DATE:  February 19, 2001	Submitted by: TAXATION AND REVENUE DEPT.
	T. GLENN ELLINGTON, SECRETARY 
BILL NUMBER:  HJR-19

SPONSOR:  Representative Larranaga

BILL SHORT TITLE:  Limit Use of Motor Fuels Tax Revenue, CA

CONFLICTS, DUPLICATES, COMPANIONS:

DESCRIPTION:  This bill proposes to amend the Constitution of New Mexico to require all revenue from the taxes and fees imposed on the sale or use of motor fuel, and all taxes and fees imposed on the sale of motor vehicles, be used solely for the purpose of road construction and maintenance or transportation purposes.  Vehicle-associated revenue could only be appropriated to the State Highway and Transportation Department or distributed to local governments for highway or transportation purposes.  The proposed amendment would be presented to the voters at the next general election (presumably November, 2001) or a special election.

EFFECTIVE DATE:  Not specified – assume 90 days following adjournment (approx. June 15, 2001).  The effective date of the Constitutional Amendment would be when it was certified as having passed, but the Amendment states the revenue changes would be in effect “After June 30, 2003”.

FISCAL ILLUSTRATION (Thousands of dollars):  		Note: Parenthesis ( ) indicate a revenue loss:

Approximate Impact on Revenues	Recurring or
Nonrecurring	
Funds	
	FY 2003-2004	    Impact     	             Affected             	
Petro. Prod. Loading Fee	(13,000)	Recurring	Corrective Action Fund	
Gasoline Tax	(190)	Recurring	Motorboat Fuel Fund	
Gross Receipts Tax	(**)	Recurring	County & Municipal:  various funds	
Motor Vehicle Excise Tax, GRT & Comp Taxes	
(130,000) or more	
Recurring	
State General Fund(1)	
Compensating Tax	(13)	Recurring	Small Cities Assistance Fund	
Compensating Tax	(13)	Recurring	Small Counties Assistance Fund	
	**  	Recurring	County & Municipal road funds	
	**  	Recurring	Local Govt. Road Fund and 
Municipal Arterial Program(2)	
	**  	Recurring	State Road Fund	
TOTAL:	0			

 (1)  State General Fund loss is associated primarily with the Motor Vehicle Excise Tax ($120 to $130 million), but also Gross Receipts and Compensating taxes imposed on motor fuel under certain conditions.  Interpretation will be required to determine which types of “motor vehicles” might be affected (off-road, agricultural, construction, special equipment, etc.), and how importation of vehicles (Compensating Tax) may apply.

(2)	The Local Government Road Fund and Municipal Arterial Program are administered by the State Highway & Transportation Dept. as grant programs for local government road projects.

•	Increased state and local road revenue has not been estimated due to uncertainty regarding applicable types of taxes and fees.  Also, the terms of the amendment may force reallocation between state and local entities in the enabling legislation.

•	Presumably the taxes and fees affected by this measure include Gross Receipts Tax and Compensating Tax imposed on motor fuel (or imposed on the importation of vehicles?), Gasoline Tax, Special Fuels Tax, Alternative Fuels Tax, Motor Vehicle Excise Tax, and Title and Transaction fees and associated “add-on fees”.

•	The majority of the Gasoline Tax and all of the Special Fuels Tax is currently directed to road-related spending.

TECHNICAL ISSUES:  
•	Motor vehicle fuel used for “off-road” purposes is subject to Compensating Tax.  Any motor fuel which is used or sold, on which the gasoline or special fuels tax has not been paid, may be subject to Gross Receipts Tax or Compensating Tax.  The tax preempted fuel received by Native American gasoline distributors and subsequently sold off reservation boundaries is subject to Gross Receipts Tax.

The Compensating Tax and the Gross Receipts Tax imposed on motor vehicle fuel would be subject to the provisions of this bill, both the state’s portion and the locally-imposed portion. 

ADMINISTRATIVE IMPACT:
•	To implement the provisions of this amendment, it would be necessary to revise state statutes, TRD tax and fee processing systems, and revenue distribution procedures.  The magnitude of this impact has not been quantified, but would involve substantial computer system programming costs, possible revisions to tax reporting forms, possible addition of a motor fuel “commodity type” indicator for gross receipts and compensating tax reporting by taxpayers, and taxpayer education initiatives.

SUBSTANTIVE ISSUES:  
•	Once revenue sources are dedicated to the state road fund, it is generally very difficult to divert those revenues to other purposes, even when the dedication is not constitutionally provided.  Virtually all state road fund money which is not otherwise restricted is currently pledged to state highway debenture, and Article IX, Section 16 of the Constitution prohibits any decrease in revenue pledged toward those bonds.

OTHER IMPACTS AND ISSUES:  
•	This bill, in the form of a Constitutional Amendment, constitutes a call for a referendum by the people on the appropriate use of revenue from certain vehicle-related taxes.  In the past, the legislature has seen fit to consistently dedicate the majority of these taxes to road-related expenditures; however, to make that policy an unequivocal requirement within the Constitution may unnecessarily restrain future legislatures. A widely-held view by students of budget and tax policy is that it is generally ill-advised to enshrine specific budget or tax limitations in a constitutional framework. Money is fungible; artificial constraints may simply force future Legislatures to be more imaginative in using “highway” money for other purposes.  Presumably, once the vehicle tax revenue was appropriated to the state road fund through statutory distribution, a legislature could appropriate money from the state road fund for particular non-road uses.