Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are available on the NM Legislative Website (legis.state.nm.us). Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

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

SPONSOR	Beam		DATE TYPED	2-1-04		HB	85
SHORT TITLE		Escrow Fund Quarterly Deposit Requirements				SB
					ANALYST		Neel

Duplicates:

SB 66, Escrow Fund Quarterly Deposit Requirements

Relates to:

HB 59, Increase Tobacco Products Tax

HB 86, Tobacco Stamp Procedure Changes

HB 220, Tobacco Settlement Revenue Appropriation

SB 192, Smart Moves Smoking Cessation Program Funding

HM 1, Promote Cigarette Taxation Parity

SOURCES OF INFORMATION

LFC Files

Responses Received From

Attorney General Office (AGO)

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of Bill

House Bill 85 amends statute to allow the AG the discretion to require non-participating tobacco manufactures, those not included in the 1998 Master Settlement Agreement (MSA) to make quarterly payments into an escrow fund rather than the current annual payments. Further, it gives the Attorney General the ability to exercise this discretion without first having to promulgate regulations.

Significant Issues

The following was excerpted from the November/December 2003 edition of State Government News:

As part of Phase I of the MSA, tobacco manufacturers that signed on the agreement are required to make annual payments to state governments in perpetuity. It was originally estimated that over the first 25 years of the agreement, the cumulative total of those payments would be approximately $200 billion.

The base amounts are subject annually to three adjustments: inflation accounting for the change in the value of a dollar each year; volume, ensuring that payments to the states are based on the total number of cigarettes sold by the participating manufacturers; and market share, to take account of gains in the market share by companies that haven’t signed the MSA….

The size of the volume reduction has grown by 14 percent in 2000 to more than 23 percent in 2003. … By 2018 more than half of each annual payment will be lost to volume adjustments. Two trends are responsible for this volume decline. First, cigarette consumption is down. Fewer people are smoking, and those who continue to smoke are smoking less. The United States’ overall cigarette consumption continues to drop at an annual rate of roughly 1.5 percent… The second trend, however, is less positive. Smoking statistics are down, but not as much as sales figures would indicate. The decline in the volume of cigarettes sold is several percentage points greater than the decline in consumption. This suggests that an increasing number of cigarettes are being sold through illegitimate unmonitored channels. These sales artificially inflate the reductions applied to MSA payments, undermining the MSA’s health goals and cutting the size of states settlement payments.

FISCAL IMPLICATIONS

SB 66 does not include an appropriation.

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