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

SPONSOR Nava

DATE TYPED 03/07/05 HB

SHORT TITLE Public Peace, Health, Safety and Welfare

SB 1077

ANALYST Chabot

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

See Narrative

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB 1081

Relates to Appropriation in the General Appropriation Act

SOURCES OF INFORMATION

LFC Files

Responses Received From

Public Education Department (PED)

SUMMARY

Synopsis of Bill

Senate Bill 1077 amends Section 22-8-5 NMSA 1978 (Rules—Procedures) to require, no later

than July 1, 2006, all public schools and school districts to comply with the accounting rules of

the 2003 edition of the National Center for Education Statistics’ chart of accounts. School dis-

tricts are to comply with requests for financial information by PED. The official submitting

district or charter school budget reports will certify in writing the report contains correct classifi-

cation of expenditures and reporting of public school funds. Intentional misreporting shall con-

stitute grounds for suspending or revoking any license of the person submitting the report by

PED or for taking any other action provided for by law or department rule. PED is to submit fi-

nancial information as requested by DFA, LFC or LESC. The bill also amends Section 22-8-9

NMSA (Budgets—Minimum Requirements) to require the allocation of maximum dollars to in-

struction as defined by NCES.

Significant Issues

An LFC audit conducted in 2003 found inconsistencies in how school districts classify expendi-

Senate Bill 1077 -- Page 2

tures, which makes comparisons among districts and state statistics with other states. The con-

version to the National Center for Education Statistics (NCES) chart of accounts was begun in

FY04 at $1.8 million, and the Executive, LESC and LFC all recommended continued funding to

complete the process. The LFC has recommended extending the FY04 appropriation through

2006 and including additional funding through FY06. At a LESC meeting in October 2004, PED

indicated the complete conversion would take approximately three years. This bill would require

implementation by July 1, 2006.

There is a potential conflict with the legislation by referencing the “National Center for Educa-

tion Statistics”. Article IV, Section 18 of the New Mexico Constitution provides that no law

shall be revised or amended by reference. Designation of NCES is a reference to a specific or-

ganization and standard of accounting.

PED indicates NCES does not specify a budget format nor does it define “allocation of maxi-

mum dollars to instruction.”

In addition, PED states it is the process of upgrading the technological infrastructure to collect

and report financial data. “Due to years of under funding…the technology currently used by the

PED is outdated and in many cases incompatible with the technology used by school districts

and charter schools. It is critical that the technological infrastructure be upgraded before a new

chart of accounts is fully implemented.”

PED will use the appropriations in the General Appropriations Act to begin the upgrade. It has

begun to design and implement a workplan and has established a vendor advisory committee to

assist in determining costs for the total project. This includes interface with the public school

districts.

PED further advises the current Public School Finance Act provides sanctions for intentionally

falsifying financial information.

PERFORMANCE IMPLICATIONS

A uniform chart of accounts as established by the U.S. Department of Education will allow direct

comparisons with other states using the same chart of accounts.

FISCAL IMPLICATIONS

HB 2 as amended by the Senate has a special appropriation of $600 thousand through fiscal year

2007 for the implementation of a standardized chart of accounts. In addition, the balance of the

special appropriation for $1.8 million in the 2004 General Appropriation Act for the same pur-

pose is extended through fiscal year 2006 for the same purpose.

TECHNICAL ISSUES

The LFC has not been able to find a definition of “the allocation of maximum dollars to instruc-

tion” by NCES. The uniform chart of accounts would allow comparisons with school districts

within the state and with other states. As Section 22-8-9A(4) is written, PED will have to deter-

mine what would be the intent of the subsection.

Senate Bill 1077 -- Page 3

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL.

Current statutes will remain in effect.

POSSIBLE QUESTIONS

1.

Can a standardized chart of accounts be fully implemented by July 1, 2006.

2.

How does the sponsor interpret the statement “the allocation of maximum dollars to in-

struction as defined by the national center for education statistics”.

GAC/lg