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

SPONSOR Foley

DATE TYPED 02/07/05 HB 117/aHCPAC

SHORT TITLE Retiree Health Care Authority Expenses

SB

ANALYST Geisler

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$950.0

Non-Recurring Retiree Health

Care Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates: Senate Bill 322

Relates to: Senate Bill 224

SOURCES OF INFORMATION

Department of Finance and Administration (DFA)

New Mexico Retiree Health Care Authority (RHCA)

SUMMARY

Synopsis of HCPAC Amendments

The House Consumer and Public Affairs Committee amendments to House Bill 117 increased

the appropriation from $615.5 thousand to $950 thousand and changed the funding source from

the general fund to the retiree health care fund. The establishment of a satellite office in Santa Fe

is also authorized by amendment. As amended, HB 117 now duplicates SB 322.

In should be noted that in regards to the satellite office, DFA has stated that it is not clear why a

satellite office in Santa Fe is necessary now that the agency has consolidated its operations in a

single office in Albuquerque.

Synopsis of Original Bill

HB 117 would appropriate $615.5 thousand to the Retiree Health Care Authority (RHCA) for

operational expenses in FY05. Unexpended or unencumbered amounts would revert to the Gen-

eral Fund at the end of FY05. The bill contains an emergency clause which would make the bill

effective upon enactment

House Bill 117/aHCPAC -- Page 2

Significant Issues

RHCA believes a supplemental appropriation is essential to continue FY05 operations. The

Department of Finance and Administration (DFA) counters that supplemental funding is not re-

quired since RHCA can request an increase in operating budget funds thru the budget adjustment

review (BAR) process.

RHCA provides: the Governor line-item vetoed $1,231.0 of the RHCA’s operating funds for

FY05 and proposed to partially re-appropriate the funds to the vetoed categories via BARs from

the Benefits Division of the agency’s budget, for selected activities only. The RHCA and other

interested parties filed a lawsuit claiming that this funding mechanism would unconstitutionally

usurp the Legislature’s sole authority to make appropriations; that suit is pending. An immediate

supplemental appropriation for FY05 is critical to maintain program operations. This approach

would address the immediate crisis without compromising either the Governor’s or the RHCA’s

position.

DFA notes that the agency already has statutory authority to increase its budget as necessary,

without additional legislation and without having to draw upon the General Fund. This authority

is provided in Section 11(E)(15) of the General Appropriation Act of 2004, which states "the re-

tiree health care authority may request budget increases from internal service funds/interagency

transfers and other state funds."

If the agency requires more funds to support its administrative costs, it can submit a budget ad-

justment request to DFA and draw upon the retiree health care fund to increase its program sup-

port budget.

FISCAL IMPLICATIONS

RHCA provides: to continue operations, the RHCA transferred funding via BARs from the in-

tact personal services category to the other category. However, without availing itself of a fund-

ing mechanism that it believes to be illegal and with inadequate funds remaining in Personal

Services, the RHCA will exhaust available funds by March 2005.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

SB 224 duplicates this bill. SB 322 provides RHCA with an appropriation of $950 thousand for

FY05.

OTHER SUBSTANTIVE ISSUES

RHCA notes that the proposed appropriation of $615.5 is inadequate and proposes an amend-

ment below. Both DFA and RHCA believe that a general fund appropriation in not necessary—

there are sufficient funds in the retiree health care fund.

ALTERNATIVES

According to DFA, this bill is not necessary--the agency can request any necessary increases to

its FY05 budget under existing statutory authority, subject to State Budget Division approval.

RHCA believes this would be unconstitutional.

House Bill 117/aHCPAC -- Page 3

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

RHCA states that their program operations for the remainder of FY05 will be jeopardized.

AMENDMENTS

RHCA suggests:

1) Change the appropriation from $615.5 to $950.0.

2) Change the funding source from the general fund to the retiree health care fund.

GG/lg/njw