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

SPONSOR Altamirano

ORIGINAL DATE

LAST UPDATED

1-24-07

HB

SHORT TITLE Beneficial Use of Gila River Water

SB 228

ANALYST Woods

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

NFI

4,600.0

Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

Office of the State Engineer (OSE)

SUMMARY

Synopsis of Bill

Senate Bill 228, Making an Appropriation for Beneficial Use of Gila River Water Pursuant to the

Arizona Water Settlements, seeks to appropriate $4,600,000 from the general fund to the

Interstate Stream Commission (ISC) for expenditure in fiscal years 2008 through 2014 to comply

with the requirement in the 2004 Arizona Water Settlements Act to consider the impacts to

endangered species and the environment, protect the invaluable ecology of the Gila river basin in

New Mexico and create by 2014 a plan that maximizes beneficial use of New Mexico's water

pursuant to that act. The legislation further requires that the ISC make annual reports to the

appropriate interim committee of the legislature on the status of planning resulting from this

appropriation. Any unexpended or unencumbered balance remaining at the end of fiscal year

2014 shall revert to the general fund.

FISCAL IMPLICATIONS

DFA notes that the fiscal implications to the State could potentially be substantial on both the

appropriation side and revenue sides. While it is unclear whether the amount appropriated in the

act would over- or under-fund the total eventual outlay required of the state to fully leverage

federal funds made available as a result of the Arizona Water Settlement, completion of a plan

Senate Bill 228 – Page

2

that successfully addresses federal requirements would result in availability beginning in 2012 of

at least $66.0 million federal dollars with the possibility of up to $128.0 million additional

federal funds. Further, that, under modified accrual accounting (Section 6-5-10(A) NMSA

1978), reversion language should read “Any unreserved undesignated balance remaining at the

end of fiscal year _____ shall revert to the general fund." Using language that includes the term

“unencumbered" could unnecessarily extend spending authority beyond the designated fiscal

year and result in projects not being completed within the timeframe intended in the bill.

SIGNIFICANT ISSUES

OSE notes that, in 1964, the US Supreme Court limited depletions in the Gila Basin in New

Mexico to approximately 30,000 acre-feet, the amount of water in use at that time in the entire

basin. There was no provision to provide water for future demand or the inevitable growth. In

the 2004 Arizona Water settlements Act (S.437), Congress apportioned an additional 14,000

acre-feet of water to New Mexico. The 2004 Act also appropriated up to $128 million in non-

reimbursable federal funding to make development of the 14,000 acre-feet of water possible.

New Mexico will not be able to access that funding until 2012, in $6.6 million annual

increments. To realize the funding and the water, the federal legislation requires that by 2014

New Mexico must present to the Secretary of the Interior a plan that describes how New Mexico

wishes to utilize the funding and water. That plan must comply with all federal environmental

statutes, an onerous and time-consuming task. If New Mexico cannot provide the Secretary with

an acceptable plan by 2014, use of the water and $62 million effectively revert to Arizona.

OSE adds that because completing the plan by 2014 is not possible if New Mexico waits until

2012 to receive the first installment of the federal funds, New Mexico must begin funding the

necessary environmental studies and full public involvement activities immediately. This

appropriation will allow completion of the necessary work within the statutory deadlines. If, as

Arizona anticipates, New Mexico fails to complete the work necessary to realize and optimize

the enormous benefits received in the 2004 Act, there will be no water supplies to accommodate

or provide for future growth, and the economic repercussions in this chronically under-employed

region of the state and the probable detrimental impacts on the valuable Gila ecology would be

great.

PERFORMANCE IMPLICATIONS

DFA suggests that agency performance implications are hard to anticipate. Pursuing the path of

developing a plan to use the Gila River water and fully leverage the federal funds made available

would result in development of more water for use in New Mexico, which may improve the

outlook for water management in the southwest corner of the state. However, a greater

availability of water may not necessarily result in better agency water management performance.

DFA further observes that there may be physical challenges to developing the Gila River water

for existing population center, and that there is not absolute consensus or certainty about whether

it is possible to develop a plan for human use of the water that could meet federal environmental

mandates. The agency reports it can. However, if unsuccessful, it is possible that the funds

appropriated in this bill could fail to result in a quantifiable benefit to the state.

BFW/nt