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 a vailable 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 Begaye

DATE TYPED 2/08/05

HB 415

SHORT TITLE Create Indian Water Rights Settlement Fund

SB

ANALYST Aguilar

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$4,300.0

Indeterminate Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB-126, SB-172, HB-14

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

$4,300.0

Indeterminate Recurring Indian Water Rights

Settlement Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Attorney General’s Office (AGO)

Office of the State Engineer (OSE)

SUMMARY

Synopsis of Bill

House Bill 415 appropriates $4.3 million dollars from the general fund to the Indian Water rights

Settlement Fund to facilitate the implementation of the state’s portion of Indian water rights set-

tlements.

House Bill 415 -- Page 2

House Bill 415 bill provides the legislature with a means through which it can be informed of,

and approve, the costs to be borne by the state resulting from settlements involving the water

rights claims of Indian tribes and pueblos. This bill requires expenditures from the fund be re-

ported to the legislature each year prior to September 15.

Significant Issues

HB 415 provides that upon congressional funding of the federal share of an Indian water right

settlement the State Engineer would inform the legislature of the state’s share and request ap-

proval of the settlement. Upon legislative approval, the Interstater Stream Commission would be

able to expend money from the Indian Water Rights Settlement fund to implement the settle-

ment.

The LFC in the interim has expressed concern that the settlement process does not include the

legislature until after congressional approval of such settlements. The LFC seemed to view this

as a problem that could prove critical to a settlement’s successful implementation.

The state engineer agrees and notes the terms of such settlements typically provide for the con-

struction of infrastructure projects and the acquisition of water rights to augment the existing

supply of water. Many times this process begins many years after congressional approval of a

settlement. At present, the state is not able to assure the settlement parties and congress that the

legislature both approves of the settlement and guarantees that state funds will be made available

on the schedule required by the settlement. This is due to the lack of a process for obtaining leg-

islative approval under existing law until funding for the state’s shares of costs is requested from

the legislature. At present, the only way to obtain legislative approval and commitment to the

implementation of a settlement is for the legislature to make the necessary appropriations years

after congress has approved the settlement. The LFC has pointed out that it is possible that the

parties and congress will discover that their settlement cannot be implemented when years later

the legislature does not fund the state’s share of the costs, either because it does not approve of

the settlement, or because no funds are available to make the requisite appropriations at the time

required by the settlement.

The state engineer has worked to address the legislature’s suggestion the legislature be included

in the settlement process early enough to ensure that the settlement process proceeds in a manner

consistent with the legislature’s intent. This bill proposes to provide the parties and congress

with a statement of the legislature’s approval so that they may proceed accordingly before a set-

tlement is submitted to congress. It also provides the legislature with the option of setting aside

the state’s funds over a number of years to complement its existing authority to make lump sum

appropriations.

FISCAL IMPLICATIONS

The appropriation of $4.3 million dollars contained in this bill is a recurring expense to the gen-

eral fund. Any unexpended or unencumbered balance remaining at the end of a fiscal year does

not revert but remains in the Indian water rights settlement fund.

Revenue estimates from December 31, 2004 indicate $43 million dollars is expected to be re-

ceived in FY06 from Indian gaming entities.

House Bill 415 -- Page 3

ADMINISTRATIVE IMPLICATIONS

Some additional administrative burden would accrue to the ISC that relates to the ISC’s admini-

stration and supervision of the projects being funded by the state. The ISC’s role in reporting to

the legislature and in administering the fund is intended to provide the legislature with oversight

by an agency with the expertise to assure the prudent and legal expenditure of the funds ex-

pended under this act.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

HB 415 is almost identical to SB 172 and HB 126 except that HB 415 provides for annual fund-

ing of the settlement fund from monies in the general fund equivalent to “ten percent of all reve-

nues received on a quarterly basis by the state as the state’s share of Indian gaming revenue.” In

contrast, SB 172 and HB 126 contain no appropriation to establish or fund the settlement fund.

HB 415 is also related to House Bill 14, which appropriates $8,400,000 to the Interstate Stream

Commission for expenditure in fiscal year 2006 to initiate the Gallup-Navajo Pipeline Project,

contingent on matching funds from the federal government. The Gallup-Navajo Pipeline Project

is required under the terms of a settlement agreement recently approved by the Navajo Nation

Council and the New Mexico Interstate Stream Commission. This settlement agreement is cur-

rently being reviewed by the New Mexico Attorney General.

TECHNICAL ISSUES

The Office of the state Engineer proposes the following amendments for consideration by the

legislature:

Page 1, line 18: after with word “congressional” insert “authorization of”

[Explanation: Under section B of this act, that state engineer informs the legislature of the set-

tlement terms prior to congress’ authorization of and commitment to fund the settlement. Upon

congressional authorization, the legislature needs to be informed as quickly as possible of that

action and of any substantive changes required by congress to the terms of the settlement. The

state engineer therefore proposes this amendment to ensure that the legislature is informed in a

timely fashion of any congressional authorization and of the expected state contribution. Since

congressional funding of Indian water right settlements typically lags behind congressional au-

thorization, without this amendment the legislature might not be notified in a timely manner of

the expected state contribution to a settlement.]

Page 1, line 22: after the word “Upon” strike “approval of a settlement by”

[Explanation: This amendment contemplates that the legislature will have at least two opportu-

nities to approve an Indian water rights settlement after action by congress. A joint resolution

approving the ISC expenditure of funds on the settlement, which the legislature could pass after

congress has approved a settlement, would be the first such opportunity. The second opportunity

would be when the legislature completes the appropriation of all the funds necessary to fully im-

plement the terms of a settlement.]

Page 3, line 9: strike “that have been” and insert in lieu thereof “as”

[Explanation: This amendment is intended to clarify that the expenditures from the fund are to

House Bill 415 -- Page 4

be consistent with the amount approved by the legislature, and to foreclose an interpretation that

fund expenditures can vary from the amount actually approved as long as they are expended to

implement a settlement approved by the legislature. This amendment recognizes and attempts to

maintain the legislative check over agency expenditures.]

ALTERNATIVES

HB 126 and SB 172 offer the alternative of establishing the Indian Water Rights Settlement Fund

without appropriating any monies into that fund.

PA/sb