[1] NOTE: As provided in LFC policy, this report is intended only 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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F I S C A L I M P A C T R E P O R T

SPONSOR:	Rep. Lundstrom		DATE TYPED:	2/3/02		HB	HB 54/aHBIC
SHORT TITLE:		Individual Development Accounting Act				SB
					ANALYST:		Joey F. Sandoval

APPROPRIATION

Appropriation Contained		Estimated Additional Impact		Recurring or Non-Rec	Fund Affected
FY02	FY03	FY02	FY03
$0.0	$250.0	$0.0	$0.0	Non-Recurring	General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates/Conflicts with/Companion to/Relates to Except for HBIC amendment, HB54/a duplicates SB322 and SB 347

SOURCES OF INFORMATION

LFC files

Responses Received From

Department of Labor

Division of Vocational Rehabilitation

Financial Institutions Division of the Regulation and Licensing Department

No Response

Department of Finance and Administration

SUMMARY

Synopsis of HBIC Amendment

The House Business and Industry Committee amendment makes a technical correction and does not change the original intent of the bill.

Synopsis of Original Bill

House Bill 54 appropriates $250.0 from the general fund to the Local Government Division of the Department of Finance and Administration for the purpose of administering and implementation of the Individual Development Account Act. No more than five percent ($12.5) of this allocation is to be used for administrative costs.

Significant Issues

• IDAs are for eligible individuals who meet specific earned income criteria and are to be used for specific purposes to be identified by state statute and rules adopted by the director.
• On an annual basis, the division is to solicit a request for proposals from nonprofit organizations or tribes interested in establishing an IDA program.

· This bill also creates an advisory committee that is to provide oversight, suggest possible changes and is to be composed of the division director and eight members that are appointed by the division director to represent the state geographically.

· A limited version of this proposed program currently exists under the New Mexico Works Act; Section 27-2B-10 NMSA 1978.

· The division shall use no more than 5 percent of the money appropriated to fund and administer this Act.

FISCAL IMPLICATIONS

The appropriation of $250.0 contained in this bill is a non-recurring expense to the general fund. Any unexpended or unencumbered balance remaining at the end of FY03 shall revert to the general fund.

Continuing Appropriations

There is no language contained in this bill for the continued funding of this program. This program will require continued funding to insure its success and continued operation.

ADMINISTRATIVE IMPLICATIONS

There has been no response form the Department of Finance and Administration.

TECHNICAL ISSUES

• The accumulation of interest in the owner’s account and for the designated matching funds in the reserve fund is not fully addressed in this bill.
• Account owners are to complete a financial education program prior to withdrawing money from their accounts. This bill does not mention what happens to the money deposited by the owners if the owners do not complete the mentioned financial education program.

· This bill appears to expand this program and the duties of the department while eliminating the current version of this program, as it exists in the New Mexico Works Act.

· The description “a proportionate” in section 8, subparagraph B, line 12 of this bill can be rewritten to say “the designated” to make the meaning of this sentence more clear to the reader and more consistent with other language contained in this bill.

OTHER SUBSTANTIVE ISSUES

• The owner of and IDA has ninety days to re-deposit unauthorized withdrawals so that proportionate matching funds are not forfeited.
• The director is to make an annual report each November to the Governor and to an appropriate interim committee of the New Mexico Legislature.

POSSIBLE QUESTIONS

• Is an account owner not allowed to withdraw their own contribution to the IDA if they do not complete a financial education program?
• Is the question of accumulated interest in IDAs and reserve funds to be addressed in the rules to be adopted by the director?
• Is the mention of forfeiture of matching funds, unless an amount equal to the unallowed withdrawn amount is re-deposited within 90 days, mentioned because of a possible loss of accumulated interest in designated matching funds? If not, what is the penalty, deterrent or reason for this part of the bill (Section 8, subsection B.)?
• What funding sources are to be used for the continued operation of this program?
• How is this program as it currently exists in the New Mexico Works Act funded?
• Will this program continue to be funded as it is now?
• Will this bill expand the IDA program?

JFS/njw

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