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

SPONSOR Heaton

DATE TYPED 02/28/05 HB 54/aHBIC/aHAFC

SHORT TITLE Conditions for Business Incubators

SB

ANALYST Ford

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to

HB 52, HB 96, HB 367, HB 381, SB 79

SOURCES OF INFORMATION

LFC Files

Responses Received From

Economic Development Department (EDD)

SUMMARY

Synopsis of HAFC Amendment

The House Appropriations and Finance Committee amendment removes sections 2 and 3, the

appropriations of $700 thousand and $50 thousand respectively, from the measure, so that the

measure now simply establishes the conditions a small business incubator must meet in order to

receive state funds. The amendment also removed several House Business and Industry Com-

mittee amendments, but these amendments related to sections 2 and 3, which were also removed.

Synopsis of HBIC Amendment

The House Business and Industry Committee amendment removes the emergency provision and

increases the appropriation from $500 thousand to $700 thousand. The amendment clarifies that

the required match from the grant recipient must be a cash match. Finally, the amendment adds

a requirement that the grant recipient must demonstrate a reasonable strategy or plan for sustain-

able operations for the period after grant funds expire.

House Bill 54/aHBIC/aHAFC -- Page 2

Synopsis of Original Bill

House Bill 54 appropriates $500 thousand from the general fund to the EDD for expenditure in

fiscal years 2005 and 2006 for the purpose of providing start up operating funds for new business

incubators through a competitive grant program.

House Bill 54 also appropriates $50 thousand from the general fund to the EDD for expenditure

in fiscal years 2005 and 2006 for the purpose of developing and administering the business incu-

bator certification program. The bill establishes criteria for the certification of business incuba-

tors and limits state funding to certified incubators.

Significant Issues

House Bill 54 establishes the state incubator certification program and requires that state funding

be provided only to incubators that have passed this program. These criteria touch on such is-

sues as a mission statement, feasibility study or business plan, governing board or oversight

committee, qualified management and staff, business assistance program, facility requirements,

screening process, program evaluation, required licenses and permits, accounting systems, and

membership in the national business incubation association. The bill appropriates $50 thousand

to EDD to establish and operate this program.

The measure appropriates funding to establish a competitive grants program, which would pro-

vide up to $150 thousand in start-up operating costs for new incubators. A fifty percent match

from the recipient is required.

House Bill 54 is an emergency measure.

PERFORMANCE IMPLICATIONS

Performance measures for the EDD include: number of business expansions assisted by the eco-

nomic development program in urban areas of New Mexico, total number of rural jobs created,

and number of business expansions assisted by the economic development department in rural

New Mexico. To the extent that the business incubators assisted new business development, this

measure would help the EDD meet its performance measures.

FISCAL IMPLICATIONS

The appropriation of $550 thousand contained in this bill is a recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of fiscal year 2006 shall

revert to the general fund.

ADMINISTRATIVE IMPLICATIONS

The EDD would have to establish the business incubator certification program. It would also

have to develop and administer the competitive grants program.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Several bills have been introduced relating to business incubators and small business develop-

House Bill 54/aHBIC/aHAFC -- Page 3

ment.

House Bill 52 appropriates $600 thousand to EDD for the purpose of funding a competitive

grants program in three local public bodies to demonstrate the efficacy of enterprise facilitation.

House Bill 96 and Senate Bill 79 (duplicates) appropriate $3 million to the Commission on

Higher Education to fund the statewide New Mexico small business development center at Santa

Fe Community College.

House Bill 367 appropriates $10 million to EDD to finance a pilot film business incubator for

apprenticing New Mexico resident workforce training students of film and digital media.

House Bill 381 appropriates $200 thousand from the general fund to the Economic Development

Department for the purpose of contracting for support and expansion of business incubation ser-

vices in southeast Albuquerque.

TECHNICAL ISSUES

The bill limits funding to start-up costs. Established and fledgling business incubators would not

qualify for grant funding.

POSSIBLE QUESTIONS

Should the grant program be available to existing business incubators whose clients may benefit

from the improved services brought about by certification of, and additional funding for, their

incubators.

EF/yr:lg