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

SPONSOR Campos

DATE TYPED 3/3/05

HB

SHORT TITLE Annual School Project Short-Term Stb's

SB 572

ANALYST Padilla-Jackson

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$52,800.0 Indeterminate

Recurring

Public School

Capital Outlay

Fund

$13,200.0 Indeterminate

Recurring

Higher Educa-

tion Capital Pro-

ject Fund

($66,000.0) Indeterminate

Recurring Severance Tax

Bonding Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Negative

(see text below)

General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to Senate Bill 14 and Senate Bill 455

SOURCES OF INFORMATION

LFC Files

Responses Received From

Board of Finance (BOF)

Public School Finance Authority (PSFA)

Senate Bill 572 -- Page 2

SUMMARY

Synopsis of Bill

Senate Bill 572 would allow the State Board of Finance (BOF) to issue severance tax bonds in

the form of short-term notes in a fiscal year (maturing on or before June 30 of that year). The

bonds can be issued from any available cash in the severance tax bonding fund as long as no

short-term notes are issued:

(1) until all other severance tax bonds and supplemental severance tax bonds to be issued in that

fiscal year have been issued; and

(2) unless the balance in the severance tax bonding fund as of the date that the bonds are issued

is greater than the sum of:

(a) the debt service on the severance tax bonds to be issued pursuant to this subsection;

(b) the debt service scheduled to be paid during the remainder of the fiscal year on all

outstanding severance tax bonds and supplemental severance tax bonds; and

(c) the amount necessary to meet all principal and interest payments on outstanding

bonds payable from the severance tax bonding fund on the next two ensuing semiannual

payment dates.

The bill appropriates 80 percent of the funds to the Public School Capital Outlay Fund and 20

percent to the Higher Education Capital Project Fund, a fund created by the bill. The Higher

Education Capital Project Fund would be administered by the Commission on Higher Education.

Significant Issues

The Board of Finance notes that Senate Bill 572 effectively sweeps excess cash in the severance

tax bonding fund at the end of FY05 that would otherwise be transferred to the severance tax

permanent fund. They note that the strong revenue in the severance tax bonding fund for the cur-

rent fiscal year is a result of high oil and gas revenues. The excess cash balances in the fund, af-

ter the statutory tests used to finance senior and supplemental severance tax bonds are met,

would be appropriated rather than transferred to the severance tax permanent fund.

PERFORMANCE IMPLICATIONS

PSFA commented that the Public School Capital Outlay Task Force (PSCOTF) 2004 recommen-

dations includes that, because of the volatility and uncertainty of severance tax revenues upon

which supplemental severance tax bonding capacity is based, the state should consider, on a

year-by-year basis, using severance tax revenues that would otherwise flow to the Severance Tax

Permanent Fund for supplemental severance tax bonds for public school capital outlay purposes.

They also note that the most updated assessment of New Mexico K-12 school facilities per-

formed by 3D International shows a total estimated current cost for building renewal and repair

needs of $2.28 billion.

Senate Bill 572 -- Page 3

FISCAL IMPLICATIONS

Using the latest information provided by the Board of Finance, the total fiscal impact of this bill

is $66 million, which will be appropriated to the Public School Capital Outlay Fund and the

Higher Education Capital Outlay Fund. The bill’s provisions could also result in a lower distri-

bution from the Severance Tax Permanent Fund to the General Fund in future years, though this

amount is indeterminate, as it is based on the amount that would be transferred and the rate of

return on the fund for that year. The amount used to estimate the fiscal impact is only an esti-

mate. The Board of Finance notes that the amount of available funds in the severance tax bond-

ing fund for those projects will be determined during the last week of the fiscal year 2005.

OPJ/lg