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 for
other purposes.
The most recent FIR
version (in HTML & Adobe PDF formats) is available on the Legislative
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SPONSOR: |
Vigil |
DATE TYPED: |
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HB |
725/aHEC/aHAFC |
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SHORT TITLE: |
Create |
SB |
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ANALYST: |
Williams |
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APPROPRIATION
Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
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FY03 |
FY04 |
FY03 |
FY04 |
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NFI |
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(Parenthesis
( ) Indicate Expenditure Decreases)
LFC Files
Commission on Higher Education (CHE)
Department of Finance and Administration (DFA)
SUMMARY
Synopsis
of HAFC Amendment
The House Appropriation and Finance Committee
amendment removes the appropriation and makes technical corrections to the fund
name.
Synopsis
of HEC Amendment
The House Education Committee amendment changes
the name of the fund to the New Mexico Highlands University Loan Fund.
Synopsis
of Original Bill
House Bill 725
appropriates $1,600.0 from the general fund to the newly created highlands loan
fund for the purpose of assisting New Mexico Highlands University (NMHU) with
liquidity problems due to outstanding federal government accounts
receivable. The fund would be administered
by the Secretary of the Department of Finance and Administration.
NMHU is authorized to
apply for a loan from the fund by identifying account receivables contributing
to a liquidity problem. The loan would
not bear interest and would be repaid to the fund within thirty days of payment
of the account receivable.
Significant
Issues
CHE presents a brief chronology of funding
concerns facing NMHU. In June 2000, then
President Rael notified the CHE of serious financial
difficulties due to: 1) entering an incorrect infrastructure allotment into the
financial system and 2) escalation of a deficit in the area of athletics. Subsequently, CHE conducted inter-agency
oversight meetings with NMHU and placed the institution on “fiscal watch” in
January 2003.
According to the LFC budget document, the CHE
convened a fiscal watch task force of institutional representatives to develop
a system to allow the commission to monitor the financial condition of
institutions and to develop “triggers” to flag potential financial problems and
place the institution on “fiscal watch.”
The fiscal watch is based on two key components: 1) An
examination of five financial ratio (primary reserve, return on new assets, net
operating revenues, viability and debt burden) submitted by an institution to
CHE annually upon completion of an independent financial audit and 2)
certification by the president or chief financial officer that the governing
board has been notified of the financial condition of the institution.
NMHU received disclaimed audit opinions on their
1999-2000 and 2000-2001 fiscal year audits and a qualified audit opinion on the
2001-2002 fiscal year audit.
The LFC budget recommendation reflects that the
ratio analysis and associated reports should be submitted on a quarterly
basis. Further, the LFC budget
recommends CHE develop a meaningful performance measure to reflect that
agency’s efforts to monitor financial conditions of institutions.
FISCAL IMPLICATIONS
The appropriation of
$1,600.0 contained in this bill is a non-recurring expense to the General
Fund. Any unexpended or unencumbered
balance remaining would not revert.
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
Both DFA and CHE note due to the Commission’s
oversight responsibility, the loan request could be submitted to the Department
of Finance and Administration via the CHE.
A clarification between the recurring versus
non-recurring nature of the appropriation could be made by include a reference
to “one time”.
OTHER SUBSTANTIVE ISSUES
CHE notes the
Commission has not reviewed this proposal.
POSSIBLE QUESTIONS
AW/prr:yr