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

SPONSOR Sandoval

DATE TYPED 10/10/05 HB 8/aHAFC/aSFC/aCC

SHORT TITLE Gasoline and Home Heating Relief Fund

SB

ANALYST

Weber, Kehoe, Had-

wiger, Peery, Aguilar,

Surdi, Fernandez

APPROPRIATION

Appropriation Contained Estimated Additional Impact Recurring

or Non-Rec

Fund

Affected

FY05

FY06

FY05

FY06

$37,500.0

Non-Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates SB 2

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

Uncertain

Non-Recurring General Fund

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department

Public Education Department

SUMMARY

Synopsis of CC Amendment

The Conference Committee amendment adds a section that would prohibit a utility company

from discontinuing or disconnecting service to a residential customer for any billing cycle from

November 15 through March 15 of a given year for nonpayment if the customer meets the quali-

fications for the low income home energy assistance program and further requires the utility

company to report the customer’s need for assistance to the human services department. When

notified, the department shall take immediate action to mitigate the problem.

House Bill 8/aHAFC /aSFC -- Page 2

The table below summarizes the Conference Committee amendment to House Bill 8:

CC

SFC HAFC Original

Low Income Heating Assistance Program $23,000.0 $23,000.0 $20,000.0 $20,000.0

Statewide Weatherization Programs

$ 2,500.0 $ 4,000.0 $ 1,500.0 $ 1,500.0

Department of Public Safety Fuel Costs $ 1,500.0 $ 1,500.0 $ 1,500.0 $ 1,500.0

Heating Costs for Public Schools

$ 2,500.0 $ 4,000.0 *

*

Transportation Costs for Public Schools $ 2,500.0 $ 3,000.0 $ 4,500.0 $ 1,500.0

Utilities and Fuel Costs for Post Secon-

dary Institutions

$ 3,500.0 $ 4,500.0 $ 4,500.0

State Fire Marshal for Volunteer Fire

Depts.

$ 2,000.0 $ 2,000.0

Local Govt Division - County Sheriff Of-

fices

$ 2,000.0

TOTAL

$37,500.0 $44,000.0 $32,000.0 $24,500.0

*Note: the original bill and HAFC bills appropriated a lump sum of $1.5 million and $4.5 million

respectively, for heating and school bus fuel costs.

Synopsis of SFC Amendment

The Senate Finance Committee amendment to House Bill 8 makes the following changes:

•

Strikes House Appropriations and Finance Committee amendments 4 and 5 which

appropriated $4.5 million to the Public Education Department for school district utilities

and school bus fuel costs and $4.5 million to the Higher Education Department for

natural gas and motor fuel costs for public post secondary institutions;

•

Inserts a new section that would prohibit a utility company from discontinuing or discon-

necting service to a residence for any billing cycle during the months of December, Janu-

ary and February in fiscal years 2006 and 2007 as a result of the inability of the residen-

tial customer to make payment for electric or gas service and further requires the utility

company to assist residential customers who continue to receive services during these

months with development of a payment plan that is based on the customer’s ability to

pay;

•

Increases the appropriation to the Human Services Department for the low income heat-

ing assistance program (LIHEAP) by $3 million for a new total of $23 million;

•

Increases the appropriation to the Department of Finance and Administration for weather-

ization programs statewide by $2.5 million for a new total of $4 million and adds lan-

guage that the funds may be expended in fiscal years 2006 and 2007;

•

Inserts a new appropriation of $4 million to the Public Education Department for in-

creased heating costs for public schools;

•

Inserts a new appropriation of $3 million to the Public Education Department for in-

creased school transportation costs for public schools;

•

Inserts a new appropriation of $4.5 million to the Higher Education Department for utili-

ties and fuel costs for public post secondary institutions.

•

Inserts a new appropriation of $2 million to the State Fire Marshal to be divided among

House Bill 8/aHAFC /aSFC -- Page 3

the volunteer and predominantly volunteer fire departments for fuel and related vehicle

repair or maintenance; provided that the division be based on 10 percent of each depart-

ment’s current-year distribution from the fire protection fund; and

•

Inserts a new appropriation to Department of Finance and Administration, Local Gov-

ernment Division for $2 million to be divided equally among all county sheriff offices.

The table below summarizes the total bill with the SFC amendments:

SFC

HAFC Original

Low Income Heating Assistance Program $23,000.0 $20,000.0 $20,000.0

Statewide Weatherization Programs

$ 4,000.0 $ 1,500.0 $ 1,500.0

Department of Public Safety Fuel Costs

$ 1,500.0 $ 1,500.0 $ 1,500.0

Heating Costs for Public Schools

$ 4,000.0 *

*

Transportation Costs for Public Schools

$ 3,000.0 $ 4,500.0 $ 1,500.0

Utilities and Fuel Costs for Post Secondary

Institutions

$ 4,500.0 $ 4,500.0

State Fire Marshal for Volunteer Fire Depts. $ 2,000.0

Local Govt Division - County Sheriff Offices $ 2,000.0

TOTAL

$44,000.0 $32,000.0 $24,500.0

*Note: the original bill and HAFC bills appropriated a lump sum of $1.5 million and $4.5 million

respectively, for heating and school bus fuel costs.

Synopsis of HAFC Amendment

The House Appropriations and Finance Committee amendment to House Bill 8 makes the fol-

lowing changes.

On page 1 strike all of line 23 up to the colon.

On page 2 line 2 after relief insert “,in accordance with programs existing within New Mexico

law,”

On page 2 line 19 strike “and”.

On page 2 lines 20 and 21 strike the money amount one million five hundred thousand dollars

($1,500,000) and replace it with “four million five hundred thousand dollars ($4,500,000)”.

On page 2 line 22 strike the period, insert in lieu thereof “; and” and between lines 22 and 23,

insert the following new paragraph:

“(5) four million five hundred thousand dollars ($4,500,000) to the higher education department

for natural gas and motor fuel costs of public post-secondary educational institutions, to be dis-

tributed to each institution on a pro rata basis of the difference between fiscal year 2005 actual

expenditures for those items and the fiscal year 2006 projections of expenditures as of October 5,

2005.”

House Bill 8/aHAFC /aSFC -- Page 4

The final result is the following;

$20 million appropriated to HSD for relief of residential; heating costs, $1.5 million appropriated

to DPS for gasoline expenses, $1.5 million appropriated to DFA for weatherization programs,

$4.5 million appropriated to PED for utility and gasoline costs and $4.5 million appropriated to

institutions of higher education for utility and gasoline expenses. The amended total is $32 mil-

lion from the general fund.

Synopsis of Original Bill

House Bill 8 appropriates $24.5 million from the GENERAL FUND for the purpose of providing

economic relief to New Mexico citizens due to high energy prices and alleviation of energy ex-

penses for some agencies and weatherization programs. In addition, the bill creates a fund at

DFA for donations to be used for purposes related to high energy process.

Section 1 creates the Gasoline and Home Heating Relief Fund in the state treasury to be adminis-

tered by the Department of Finance and Administration. The fund shall consist of appropria-

tions, gifts, grants and donations and is appropriated to DFA. The funds are to be used for pro-

viding gasoline price rebates to New Mexico taxpayers, to provide economic relief for New

Mexico taxpayers burdened as a result of high gasoline price, to provide economic relief for

those suffering from high home heating costs and for the LIHEAP program. Balances in the

fund shall not revert.

Section 2 appropriates $24.5 million from the general fund for the following purposes.

1.

$20 million to the Human Services Department for the low income heating assistance

program (LIHEAP)

2.

$1.5 million to the Department of Finance and Administration for state wide weatheriza-

tion programs.

3.

$1.5 million to the Department of Public Safety for fuel costs.

4.

$1.5 million to the Public Education Department for school district bus fuel and utilities

costs.

These funds are for expenditure during FY06. Unexpended funds remaining in agency accounts

at the end of FY06 shall revert to the general fund.

Significant Issues

Regarding Section 1, the bill does not provide adequate measures to determine who should con-

tribute to the fund and how much they should contribute. Relying on voluntary undefined con-

tributions from private entities may lead to problems administering the fund. Consistency in the

revenues and distributions of a fund designed to assist needy residents is crucial.

Smaller operations may be less capable of donating to the fund than larger ones but still feel

compelled to contribute. There may be significant fiduciary issues regarding publicly held com-

panies and their ability to contribute and maintain their commitments to their shareholders.

There may be a substitution of donations from the community in which a company operates to

the fund. Many smaller communities, for instance, receive a great deal of support and charity

House Bill 8/aHAFC /aSFC -- Page 5

from oil and gas companies and any donations to the proposed fund may come out of those

community activities.

The fund has too few safeguards on distribution. First, it is appropriated to DFA, which means

that the funds are expended at the discretion of the executive. Second, the purposes to guide

DFA are vague. Third, since the revenues to the fund are intended to be voluntary contributions,

there should be language to completely distribute the fund on a regular basis. Unexpended bal-

ances, per the bill, will not revert to the general fund but there should be a mechanism to distrib-

ute donations as expediently as possible for maximum impact.

The legislation calls for the fund to be appropriated to the department of finance and administra-

tion (DFA) for the following purposes:

1.

to provide gasoline tax rebates to New Mexico taxpayers,

2.

to provide economic relief to New Mexico taxpayers suffering from rapidly increas-

ing home heating costs, and

3.

to augment the low income heating assistance program.

It is unclear how “economic relief” is going to be different then “gasoline tax rebates.” The for-

mer allows much more latitude in the disbursement of the funds. The first purpose also does not

have the high price qualifier which suggests greater latitude in triggering rebates.

There are no definitions of “extremely high gasoline prices” or “rapidly increasing home heating

costs.” Currently prices have been fluctuating from $2.70 to as high as $3.00. If the prices are

the same in one year, should they still be considered “extremely high” or will they have set a

new level.

Section 2 appropriates funds to agencies to offset high energy costs for a variety of purposes.

HB 8 appropriates $20 million to HSD to augment the Low Income Home Heating Assistance

Program (LIHEAP). The federal government provided funding of $9.9 million to LIHEAP in

FY 2005. Assuming that funding from the federal government will remain the same in FY 2006,

with the addition of the $20 million from the general fund and with $800 thousand of unused

federal funds from prior years, the potential FY06 budget will equal $30.7 million

The objective of the Low Income Home Energy Assistance Program (LIHEAP) is to assist the

energy needs of low income households. Within this population additional consideration is made

for households with vulnerable populations such as young children, older individuals and indi-

viduals with disabilities.

Households that have incomes below 150% of the federal poverty guidelines (FPG) (approxi-

mately $1960/month for a family of three) are eligible to receive benefits. The monetary benefits

to households are based on a point system which translates into a specific dollar amount of assis-

tance. The point system takes a number of factors into consideration: vulnerable populations,

income levels, and energy costs. For FY 2005, one point was worth $20 and the average benefit

was $128. The average benefit to households in FY 2006 at the current $20 value will be $142.

If the approximate 55,000 households served in FY05 receive the $142 benefit the total ex-

pended will be $7.8 million. Moving the $20 award to $80 would expend over $29 million or the

approximate amount available.

House Bill 8/aHAFC /aSFC -- Page 6

It is important to note that only 30 percent, about 55,000 households, of all eligible households

currently receive benefits. More households may apply for LIHEAP in the coming year for the

following reasons:

•

Outreach by a greater number of community and senior centers

•

Outreach by the Association of Community Organizations for Reform Now (ACORN)

providing in home visits to assist with the application process

•

Support from AARP

•

Online LIHEAP applications in English and Spanish

•

Greater financial needs motivating the 70% (LIHEAP Clearinghouse) of eligible house-

holds not being served

MFA administers home weatherization projects. Traditionally weatherization funds are appro-

priated to DFA and then “passed through” to MFA. Other funds may come from HSD from

LIHEAP

According to MFA 630 applicants remain on the waiting list. Based on the average of approxi-

mately $3,600/unit, $2.5 million would be required to service the homes on the waiting list.

More monies available for weatherization front rather should tend to reduce bills and provided

continuing relief for recipients even though the funds may be considered non-recurring.that will

continue to rise unless the homes are serviced for energy efficiency.

Of the federal LIHEAP funds, HSD is allowed to expend up to 25% of the federal funds for

home weatherization. However, of the approximate $10 million HSD federal funds traditionally

MFA receives approximately 15 percent.

The Department of Finance and Administration (DFA) has received special appropriations al-

most every year to pay for weatherization of homes of low-income persons, typically in the range

of $800 thousand - $1.0 million per year. DFA provides funding through a JPA to the Mortgage

Finance Authority to administer the program. The table below shows appropriations for this

program in recent years.

FY06: $800.0 special appropriation

FY05: $800.0 special appropriation

FY04: $0

FY03: $1 million

FY02 $1 million

HB 8 appropriates $1.5 million to DPS for gasoline expenses. DPS has reported that their oper-

ating budget for FY06 is not sufficient to cover the increases in the cost of gasoline. The LFC,

DFA, Taxation and Revenue Department (TRD) and the Department of Transportation (DOT)

developed a consensus on the price forecast for regular unleaded gasoline in FY06 at

$2.65/gallon. DPS does not pay the $.17 cents in taxes on gasoline. Therefore, DPS estimates

for FY06 projected mileage of 16,078,130 at 13.52 miles per gallon with gasoline at $2.48 per

gallon would cost $2,949,243. DPS reports their FY06 general fund budget for gasoline is

$1,436,600. The department projects a deficit of $1,512,643 for gasoline in FY06. DPS’s oper-

ating budget for FY06 states $1,559,300 was appropriated for gasoline in the Law Enforcement

Program.

House Bill 8/aHAFC /aSFC -- Page 7

HB 8 appropriates $1.5 million for school district bus fuel and utility increases for the remainder

of FY06. The Public Education Department notes PNM estimates an average increase in heating

fuel costs of 50 percent for December, January and February. This results in an increase in heat-

ing fuel costs of $2.6 million. It is important to note this amount does not include increases in

electrical costs over the same time frame. Electricity producers nationwide have moved more to

natural gas fuel to power electrical generating stations and increases for electricity are expected

as well. With regard to bus fuel needs, the department estimates a price differential of approxi-

mately 12 cents per gallon of diesel leading to a calculated need of $400 thousand. Interestingly,

these estimates mirror portions of the agency request during the last budget cycle and supporting

documentation does not reflect any calculations regarding use projections district by district.

The agency expects to utilize $1.5 million of unbudgeted funds from the FY06 emergency sup-

plemental appropriation and the $1.5 million contained in the bill

.

FISCAL IMPLICATIONS

The appropriation of $24.5 million contained in this bill is a NON-RECURRING expense to the

GENERAL FUND. Any unexpended or unencumbered balance remaining at the end of FY06

shall revert to the GENERAL FUND.

Regarding Section 1, HB 8 creates a new fund and provides for continuing appropriations. The

LFC objects to including continuing appropriation language in the statutory provisions for newly

created funds. Earmarking reduces the ability of the legislature to establish spending priorities.

ADMINISTRATIVE IMPLICATIONS

There will potentially be greater demands on the HSD Income Support Division offices since

only about 30 percent of the eligible population is currently participating in LIHEAP. As the

availability of funds is publicized many more eligibles may apply creating an administrative bur-

den on the ISD offices. A similar situation could develop at MFA. However, since these are

non-recurring funds, this burden should only happen one time.

OTHER SUBSTANTIVE ISSUES

Since this is not an entitlement program it is unclear what might happen if LIHEAP funds are

depleted with unserved persons creating a waiting list. Also, regarding Section 1, it must be

asked if it is good public policy to solicit donations for what may be described as essential gov-

ernment functions.

If income levels for eligibility are increased, so are the numbers of eligible households. At 150%

of the FPG there are 184,000 eligible households. At the 200% of the FPG there are 266,000

households with an approximate net increase of eligible households of 82,000. Interest in raising

the income eligibility level will expand potential applicants thereby diluting the potential per

household award. In addition, the likelihood of depleting the fund leaving persons unserved in-

creases

.

ALTERNATIVES

See attachment regarding the existing Low Income Utility Assistance Act. Using this existing

House Bill 8/aHAFC /aSFC -- Page 8

fund may negate the need for Section 1 of HB 8 and activate an unused prior legislative initia-

tive.

POSSIBLE QUESTIONS

Should the existing Low Income Utility Assistance Act be utilized rather than creating new

funds.

MW/yr:sb

Attachment