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

SPONSOR Griego

DATE TYPED 02/25/05 HB

SHORT TITLE Mortgage Authority Investment Council Service

SB 443

ANALYST Padilla-Jackson

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

$0.1

Recurring

MFA

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

State Investment Council (SIC)

New Mexico Mortgage Finance Authority (MFA)

SUMMARY

Synopsis of Bill

Senate Bill 443 clarifies the definition of eligible “state agencies” for which the State Investment

Council may provide investment advisory or investment management services to include the

New Mexico Mortgage Finance Authority. Currently, in order for the SIC to invest these funds:

•

the funds must be available for investment for more than one year;

•

the state agency must enter into a joint powers agreement with the council;

•

the state agency must pay at least the direct cost of such services; and

•

SIC may invest the funds in any type of investment permitted for the Land Grant Perma-

nent Fund.

Significant Issues

The MFA stated that it would like to utilize the expertise of the state investment officer for the

investment of its General Fund.

Senate Bill 443-- Page 2

Current statutes allow the SIC to invest funds for any branch, agency, department, board, instru-

mentality, institution or political subdivision of the state, and any tax-exempt private endowment

entity whose sole beneficiary is a state agency. Adding the New Mexico mortgage finance au-

thority does appear to deviate from the spirit of the existing law. However, MFA notes that the

Mortgage Finance Authority Act states that “...the use of the terms ‘state agency’ or ‘instrumen-

tality’ in any other law of the state shall not be deemed to refer to the authority unless the author-

ity is specifically named.” Therefore the MFA believes that it needs an amendment of Section 6-

8-7 to add the MFA to the definition of “state agency” in Section 6-8-7.

PERFORMANCE IMPLICATIONS

The MFA notes that it does not receive operating funds from the state and that earnings from its

investments are a significant factor in its operating revenues. If the MFA is allowed to contract

for investment services with the SIC, MFA should be able to earn a higher rate of return on its

General Fund money available for investment for more than one year. MFA reserves are used

for affordable housing programs. As an example, MFA notes that if it can earn an additional 0.5

percent annually on $10 million, this is an additional $50 thousand that MFA can apply to pro-

grams and support of operations.

FISCAL IMPLICATIONS

As noted above, investing its funds with the SIC could increase annual investment returns to the

MFA quite significantly.

ADMINISTRATIVE IMPLICATIONS

SIC anticipates only a minor administrative impact with adding a new investment client, though

any associated costs would be paid by the MFA out of its investment returns.

OPJ/lg