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

SPONSOR Larranaga

DATE TYPED 02/14/05 HB 252

SHORT TITLE Public School Project Gross Receipts

SB

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

($7,330.0)

Similar Recurring

General Fund

($4,900.0)

Similar Recurring Local Governments

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Public Education Department (PED)

Taxation and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 252 proposes a gross receipts tax exemption for small (less than $250,000) public

school projects, to which the state or any political subdivision of the state is a party. Qualifying

projects would include construction, alteration, demolition, or repair, including painting and

decorating.

The effective date of the provisions of this bill is July 1, 2005.

PERFORMANCE IMPLICATIONS

PED notes that the gross receipts exemption for certain public school projects will increase the

availability of allocated funds for school districts to complete their projects. They also note that

the bill would also increase the ability for the Legislature and the Public School Capital Outlay

Council (PSCOC) to fund the construction of more facilities to benefit all New Mexicans.

House Bill 252-- Page 2

In 2004, the PSCOC allocated approximately $198,500,00 for school construction projects from

the PSCOC fund and an additional $35,000,000 for the deficiency correction program. The Leg-

islature approved an additional $20,000,000 through the Capital Projects Act and an additional

$5,000.0 was allocated for the construction for full-day kindergarten classrooms totaling ap-

proximately $238,500,000. PED notes that while all elements for these appropriations may not

be subject to gross receipts tax, 6 percent of the total is nearly $15 million.

FISCAL IMPLICATIONS

The analysis provided by TRD showed a total fiscal impact of -$12,230.0 in FY06, -$7,330.0 of

which will impact the general fund and -$4,900.0 of which will impact local governments. Ac-

cording to TRD, the fiscal impact estimate was based on information provided by the Public

School Capital Outlay Council, which reported that total state spending on public school con-

struction projects will average approximately $122 million per year over the next four years.

This amount is matched by local spending, bringing the total spent on jointly-funded projects to

about $250 million. TRD notes that local school districts also pay for a substantial amount of

construction separate from the projects jointly funded with the PSCOC using local financing

only. TRD assumes that locally-funded projects are half as large as the PSCOC spending, at ap-

proximately $375 million per year. Information from the PSCOC suggests that as much as 50

percent of this spending is on projects budgeted at less than $250 thousand. Thus, TRD con-

cludes that expenditures eligible for the new deduction are estimated to be approximately $188

million per year. Utilizing an average 6.5 percent gross receipts tax rate, the estimated impact

totals just over $12 million.

OPJ/lg:yr