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F I S C A L I M P A C T R E P O R T
SPONSOR Garcia, M.J.
ORIGINAL DATE
LAST UPDATED
1-27-2007
3-1-2007 HB
SHORT TITLE Teacher Loan Repayment Act
SB 560/aSEC/aSJC
ANALYST Dearing
APPROPRIATION (dollars in thousands)
Appropriation
Recurring
or Non-Rec
Fund
Affected
FY07
FY08
$400.0
Recurring
General Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates HB531
Relates to Appropriation in the General Appropriation Act
SOURCES OF INFORMATION
LFC Files
Responses Received From
Higher Education Department (HED)
SUMMARY
Synopsis of SJC Amendment
The Senate Judiciary Committee amends Senate Bill 560/aSEC such that;
1.) On page, 5, line 8, strike “three times the principal due plus eighteen" and insert in lieu
thereof “fifteen".
The Senate Judiciary Committee amendment makes minor changes to the proposed legislation,
thereby reducing the default penalty from treble the principal plus eighteen percent to 15 percent.
The results of the changes are such that there would be somewhat less deterrence for program
participants defaulting on program loans.
Synopsis of SEC Amendment
The Senate Education Committee amends Senate Bill 560 such that;
1. On page 1, line 19, after "of" insert "public school".
pg_0002
Senate Bill 560/aSEC/aSJC – Page
2
2. On page 2, line 10, after the first "teacher" insert "in a public school".
3. On page 2, line 22, after "teach" insert "in a public school".
4. On page 3, line 12, after "in" insert "a public school in".
5. On page 3, line 16, after "the" insert "public school".,
Senate Education Committee amendments make minor changes to the proposed legislation,
thereby clarifying its intention. The intent of the changes are such that the term “teacher in a
public school" is specified through-out the bill, for language clarification.
Synopsis of Original Bill
Senate Bill 560 enacts the Teacher Loan Repayment Act and appropriates $400 thousand from
the general fund to a newly-created non-reverting fund to be administered by the New Mexico
Higher Education Department (NMHED) for expenditure in FY08 and subsequent fiscal years to
carry out the provisions of the Act. Senate Bill 560 creates the Teacher Loan Repayment Fund,
establishes framework for teachers’ loans for service provided to the state of New Mexico,
mandates annual reporting of the program’s status to the Executive and Legislature, and provides
penalties for service loans in default.
FISCAL IMPLICATIONS
The appropriation of $400 thousand contained in this bill is a recurring expense to the General
Fund. Any unexpended or unencumbered balance remaining at the end of FY08 shall not revert
to the General Fund.
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.
SIGNIFICANT ISSUES
A similar program currently exists and receives annual funding through the Higher Education
department’s Student Financial Aid program budget. Existing sections 21-22E-1 through 21-
22E-1 NMSA 1978, "Teacher Loan for Service Act" provide a similar loan servicing program.
FY06 actuals and FY08 budget amounts were $350 thousand for this program.
The significant difference between the existing Loan for Service Act and this proposed
Repayment Act is that students participating in the existing program must be enrolled or accepted
in a New Mexico postsecondary institution’s teacher preparation program. Under the Loan
program, upon graduation and entry into service in a New Mexico school, principle and accrued
interest of loans taken out to fund participating students’ education are incrementally retired or
repaid with successive years of service. The interest on Teacher Loan for Service loans accrues
at 7 percent while in a teacher preparation program and 18 percent if in non-compliance with the
terms and (contract) default occurs. Again, only New Mexico residents entering an accredited
NM program are eligible for the Teacher Loan for Service program.
pg_0003
Senate Bill 560/aSEC/aSJC – Page
3
The proposed legislation would instead provide repayment for service after the debt is incurred.
Participating teachers would have at minimum a 2-year service commitment. Contract terms
would be determined, and the Higher Education department would then establish a yearly service
credit value. In the event that a participant failed to comply with the terms of the agreement, a
maximum penalty of up to 3 times the principle plus 18 percent interest could be assessed.
Senate Bill 560 as written allows variable amounts for the yearly service credit value, increasing
it both for difficult to fill locations as well as skill-sets and certifications. The proposed program
would make it easier to recruit teachers from outside the state, as well as positioning teachers in
underserved rural areas. New Mexico residents and teachers from non-profit postsecondary
institutions could receive preference.
Other loan or repayments for service programs include the following programs.
Medical Student Loans, 21-22-1 through 21-22-10
Osteopathic Medical Student Loans, 21-22A-1 through 21-22A-10
Nursing Student Loans, 21-22B-1 through 21-22B-10
Allied Health Student Loan for Service, 21-22C-1 through 21-22C-10
Health Professional Loan Repayment, 21-22D-1 through 21-22D-10
Public Service Law Loan Repayment Act, 21-22F-1 through 21-22F-11
While the terms of these existing programs vary, the Health Professional and Public Service Law
programs have penalties and contract terms similar to the proposed program. Many existing
programs have clauses specifying participants’ graduation or enrollment from New Mexico
postsecondary institutions. The proposed legislation could encourage recruitment of teachers
with specialty skills from other states. An important consideration of Senate Bill 560 is the
ability to effectively apply a bonus to entice teaching professionals to the areas with teacher
shortages, and direct specialty certified professionals where they are needed.
If enacted, the legislation could promote relocation of teachers to underserved rural areas, as well
as underperforming districts needing specialty language or teachings skills.
PERFORMANCE IMPLICATIONS
The department will make annual reports to the governor and to the legislature regarding
repayment award grants, current information on participants, and the status of participants
serving in designated teacher shortage areas.
DUPLICATION;
Senate Bill 560 Duplicates House Bill 531
RELATIONSHIP
Senate Bill 560 relates to 21-22E-1 NMSA 1978, "Teacher Loan for Service Act." Relationship
is described in detail in the significant issues narrative.
pg_0004
Senate Bill 560/aSEC/aSJC – Page
4
TECHNICAL ISSUES
Revenue from penalties and program-default repayment shall be credited back to the fund.
PD/nt