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

SPONSOR Martinez

DATE TYPED 3/2/05

HB

SHORT TITLE Individual Development Account Financing

SB 756

ANALYST Hadwiger

APPROPRIATION

(in $000s)

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$1,500.0

Non-Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

Human Services Department (HSD)

Public Education Department (PED)

SUMMARY

Synopsis of Bill

Senate Bill 756 appropriates $1.5 million from the general fund to the Department of Finance

and Administration (DFA) for expenditure in FY06 and subsequent fiscal years to establish re-

serve funds and otherwise carry out the provisions of the Individual Development Account Act

(IDA).

Significant Issues

The IDA program allows poverty profile individuals the ability to enhance their assets without

reducing their public assistance. The act was signed into law by Governor Richardson in April

of 2003 with an original appropriation of $100,000 which was reverted back to the general fund

in May 2004. The City of Gallup, City of Bloomfield and the Village of Milan will be the first to

implement the IDA pilot program for the State of New Mexico. The initial projections indicate

that approximately 70 area residents will participate in the project. CDBG will match funds in

addition to funds provided by the Economic Development Department, The New Mexico Fi-

nance Authority and federal monies.

Senate Bill 756 -- Page 2

The IDA receives oversight of an advisory committee appointed by the Governor, consisting of

nine members representing different areas of the state. The Lieutenant Governor serves as the

chair of the committee. So far the committee has performed these duties pro-bono. SB756 will

provide much needed seed money required to procure federal funding and help meet the ever in-

creasing demand for these types of programs statewide. The funding will enhance New Mexico's

visibility to the federal government showing our dedication in improving the poverty profile.

The Human Services Department (HSD) noted it is difficult to predict how many of HSD’s cur-

rent recipients would take advantage of this opportunity, but under Section 58-30-12, NMSA

1978, money deposited into an individual development account, interest earned on that account

and interest and matching funds deposited in a reserve account for the benefit of the account

owners are disregarded for the purposes of determining TANF eligibility for benefits and for de-

termining benefit amounts. Similarly, in determination of eligibility for benefits and monies due

under the Food Stamp Program and Medicaid, HSD must disregard money deposited into an in-

dividual development account, interest earned on that account, and interest and matching funds

deposited in a reserve account for the benefit of the account owners.

PERFORMANCE IMPLICATIONS

DFA noted that the IDA advisory committee has held six meetings in the year 2004. Since that

time, the committee has produced a list of rules and regulations that will be published in the New

Mexico Register in April 2005. Currently, DFA oversees the large IDA program within New

Mexico through the small cities CDBG Economic Development funding. DFA is the only body

with actual governing authority. According to DFA, the IDA program needs to have a formida-

ble structure, a source of funding and a plan to disburse those funds. Once the rules are pub-

lished the state will be prepared move ahead to meet the demands for IDA services throughout

New Mexico.

FISCAL IMPLICATIONS

The appropriation of $1.5 million contained in this bill is a non-recurring expense to the general

fund, because the appropriation would be used to establish a reserve fund. These funds could be

used to draw as much as $1 million in federal funds, according to DFA. Any unexpended or un-

encumbered balance remaining at the end of FY06 would not revert to the general fund.

ADMINISTRATIVE IMPLICATIONS

The Local Government Division of DFA in conjunction with the Department of Labor Office Of

Workforce Training (OWFT) will administer these funds pursuant to a Memorandum of Under-

standing. This is a program currently in place and the department does not see this as overly

burdensome. According to LGD, once the funding is in place the understanding is that the fund-

ing will transfer to the OWFT. SB285 is proposing this transfer of administrative power in this

year’s legislature. DFA indicated the OWFT is better suited to oversee this funding. The OWFT

is currently administering several similar projects including TANF (temporary assistance for

needy families) recipients.

DH/yr