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

SPONSOR SEC

ORIGINAL DATE

LAST UPDATED

2/13/06

2/14/06 HB

SHORT TITLE Public Peace, Health, Safety & Welfare

SB 750/SECS

ANALYST Lewis/Earp

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

Indeterminate*

(Parenthesis ( ) Indicate Expenditure Decreases)

*See narrative.

Relates to HB 301/SB 95 (Increase School District Cash Balances).

Conflicts with HB 432/SB 450 (Public School Capital Outlay Omnibus Bill).

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Education Department (PED)

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of SEC Substitute

The SEC substitute for Senate Bill 750, with emergency clause,

amends the Public School Fi-

nance Act to increase the allowable limits for a school district’s or charter school’s ending opera-

tional cash balance based on the size of the district’s or charter school’s current year budgeted

program cost, as shown below:

If the current year program cost is:

The ending operational cash balance limit is:

less than $5 million

increased from 9 to 15% of budgeted expenditures

$5 million or more but less than $10 million

increased from 7.5 to 12% of budgeted expenditures

$10 million or more but less than $25 million increased from 6 to 9% of budgeted expenditures

$25 million or more but less than $200 million increased from 4.5 to 7% of budgeted expenditures

$200 million or more

increased from 9 to 15% of budgeted expenditures

Senate Bill750/SECS – Page

2

FISCAL IMPLICATIONS

The Public Education Department (PED) and Department of Finance & Administration (DFA)

report that, while this legislation carries no appropriations, increasing school district’s and char-

ter school’s cash balance limits could have an indeterminate fiscal impact on statewide public

school support funding since emergency supplemental funding flows through the PED to districts

and charter schools based on their certification of need. Historically there is considerable vari-

ability across the 89 public school districts in cash balance management, depending upon local

conditions and interpretation of emergency needs.

SIGNIFICANT ISSUES

According to the Public Education Department (PED), by allowing school districts to carry

higher cash balances, this bill would allow districts extra cash to pay for unforeseen, non-

recurring expenditures (e.g. increased energy costs) and make districts less reliant on supplemen-

tal emergency funding.

PED further suggests that

allowing school districts to carry higher cash balances would posi-

tively affect their bond ratings.

According to the Department of Finance and Administration (DFA), the limit (established by the

Legislature in 2003) on the amount of excess operational cash balances that a district or charter

school can retain has generated a great deal of discussion. The concerns raised include the num-

bers of districts and charter schools that apply for emergency supplemental funding; limiting

some districts’ ability to absorb the costs of implementing the three-tiered teacher licensure sys-

tem; or reducing the bond ratings of school districts. The DFA suggests that

raising the limits as

outlined in this bill may provide more flexibility for districts and charter schools in meeting the

goals of helping students meet academic standards.

According to the DFA, the Public School Capital Outlay Oversight Task Force recommends the

elimination of restrictions on operational cash balances so that districts may have the opportunity

to plan for efficient use of funds for capital outlay programs.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

To the amendments to Section 22-8-41 NMSA 1978 that are proposed by duplicate bills HB 301

and SB 95 (Increase School District Cash Balances), SB 750/SECS adds clean-up amendments

and the emergency clause.

SB 750/SECS conflicts with duplicate bills HB 432 and SB 450 (Public School Capital Outlay

Omnibus Bill), which include conflicting amendments to Sec. 22-8-41.

ML/mt