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F I S C A L I M P A C T R E P O R T
SPONSOR Rodella
ORIGINAL DATE
LAST UPDATED
2/1/06
3/8/06 HB 497/aHAFC
SHORT TITLE Fire Protection Fund Distributions
SB
ANALYST Schardin
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
FY08
($28,600.0)
Non-Recurring General Fund
($9,600.0)
(12,900.0) Recurring General Fund
$5,100.0
$5,800.0 Recurring Local Govern-
ments
$2,300.0
$4,700.0 Recurring Fire Protection
Grant Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
Duplicates SB458.
Relates to HB309.
Conflicts with HB310.
SOURCES OF INFORMATION
LFC Files
Responses Received From
Department of Finance and Administration (DFA)
SUMMARY
Correction
House Bill 497 as passed by both houses contains drafting errors that could prevent the annual
fire protection fund reversion to the general fund in FY06. Language stating that the reversion is
to take place on or before June 30 of each fiscal year (page 8, line 9) is replaced (page 9, line 8)
with language stating that the reversion will take place on July 1 of each year. This means that
unless action is taken to ensure that the FY06 general fund reversion takes place before the effec-
tive date of this bill (May 17, 2006), FY06 general fund revenue will be reduced by $28.6 mil-
lion. This amount is higher than the general fund reversion forecast in the January 2006 consen-
sus estimate, and is based on new analysis.
pg_0002
House Bill 497/aHAFC– Page
2
Further, by deleting the text on page 8 lines 4-7, the bill erases an earmark that currently distrib-
utes money from the fire protection fund to pay 75 percent, or about $3.2 million, of the state fire
marshal and state fire academy budgets. However, since this amount is specifically appropriated
in the General Appropriation Act, DFA believes the state fire marshal will still receive this
money for its FY07 operating budget.
The corrected revenue table also includes an increase in funding to local governments due to the
increased distributions the state fire marshal will be allowed to certify.
Finally, an analytical error in the original FIR underestimated the fiscal impact the bill would
create by increasing the minimum distribution amounts the state fire marshal may certify to each
fire district. The fiscal impact of increasing these minimum levels will increase the recurring re-
venue loss of the bill to about $9.6 million in FY07 and $11.4 million in FY08.
Consultations between LFC, DFA, and PRC produced the following options that that should be
considered before the governor takes action on HB497:
•
By signing HB497 and taking no special action, the general fund will incur a $28.6 million
nonrecurring revenue loss in FY06. This option is reflected in the revenue table on page 1.
•
By vetoing HB497 in its entirety, the governor can prevent a $26.8 million nonrecurring
revenue loss to the general fund. This option would have no revenue impact versus current
law.
•
By vetoing Section 5 of the bill in its entirety, the governor could allow the minimum distri-
butions to fire districts to increase but prevent the complications found in this bill. However,
this option would eliminate the gradual reduction of the general fund reversion.
Estimated Revenue with Veto of Section 5
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
FY08
$(6,500.0)
($7,200.0) Recurring General Fund
$7,200.0
$7,900.0 Recurring Local Govern-
ments
It should be noted that the General Appropriation Act passed by both houses appropriates $2 mil-
lion from the fire protection fund to the PRC to improve equipment and training at the state’s
lowest ranked fire departments.
Synopsis of HAFC Amendment
The House Appropriations and Finance Committee amendment to House Bill 497 amends the
membership of the newly-created fire protection grant council so that it will consist of a repre-
sentative from the New Mexico Municipal League, a representative of the New Mexico Associa-
tion of Counties, two members appointed by the PRC, three members appointed by the governor
who must represent three different congressional districts, one member appointed by the speaker
of the house, one member appointed by the senate pro tempore, and the state fire marshal. The
pg_0003
House Bill 497/aHAFC– Page
2
amendment also ensures that council members appointed by the governor, house speaker or sen-
ate pro tempore may not be members of the PRC, Superintendent of Insurance, or an active
member of a county or municipal fire district or department. Finally, the amendment states that
the fire grant council will elect a chair from its members.
Synopsis of Original Bill
House Bill 497 makes several changes to the way the fire protection fund is operated.
The bill phases out the reversion of the fire protection fund to the general fund over a period of
ten years and increases the base funding amount for municipal and county fire stations by about
42 percent.
The bill also creates the fire protection grant council, which will grant funding to fire districts
based on need from the newly-created fire protection grant fund. The council will consist of a
representative from the New Mexico Municipal League, a representative of the New Mexico As-
sociation of Counties, two members appointed by the PRC, three members appointed by the
governor, and the state fire marshal (see HAFC amendment synopsis).
The effective date of these provisions is May 17, 2006.
FISCAL IMPLICATIONS
The fire protection fund receives insurance premium taxes paid to the state for property and ve-
hicle insurance. Currently, the sum of 75 percent of the state fire marshal’s operating budget, 75
percent of the fire academy’s operating budget, the amount of volunteer firefighter’s retirement,
distributions to local fire districts in the pervious fiscal year, and an additional $100 thousand are
subtracted from total fire protection fund revenue. Remaining revenue above this sum reverts to
the general fund. In FY07, total fire protection fund requirements are expected to total $28.7 mil-
lion, and the general fund reversion is expected to be $27.9 million.
House Bill 497 would gradually eliminate the annual reversion of fire protection fund revenue to
the general fund between FY07 and FY16. DFA estimates the general fund reversion will fall by
$600 thousand in FY07, $4.2 million in FY08, $8.2 million in FY09, $12.2 million in FY10,
$16.5 million in FY11, $20.8 million in FY12, $25.4 million in FY13, $30.0 million in FY14,
$34.8 million in FY15, and $39.7 million in FY16.
SIGNIFICANT ISSUES
The 2003 Legislature appropriated $250 thousand for the PRC to conduct a needs assessment.
The study found that $56 million was required to bring all fire districts currently rated 9 or 10 by
the insurance service organization (ISO) up to a rating of 8. This bill addresses the recommenda-
tions of this study. However, DFA asserts that the slow phase-in of additional funding to local
fire districts may mean that improvements will not be realized for several years.
According to the needs assessment study, PRC, the New Mexico Firefighter’s Association, the
New Mexico Municipal League, and the New Mexico Association of Counties have passed reso-
lutions in support of this effort.
pg_0004
House Bill 497/aHAFC– Page
3
PERFORMANCE IMPLICATIONS
Increasing funding available for improvements to local fire districts will reduce the risk of fire
and may decrease insurance premiums by decreasing the risk of fire.
ADMINISTRATIVE IMPLICATIONS
PRC’s needs assessment survey recommended three additional FTE to improve inspections and
fiscal compliance.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
House Bill 497 duplicates Senate Bill 458. It relates to House Bills 309, which appropriate gen-
eral funds to the fire protection fund to improve fire districts with poor ISO ratings. It conflicts
with House Bill 310.
SS/mt:nt
pg_0005
Maximum amounts to be certified
General Fund Distribution
Present Law
A
BC
D
EF
G
50% Appropriation
E+ Certified Dist
Annual 75% Fire Marshal &
75% of PRC Admin Ending
Certified FPF Balance 50% Change to vol firefighters
A(t-1) or is the Greater
FPF Balance Pro-Rata Fire Academy Certified Program Support Volunteer Firefighters Balance:
Distributions (4% growth) FPF retirement fund C-D H(t-1) G(t-1) or A(t-1) and F
(4% growth) Distribution Budgets (3% Growth) Distribution (GAA) Fund (10-11A-3) General Fund
FY04 23,506,655
52,039,544
FY05 24,647,864
55,071,962
1,516,209
375,000
1,141,209
24,647,864
24,647,864
FY05 55,071,962
100,000
2,235,225
24,647,864
182,250
750,000
27,156,623
FY06
57,274,840
1,101,439
375,000
726,439
25,374,303
25,374,303
FY06 57,274,840
100,000
2,302,282
25,374,303
174,150
750,000
28,574,105
FY07
59,565,834
1,145,497
375,000
770,497
26,144,800
26,144,800
FY07 59,565,834
100,000
2,371,350
26,144,800
179,375
750,000
30,020,309
FY08
61,948,467
1,191,317
375,000
816,317
26,961,117
26,961,117
FY08 61,948,467
100,000
2,442,491
26,961,117
184,756
750,000
31,510,104
FY09
64,426,406
1,238,969
375,000
863,969
27,825,086
27,825,086
FY09 64,426,406
100,000
2,515,765
27,825,086
190,298
750,000
33,045,256
FY10
67,003,462
1,288,528
375,000
913,528
28,738,614
28,738,614
FY10 67,003,462
100,000
2,591,238
28,738,614
196,007
750,000
34,627,602
FY11
69,683,601
1,340,069
375,000
965,069
29,703,683
29,703,683
FY11 69,683,601
100,000
2,668,976
29,703,683
201,888
750,000
36,259,054
FY12
72,470,945
1,393,672
375,000
1,018,672
30,722,355
30,722,355
FY12 72,470,945
100,000
2,749,045
30,722,355
207,944
750,000
37,941,600
FY13
75,369,782
1,449,419
375,000
1,074,419
31,796,774
31,796,774
FY13 75,369,782
100,000
2,831,516
31,796,774
214,183
750,000
39,677,309
FY14
78,384,574
1,507,396
375,000
1,132,396
32,929,170
32,929,170
FY14 78,384,574
100,000
2,916,462
32,929,170
220,608
750,000
41,468,334
FY15
81,519,957
1,567,691
375,000
1,192,691
34,121,861
34,121,861
FY15 81,519,957
100,000
3,003,955
34,121,861
227,226
750,000
43,316,913
FY16
84,780,755
1,630,399
375,000
1,255,399
35,377,261
35,377,261
FY16 84,780,755
100,000
3,094,074
35,377,261
234,043
750,000
45,225,377
Proposed Law
A
BC
D
EF
G
Certified
100% Appropriation
E+ Certified Need
FPF
Volunteer
10% Annual Increase Ending
Incremental
Distributions FPF Balance 100% Change to vol firefighters
A or is the Greater
FPF Balance Appropriations Firefighters Remaining of remaining balances Balance: Change Increase
(20% Change) (4% growth) FPF retirement fund C-D H(t-1) of A or G(t-1) and F
(4% growth) (3% growth) Certified Distribution Fund Balances to FP Grant Fund General Fund General Fund Certified Need
FY05 23,506,655
52,039,544
FY06 29,577,437
55,071,962
3,032,418
750,000
2,282,418
$31,859,855
FY06
(28,574,105)
FY07
57,274,840
2,202,878
750,000
1,452,878
$33,312,733 31,859,855
FY07 57,274,840
3,397,600
31,859,855
750,000
21,267,386
2,126,739
19,140,647
(10,879,662)
7,211,991
FY08
59,565,834
2,290,994
750,000
1,540,994
$34,853,727 33,312,733
FY08 59,565,834
3,499,528
33,312,733
750,000
22,003,573
4,400,715
17,602,858
(13,907,246)
7,938,430
FY09
61,948,467
2,382,633
750,000
1,632,633
$36,486,360 34,853,727
FY09 61,948,467
3,604,514
34,853,727
750,000
22,740,227
6,822,068
15,918,159
(17,127,097)
8,708,927
FY10
64,426,406
2,477,939
750,000
1,727,939
$38,214,299 36,486,360
FY10 64,426,406
3,712,649
36,486,360
750,000
23,477,397
9,390,959
14,086,438
(20,541,164)
9,525,243
FY11
67,003,462
2,577,056
750,000
1,827,056
$40,041,355 38,214,299
FY11 67,003,462
3,824,029
38,214,299
750,000
24,215,135
12,107,567
12,107,567
(24,151,487)
10,389,213
FY12
69,683,601
2,680,138
750,000
1,930,138
$41,971,493 40,041,355
FY12 69,683,601
3,938,750
40,041,355
750,000
24,953,496
14,972,098
9,981,398
(27,960,202)
11,302,741
FY13
72,470,945
2,787,344
750,000
2,037,344
$44,008,837 41,971,493
FY13 72,470,945
4,056,912
41,971,493
750,000
25,692,539
17,984,777
7,707,762
(31,969,548)
12,267,810
FY14
75,369,782
2,898,838
750,000
2,148,838
$46,157,675 44,008,837
FY14 75,369,782
4,178,619
44,008,837
750,000
26,432,326
21,145,860
5,286,465
(36,181,869)
13,286,482
FY15
78,384,574
3,014,791
750,000
2,264,791
$48,422,466 46,157,675
FY15 78,384,574
4,303,978
46,157,675
750,000
27,172,920
24,455,628
2,717,292
(40,599,621)
14,360,901
FY16
81,519,957
3,135,383
750,000
2,385,383
$50,807,849 48,422,466
FY16 81,519,957
4,433,097
48,422,466
750,000
27,914,393
27,914,393
-
(45,225,377)
15,493,296
Scenario 2: Proposed Law, Strike Section 5
A
BC
D
EF
G
Ending
Certified
100% Appropriation
E+ Certified Need
Annual 75% Fire Marshal &
Balance:
Incremental
Distributions FPF Balance 100% Change to vol firefighters
A or is the Greater of
FPF Balance Pro-Rata Fire Academy Certified 75% of PRC Admin Volunteer Firefighters General Fund Change Increase
(20% Change) (4% growth) FPF retirement fund C-D H(t-1) A(t-1) or G(t-1) and F
(4% growth) Distribution Budgets (3% Growth) Distribution Cost (GAA) Fund (10-11A-3) Dist Prior FY General Fund Certified Need
FY05 23,506,655
52,039,544
FY06 29,577,437
55,071,962
3,032,418
750,000
2,282,418
$31,859,855
FY06 55,071,962
100,000
2,235,225
24,647,864
182,250
750,000
27,156,623
-
FY07
57,274,840
2,202,878
750,000
1,452,878
$33,312,733 31,859,855
FY07 57,274,840
100,000
2,302,282
31,859,855
174,150
750,000
22,088,554
(6,485,551)
7,211,991
FY08
59,565,834
2,290,994
750,000
1,540,994
$34,853,727 33,312,733
FY08 59,565,834
100,000
2,371,350
33,312,733
179,375
750,000
22,852,376
(7,167,933)
7,938,430
FY09
61,948,467
2,382,633
750,000
1,632,633
$36,486,360 34,853,727
FY09 61,948,467
100,000
2,442,491
34,853,727
184,756
750,000
23,617,494
(7,892,610)
8,708,927
FY10
64,426,406
2,477,939
750,000
1,727,939
$38,214,299 36,486,360
FY10 64,426,406
100,000
2,515,765
36,486,360
190,298
750,000
24,383,982
(8,661,274)
9,525,243
FY11
67,003,462
2,577,056
750,000
1,827,056
$40,041,355 38,214,299
FY11 67,003,462
100,000
2,591,238
38,214,299
196,007
750,000
25,151,918
(9,475,684)
10,389,213
FY12
69,683,601
2,680,138
750,000
1,930,138
$41,971,493 40,041,355
FY12 69,683,601
100,000
2,668,976
40,041,355
201,888
750,000
25,921,383
(10,337,671)
11,302,741
FY13
72,470,945
2,787,344
750,000
2,037,344
$44,008,837 41,971,493
FY13 72,470,945
100,000
2,749,045
41,971,493
207,944
750,000
26,692,462
(11,249,138)
12,267,810
FY14
75,369,782
2,898,838
750,000
2,148,838
$46,157,675 44,008,837
FY14 75,369,782
100,000
2,831,516
44,008,837
214,183
750,000
27,465,246
(12,212,063)
13,286,482
FY15
78,384,574
3,014,791
750,000
2,264,791
$48,422,466 46,157,675
FY15 78,384,574
100,000
2,916,462
46,157,675
220,608
750,000
28,239,829
(13,228,505)
14,360,901
FY16
81,519,957
3,135,383
750,000
2,385,383
$50,807,849 48,422,466
FY16 81,519,957
100,000
3,003,955
48,422,466
227,226
750,000
29,016,308
(14,300,605)
15,493,296