car, or start a business may qualify.

3.

An individual who may not be below 200% of the FPL but not indigent might not qual-

ify.

4.

The change in eligibility criteria is due to a narrow interpretation of the “anti-donation

clause” by DFA.

5.

Questions pertaining to the “anti-donation” clause may need to be investigated further.

•

Reduces the amount available for administration from 10% to 5%. Depending on the size of

the appropriation, this may be a significant issue for OWTD. OWTD needs a sufficient

amount of administrative budget to administer and monitor the program administrators, as

well as provide for the financial training programming. The statute requires a nine member

advisory council which meets twice a year with per diem and mileage reimbursement.

•

The responsibility to provide the financial training has been passed to the program administra-

tor. It is unclear if the program administrator will also take an additional administrative allo-

cation for providing the training or if it is a component of the 10% or 5% OWTD allocation.

•

The financial training curriculum has not been addressed. There should be a minimum

amount of class or course hours required taught by a degreed instructor.

•

Clarifies the RFP process for selecting program administrators.

•

The bill adds language to guide the selection of program administrators to ensure geographi-

cally diverse populations are served. This may limit the ability of some non-profits to respond

to the RFP if their population is concentrated such as Native Americans living on tribal lands

or densely populated Hispanic locations.

•

Another program administrator preference is given to those which can ensure the highest pos-

sible match. This may limit rural area non-profits who do not have the expertise to obtain

federal funds to match with state funds.

•

Another program administrator preference is given to one which will benefit families with

children. Foster children who may be eligible to participate beginning at age 16, may be lim-

ited from participating in the program.

•

Counting money as a resource one year after withdrawal, if not approved by the program ad-

ministrator, is problematic for eligibility determination.

Senate Bill 379/aSPAC/SFC– Page

4

•

HSD will need to amend state rules to mirror the new terminology, e.g., “family opportunity

accounts” instead of IDA, indigent, etc.

After an account has been established, an account holder may be eligible to keep the account

even after his/her income has increased.

This bill refers to childcare as a support category available for temporary assistance and a

monthly maximum amount allowable.

Page 7 lines 9 – 12 deletes language providing eligibility for a child in foster care at 200% of the

federal poverty level and replaces it with “indigent” eligibility. The use of the definition of “in-

digent” in relation to a child in foster care may eliminate many foster children. Few children in

foster care would qualify as being indigent as they do not typically have liabilities in excess of

income.

PERFORMANCE IMPLICATIONS

State general fund dollars used in matching family Opportunity Accounts might be credited to-

ward the TANF Maintenance of Effort (MOE) requirement; however, under the federal Budget

Reconciliation Bill for TANF reauthorization which is likely to pass this spring and become ef-

fective on October 1, 2006, families must be meeting the federal work participation rates. This

might be difficult to track the credit for MOE for participants under the Family Opportunity Ac-

counts Act. HSD may opt to exclude some or all of these general fund dollars form the MOE re-

quirement.

ADMINISTRATIVE IMPLICATIONS

OWTD will need an employee responsible for RFP, monitoring and assessing the success of this

program.

OWTD will be required to fund the financial training aspect of the IDA concept out of the ad-

ministrative allocation.

A nine member advisory council which meets twice a year is entitled to per diem and mileage

and the administrative support of OWTD staff. The proposed administrative allocation change to

5% may not be sufficient.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Relates to an appropriation in the General Appropriation Act – Special Appropriations – Execu-

tive recommends $2,000.0, LFC recommends $500.0,

This bill relates to SB067 which appropriates $1,000.0 from the general fund for expenditure in

2007 – 2010 with no more than $250.0 expended per year for the purpose of implementing the

individual development account program. At the end of 2010, any unexpended or unencumbered

balance shall revert to the general fund. SB067 does not change the current IDA statutes, it pro-

vides for phased-in funding.

Senate Bill 379/aSPAC/SFC– Page

5

TECHNICAL ISSUES

The bill creates a family opportunity fund to carry out the provisions of the Family Opportunity

Accounts Act. The language in this section states “… and money in the fund shall not be trans-

ferred to any other fund at the end of a fiscal year”. The Section 58-30-5 of the current statute

allows 10% of the money appropriated for the Individual Development Account Act to be used

to administer the act. Limiting the ability to transfer the 10% administrative allocation to the Of-

fice of Workforce Training and Development to one fiscal year reduces the Department’s ability

to properly use the funds.

OTHER SUBSTANTIVE ISSUES

HSD has identified a number of legal issues:

1.

Section 58-30-2(J): The definition of “indigent” is vague and ambiguous and open to

different interpretations that are or may be inconsistent with existing statutes and regu-

lations governing the Department’s public assistance programs.

2.

HB 112 allows the account holder to establish sub-accounts that, without more specific

guidelines, could open the door to abuse of the program.

3.

HB 112 would essentially require a retroactive determination of eligibility. If an im-

proper withdrawal of account funds is not repaid within a given 12-month period, the

withdrawn amount would then be countable as a resource. There is no retroactive de-

nial in Medicaid, and ISD would have no way of retroactively determining eligibility

in such a situation. (e. g., See Section 58-30-12.)

4.

In Sections 58-30-(A) and (B), the financial eligibility standards have been removed

without identifying what constitutes an eligible individual.

5.

In Section 58-30-5(B), it is not clear whether the director may report orally to the gov-

ernor or is required to submit a written annual report, which would be preferable.

6.

Section 58-30-6 has been improperly amended. Language that appears in the original

statute should be restated and lined out to indicate deletion. That step has been omitted.

7.

The “family opportunity accounts council” should be defined in the Definitions

Section (58-30-2).

8.

Section 58-30-7(C) allows the office of workforce training and development to estab-

lish a matching amount exceeding the maximum two thousands dollars, without any

stating any legal justification or program criteria.

9.

In Section 58-30-8(A)(6), the use of the term “recipient” is ambiguous and confusing.

10. Section 58-30-10(B) allows money in a reserve account to be deposited into a family

opportunity account, without proper safeguarding and tracking, in the event the direc-

tor is unable to obtain and certify a new program administrator

Senate Bill 379/aSPAC/SFC– Page

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ALTERNATIVES

Fund the IDA program as it currently exists in statute in a phased-in process. Additional legal

council can be sought to determine if a conflict exists with the anti-donation clause, as well as,

the best eligibility criteria to use.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

If this bill is not passed – the original act (IDA’s) will continue to be an unfunded Act/Program.

Federal money is continuing to be held unused because the Act requires matching funds for fed-

eral money to be spent. Also, if the changes in the original Act are not passed, but an appropria-

tion alone is passed, the original bill may violate the anti-donation clause –which DFA has

warned about.

DL/yr:nt