NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

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(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to: 1) Existing Tribal Gaming Compacts and Revenue Sharing Agreements and 2) Proposed Tribal Gaming Compacts

*The latest consensus revenue estimate forecasts $0 receipts for tribal gaming payments for the

state. All tribes ceased making payments and are not expected to resume under the current

compact and subsequent litigation. The provisions of this substitute change the provisions of the

fiscal impacts of the proposed new tribal gaming compacts, i.e. separate legislation. From a

revenue perspective, this bill in and of itself would not reduce or increase general fund revenues

scored against current law and the current revenue forecast. However, if the proposed compacts

and this bill are enacted, then the resultant fiscal impacts are outlined below.

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

SUMMARY

Synopsis of Bill

Tribes would be eligible for 50% of payments already made by the tribe to the state of New Mexico. Total tribal payments to the state were approximately $66.8 million. This amount included revenue sharing and regulatory fees which must be broken out. The potential cost to the general fund is offset. Approximately $33 million of revenue sharing amounts as they are paid in the future under the proposed new compacts will be distributed to the tribal infrastructure fund up to the target amount.

In addition, 50% of the sum of all settlement payments from tribes would be distributed to the tribal infrastructure fund. The latest estimate of the revenue sharing amounts still due is from $100 to $130 million. There is considerable uncertainty regarding the actual amount of revenue sharing currently due. The Attorney General position is that back payments are the responsibility of that office, and the current proposed compact recognizes a settlement negotiation process between the AG and the tribes. Further, the proposed compact provides for a payment schedule for back payments; thus, the timing of receipt of these liabilities under the proposed compacts is also not clear.

The bill outlines qualifying expenditures for which tribes may be eligible for reimbursement from the monies in the tribal infrastructure fund. These expenditures can include planning, design, engineering, construction, repair, renovation, acquisition, equipment and furnishing costs associated with capital outlay; water and wastewater facilities or systems; utilities; roads, streets and associated rights-of-way and parking; vehicles; computers and technology associated materials; other capital outlay; and bonded indebtedness related to these types of infrastructure. Gaming-related expenditures are specifically excluded.

Expenditures eligible for reimbursement must occur after January 1, 2001. Payments made to tribes are to be on warrants issued by the Department of Finance and Administration. The Office of Indian Affairs would annually report to interim legislative committees on payments made to the tribes.

FISCAL IMPLICATIONS

The attached flow diagram illustrates the interaction of the fiscal impacts of this bill with the proposed tribal gaming compacts.

Back Payments Still Due. There is considerable uncertainty regarding the actual amount of revenue sharing currently due. The Attorney General position is that back payments are the responsibility of that office, and the current proposed compact recognizes a settlement negotiation process between the AG and the tribes. Further, the proposed compact provides for a payment schedule for back payments; thus, the timing of receipt of these liabilities under the proposed compacts is also not clear.

The consensus revenue estimators have agreed that because of uncertainty and timing issues surrounding the back payments still due to the state under the current compacts, an amount for back payments will not be incorporated into the revenue estimates at this time due to the language contained in the proposed compacts.

Future Revenue Sharing Amounts. With respect to future revenue sharing amounts under the proposed compacts, the consensus revenue estimators have agreed to the fiscal impact analysis developed by LFC staff of $21.4 million in FY02 and $30 million in FY03, given the identity of tribes indicating plans to sign the agreement. That fiscal impact analysis does not include all gaming tribes.

HTRC Sub for HB 950

The fiscal impacts of this bill stem from two sources:

1. Tribes would be eligible for 50% of payments already made by the tribe to the state of New Mexico. Total tribal payments to the state were approximately $66.8 million. This amount included revenue sharing and regulatory fees which must be broken out. The potential cost is offset. Approximately $33 million of revenue sharing amounts as they are paid in the future under the proposed new compacts will be distributed to the tribal infrastructure fund up to the target amount.



2. 50% of the sum of all settlement payments from tribes would be distributed to the tribal infrastructure fund. The latest estimate of the revenue sharing amounts due is from $100 to $130 million. There is considerable uncertainty regarding the actual amount of revenue sharing currently due and potentially when it might be paid.

Given the Mescalero Apache tribe and Pojoaque pueblo have not indicated they would sign the proposed compact, the projected state revenue sharing amount is estimated at approximately $21.4 million in FY02 and $30 million in FY03, a full year. However, the proposed compact would be the source of the general fund revenues, not this bill. This bill would essentially earmark 25% of these revenues to go to the tribal infrastructure fund. At 25%, the earmarked portion of future revenue sharing amounts under the current compact proposal would be roughly $5.3 million in FY02 and $7.5 million in FY03.

From a revenue perspective, this bill in and of itself would not reduce or increase general fund revenues scored against current law and the current forecast.

If the proposed compacts and this bill are enacted, then the resultant fiscal impacts are as outlined.

From an appropriations perspective, the bill avoids an appropriation of roughly $33 million to gaming tribes, by earmarking 25% of future revenue sharing amounts up until the target 50% of state liability is met.

The bill authorizes an appropriation of up to $100.0 per fiscal year from the tribal infrastructure fund for administrative costs of the program borne by the Office of Indian Affairs.

Continuing Appropriations

This bill creates a new fund and provides for continuing appropriations. The LFC objects to including continuing appropriation language in the statutory provisions for newly created funds. Earmarking reduces the ability of the legislature to establish spending priorities.

TECHNICAL ISSUES

If the intent is for payments still owed and as well as the total future revenue sharing amounts to first be deposited into the general fund, but be earmarked for the tribal infrastructure fund, then that approach needs to be clarified. This analysis assumes this is the interpretation of the bill.

By practice and because of legal and Constitutional limitations, New Mexico has avoided revenues coming into the general fund which are then earmarked. The New Mexico Constitutional also restricts appropriations to entities beyond the direct control of the state.

The alternative approach is that the amounts impacted by the provisions of this bill would never hit the general fund, but instead would flow straight to the tribal infrastructure fund. Other mechanisms such as that used for personal income tax payments and refunds could be utilized.

AW/ar

Attachment