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

SPONSOR Beffort

ORIGINAL DATE

LAST UPDATED

1/19/06

HB

SHORT TITLE

COUNSELOR & THERAPIST PAYMENT GROSS

RECEIPTS

SB 29

ANALYST Schardin

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

(268)

(282) Recurring General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Human Services Department (HSD)

Taxation and Revenue Department (TRD)

Department of Health (DOH)

SUMMARY

Synopsis of Bill

Senate Bill 29 expands the list of health practitioners who receive a gross receipts tax deduction

for receipts from managed care providers, commercial health insurers and Medicare part C. The

bill adds mental health counselors, marriage and family therapists, and art therapists who have

obtained a masters degree or doctorate, as well as licensed social workers who have obtained a

master’s degree in social work and have practices two years of postgraduate social work under

supervision. These types of providers were not included in 2004 legislation that made many

other health provider receipts deductible from gross receipts tax.

The effective date of the provisions in this bill is July 1, 2006.

FISCAL IMPLICATIONS

The group Resources for Change reports that New Mexico licenses 1,200 master‘s level social

workers, but only about 400 of these social workers are independent practitioners who accept

managed care reimbursements. New Mexico licenses 1,727 masters-level counselors, but only

about 400 of these accept managed care reimbursements. Therefore, the deduction would apply

Senate Bill 29 – Page 2

to about 750-800 social workers and counselors.

TRD estimates the fiscal impact to the general fund at $268 thousand in FY07 and $282 thou-

sand in FY08. This impact includes the direct impact of making these practitioner receipts de-

ductible, as well as the impact of holding local governments harmless from the new deductions.

Local governments will not be impacted by this bill unless practitioners report their deductions

incorrectly.

TRD calculated this impact based on aggregate industry trends, which suggest that approxi-

mately half of these providers’ receipts come from managed care insurers, and thus will be eligi-

ble for the new deduction.

SIGNIFICANT ISSUES

According to DOH, recruitment and retention of health providers has been difficult in New Mex-

ico because of the gross receipts tax. Although much of this problem was addressed by the 2004

Legislature, some healthcare practitioners in New Mexico still pay gross receipts tax, while their

counterparts in most other states do not. Unlike many businesses that are subject to gross receipts

tax but pass the tax on to consumers, many health providers cannot pass the tax on because man-

aged care organizations and Medicare refuse to pay the tax.

In 2004, Governor Richardson signed an Executive Order directing specific activities to enhance

New Mexico’s behavioral health workforce (EO 2004-062). A concerted effort is now underway

to recruit and retain behavioral health professionals, particularly in the state’s rural areas. This

gross receipts tax deduction could function as a recruitment and retention incentive for counsel-

ors, therapists and social workers.

ADMINISTRATIVE IMPLICATIONS

According to TRD, Senate Bill 29 would require system coding and troubleshooting; form and

instruction revisions; taxpayer education and seminar material and instruction preparation; and

department personnel training. These changes can be implemented with existing resources.

OTHER SUBSTANTIVE ISSUES

TRD noted that receipts of health practitioners have historically grown more quickly than gen-

eral revenue. Deducting services from high-growth sectors such as health care from the existing

tax base makes it harder for tax revenue growth to keep pace with inflation.

SS/mt