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

SPONSOR Lopez

DATE TYPED 3/01/2005 HB

SHORT TITLE Income Tax for Certain Nurses and Physicians

SB 823

ANALYST Taylor

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$750

Recurring General Fund

$500

Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to Appropriation in the General Appropriation Act

Duplicates HB 744

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

(2.5)

(5.0)

Increasing

Recurring

General Fund

$500.0

Health Professionals

Loan Repayment Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

Department of Health (DOH)

SUMMARY

Senate Bill 823 provides an exemption in the income tax act for certain nurses and physicians

serving in acute shortage and medically underserved areas. Starting in FY06, it makes recurring

appropriations to the health professional loan repayment fund and the Department of Health.

Specifically, the bill amends the income tax by providing an exemption for stipend income re-

ceived by a nurse or physician pursuant to the Health Service Corps Act and Health Professional

Loan Repayment Act.

Senate Bill 823 -- Page 2

It expands the duties of the Health Profession Advisory Committee to include the designation of

nursing and the practice of medicine in which the state is experiencing an acute shortage.

The bill appropriates $500 thousand in FY06 from the general fund to the health professional

loan repayment fund for the purpose of making loans to students pursuing medical specialties

needed in acute shortage and medically underserved areas. It also appropriates $750 thousand in

FY06 from the general fund to the department of health for expanded recruitment of medical

professionals.

The bill is applicable to taxable years beginning on or after January 1, 2005.

FISCAL IMPLICATIONS

TRD estimates the fiscal impact for the tax exemptions provided in this bill to be $5.0 thousand

in FY06. They note that stipends range from $10 to $20 thousand per year, and total, on average

about $300 thousand. They further assume that two-thirds of stipends, or $200 thousand are pro-

vided to nurses and physicians. They apply a 2.5 percent tax rate against $200 thousand to arrive

at the full year fiscal impact of $5 thousand. The FY05 impact reflects the applicability date, and

is simply half of the full-year impact.

The appropriations of $500 thousand to the Health Professional Repayment Loan Fund and $750

thousand to the department of health contained in this bill are recurring expenses to the General

Fund.

The department of health’s bill analysis notes that the executive budget recommendation in-

cluded $695.7 thousand for the same purpose (as that provided in this bill). They also report that

appropriation to the Health Professional Repayment Loan Fund does not directly impact the de-

partment.

Continuing Appropriations

This bill creates provides a continuing appropriations from the general fund to another fund. The

LFC objects to including continuing appropriation language in statutory provisions. Earmarking

reduces the ability of the legislature to establish spending priorities.

ADMINISTRATIVE IMPLICATIONS

Both TRD and DOH report that the administrative implications associated with this bill are mod-

est and could be absorbed with existing resources.

OTHER SUBSTANTIVE ISSUES

The department of health submitted the following comments:

Despite progress over the years, there are still gaps in access to dental and primary care services

for many New Mexicans who reside in underserved areas of the state. The Federal government

has designated all or part of 28 New Mexico counties as either medical or dental Health Profes-

sional Shortage Areas. Dental services are inadequate especially in rural and remote areas of the

state. Similar shortages of nurses and medical specialists occur throughout the State.

Senate Bill 823 -- Page 3

The Health Professional Loan Repayment Program, administered by the Commission on Higher

Education, provides repayment of health professional education loans to selected health profes-

sionals in exchange for their commitments to practice in underserved parts of New Mexico.

Similarly, the New Mexico Health Service Corps, administered by the Department of Health,

makes stipend awards to health professional students during their training in exchange for their

commitments to practice in underserved parts of New Mexico. The exemptions from taxation

for these repayments and stipends, proposed in HB 744, would increase their net financial incen-

tive, making them a more effective tool for recruitment and retention.

The needs of underserved New Mexicans are met, in part, by a network of community-based

primary care centers. This network provides basic services to more than 230,000 patients each

year. The Rural Primary Health Care Act (RPHCA) Program, administered by the DOH, pro-

vides financial support to more than 75 clinics in the network. The majority of patients at com-

munity-based primary care centers are either indigent or Medicaid program participants. Indigent

patients receive services according to sliding fee schedules, based upon their ability to pay. It is

estimated that an additional 200,000 New Mexicans statewide could benefit from the services of

new or expanded health centers. Sections of the RPHCA authorize a program for recruitment and

retention of primary health professionals for underserved parts of the State. The $750,000 appro-

priation in HB 744 would supplement the funds currently used for RPHCA recruitment and re-

tention purposes and support the safety net services available for underserved areas.

The President has established a Community Health Center Initiative for the nation aiming to

double the number of new or expanded community-based primary care centers nationwide by

2006. All new centers receiving this funding are required to provide both medical and dental ser-

vices to their patients. New or expanded centers in Silver City, Edgewood, Mora, Santa Fe, East

Mesa (Dona Ana County), Fort Sumner, Socorro and Alamogordo have all benefited from this

Initiative. In the current fiscal year federal applications are pending or to be submitted for new or

expanded centers in Bernalillo and Hobbs. In addition, there have been numerous supplemental

grants given to existing health centers to expand the comprehensiveness of their services to in-

clude dental and basic behavioral health care. During the next year it is anticipated that at least 5

applications could be developed for new or expanded health centers in New Mexico. This would

permit a significant expansion of New Mexico’s health care safety net. The appropriations pro-

posed in HB 744 could be used to meet health professional needs resulting from expansions in

federal programs and improve access to primary medical, dental and basic behavioral health

care.

The $500,000 appropriation to the Health Professional Loan Repayment Fund for medical spe-

cialties would expand this program.

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