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

SPONSOR Sanchez, M.

DATE TYPED 3/11/05

HB

SHORT TITLE Legal Education Loan Repayment Program

SB 258/aSFC

ANALYST Medina

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

NFI

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to Appropriation in the General Appropriation Act

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

NFI

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Administrative Office of the District Attorneys (AODA)

First Judicial District Attorney

Public Defender Department (PDD)

Responses Not Received From

Commission on Higher Education (CHE)

SUMMARY

Synopsis of SFC Amendment

The Senate Finance Committee amendment removes the appropriation of $500.0 from the gen-

eral fund to the public service law loan repayment fund. The amendment clarifies the definition

Senate Bill 258/aSFC -- Page 2

of tax exempt organizations that qualifies as public service employment, requiring that such an

organization provides for the care and maintenance of indigent persons through civil legal ser-

vices. The amendment provides that CHE may grant an award to repay loans obtained for legal

education expenses of a participating attorney as consideration and inducement to the attorney to

engage in public service employment, clarifying what an attorney must do to meet the require-

ments of the Public Service Law Loan Repayment Act.

The award criteria are refined to provide that attorney applicants who are already engaged in

low-paying public service employment, rather than those simply declaring intent to do so, are to

have preference in receiving awards. The award criteria for preferential application status are

further amended to provide that preference be given to applicants who work in public service

employment in underserved areas of New Mexico that are in greatest need of attorneys practicing

in public service employment.

The terms of the loan repayment contract are modified to eliminate the provision that the con-

tract provide for the payment by the state of a stated sum to the participating attorney’s legal

education debtors, providing instead that the contract simply state the amount of the award and

the participant’s obligations.

If a participating attorney does not comply with the terms of the contract, CHE shall rather than

may require immediate repayment of the award plus penalties. The extenuating circumstances for

non-compliance with the contract are further amended to provide that if the CHE does not find

acceptable extenuating circumstances for the participating attorney’s failure to comply with the

contract, CHE shall require immediate repayment plus penalties. Finally, the proposed CHE

rules are amended to strike the provision of the disbursement of loan repayment awards that the

disbursement to the lenders of participating attorneys in installments.

Synopsis of Original Bill

Senate Bill 258 appropriates $500.0 from the general fund to the public service law loan repay-

ment fund for the purpose of providing legal education loan repayment assistance to attorneys in

public service employment through a loan-for-service program. The bill would provide law loan

repayment assistance to attorneys licensed to practice in New Mexico who declare an intent to

practice as an attorney with the Public Defender Department, a New Mexico district attorney of-

fice, or a tax-exempt civil legal service organization that provides civil legal services to indigent

persons.

Eligibility to the loan repayment program includes intent to practice as a public service attorney

in a position paying less than $45.0 thousand per year and documented proof of application to all

other available law loan repayment programs. As a condition of the law loan repayment, partici-

pating attorneys would be obligated to at least three years of service as an attorney in public ser-

vice employment. The maximum credit per year is not to exceed $7.2 thousand.

Senate Bill 258 also establishes the public service law advisory committee comprised of the dean

of the University of New Mexico School of Law or a designee, the executive director of the New

Mexico Legal Aid or a designee, the chief public defender or designee, a district attorney ap-

pointed by the New Mexico District Attorney’s Association, and a financial aid or career ser-

vices office of the UNM School of Law to be designated by the dean of the UNM School of

Law. The committee would make recommendations to the Commission on Higher Education

Senate Bill 258/aSFC -- Page 3

Significant Issues

Senate Bill 258 provides an avenue for the district attorneys and the public defender to address

recruitment and retention problems. The Public Defender Department (citing the American Bar

Association) contends that the average law school student accumulates $80.0 thousand or more.

It is unclear how many law school graduates would be eligible for the legal education loan re-

payment program.

PERFORMANCE IMPLICATIONS

According to both AODA and the Public Defender Department, it is extremely difficult for the

district attorney offices and the department to recruit and retain attorneys and it is difficult for

attorneys who are recent law school graduates to repay student loans and make a living on cur-

rent entry-level salaries. Both AODA and the public defender argue that the quality of legal ser-

vice suffers when they are unable to retain attorneys after they train them.

FISCAL IMPLICATIONS

The appropriation of $500.0 contained in this bill is a recurring expense to the general fund. Any

unexpended or unencumbered balance remaining in the newly created public service law loan

repayment fund at the end of a fiscal year shall not revert to the general fund.

Continuing Appropriations

The LFC FY06 appropriation recommendation is balanced between revenues and expenditures

and any increase in recurring funding must be offset by reductions in other areas of the recom-

mendation. The Legislature must consider all priorities and funding requirements to find reve-

nue to support this legislation.

This bill creates a new fund and provides for continuing appropriations. The LFC objects to in-

cluding continuing appropriation language in the statutory provisions for newly created funds.

Earmarking reduces the ability of the legislature to establish spending priorities.

RELATIONSHIP

Section 21-22 through Section 21-22D NMSA 1978 (Medical Student Loan Act). Senate Bill

258 is similar in its intent to the Medical Student Loan for Service Act, which is designed to ad-

dress the shortage of medical doctors and physician assistants in the less populated areas of the

state by offering the loan for service incentive to work in rural areas.

Section 21-22E NMSA 1978 (Teacher For Loan Service Act). Senate Bill 258 also resembles

the Teacher For Loan Service Act which is designed to proactively address New Mexico's loom-

ing teacher shortage by providing students with the financial means to complete or enhance their

post-secondary teacher preparation education.

Senate Bill 258/aSFC -- Page 4

ALTERNATIVES

One alternative is to focus on increasing entry-level attorney salaries for the district attorneys and

the public defender, thus making the practice of law in public service a more lucrative option for

law school graduates who have accumulated significant legal education debt.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

According to the First Judicial District Attorney, the agencies affected will continue to experi-

ence high turnover rates. According to the Public Defender Department, the department will con-

tinue to suffer from the lack of qualified applicants and lose young attorneys as soon as the de-

partment trains them.

POSSIBLE QUESTIONS

Should the proposed legal education loan repayment program be extended to other attorneys em-

ployed by the state, counties, or municipalities who would qualify under the maximum salary

requirement of $45.0 thousand.

Approximately how many graduates of the University of New Mexico School of Law enter into

public law service as attorneys immediately following graduation.

DXM/lg