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.

SPONSOR   Smith           DATE TYPED 02/01/99 HB           

SHORT TITLE Child Care Gross Receipts Reduction      SB  11             

                                                   ANALYST  Eaton      

   Estimated Revenue    Subsequent Recurring Fund

FY99 FY2000 Years Impact or Non-Rec Affected

$    .  $ (45,00.0) $    .   Recurring        General Fund

$       .  $ (2,500.0) $       .   Recurring        Municipalities

$       .  $   (500.0) $       .   Recurring        Counties   

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates/Conflicts with/Companion to/Relates to SB149

SOURCES OF INFORMATION

Taxation and Revenue Department (TRD)

Children Youth and Families Department (CYFD)

SUMMARY

Synopsis of Bill:

SB11 creates an exemption of Gross Receipts taxes for child care providers licensed with CYFD.

Significant Issues:

The state-wide average gross receipts tax rate is 5.9 percent. Exemption would affect businesses providing services to children under 15 years of age which is virtually the entire industry in NM. CYFD currently funds approximately 35% of the available child care in NM. Eighty-five percent of child day care activity occurs in municipal areas.

FISCAL IMPLICATIONS

This legislation will reduce state revenues by approximately $7.5 million. This legislation will also lower the costs for CYFD as subsidy amounts to the current number of providers are reduced. TRD estimates the CYFD budget for subsidizing child day care may be reduced by $1.78 million without affecting the agencies current level of service.

ADMINISTRATIVE IMPLICATIONS

SB11 may serve as incentive for currently unlicensed providers to register with CYFD, increasing current demands and workload of CYFD staff. TRD would no longer collect gross receipts taxes for this industry.

CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP

SB 149

TECHNICAL ISSUES

There are child care providers who are registered but not licensed. The language of the bill may include the language "licensed or registered by..."

OTHER SUBSTANTIVE ISSUES

If this legislation is passed and the CYFD budget is not adjusted, CYFD will presumably expand the daycare subsidy program. TRD expresses concern about the "efficiency" of this tax legislation. The TRD recommends a refundable personal income tax credit if the purpose of the legislation is to relieve some of the tax burden on low income providers.

TRD reports that the state currently provides child day care tax relief for low-income families and a low income comprehensive tax rebate (LICTR). In 1998, the estimated savings to families through these two policies was approximately $16.8 million.

JBE/gm