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

SPONSOR Sharer

ORIGINAL DATE

LAST UPDATED

1/23/06

HB

SHORT TITLE

TRANSFER OF LAND GRANT PERMANENT

FUNDS

SB 66

ANALYST Schardin

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

1,000,000.0

Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

$9,605.0 Recurring General Fund

$1,995.0 Recurring LGPF Other

Beneficiaries

1,000,000.0

Non-Recurring

Land Grant

Permanent

Funds

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB 41 and HB47.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of Bill

Senate Bill 66 would transfer $1 billion of nonrecurring general fund revenue in the general fund

Senate Bill 66 – Page

2

at the end of FY06 to the land grant permanent funds (LGPF). The distribution of this $1 billion

will be proportional to the percentage of LGPF ownership each beneficiary owns.

FISCAL IMPLICATIONS

Transferring $1 billion from the general fund to the LGPF would increase the LGPF corpus by

$1 billion. The market value of the LGPF at the end of the last five calendar year’s is the base for

5.8 percent distributions to the general fund (about 82.8 percent) and the LGPF’s other benefici-

aries (about 17.2 percent).

Increasing the market value by $1 billion during CY2006 would increase total LGPF distribu-

tions by $11.6 million in FY08, $24.0 million in FY09, $37.4 million in FY10, $51.4 million in

FY11, and $66.1 million in FY12. About 82.8 percent of this increase, or $9.6 million in FY07,

would accrue to the general fund, and 17.2 percent, or $2.0 million in FY07, would accrue to the

other beneficiaries.

SIGNIFICANT ISSUES

The LFC currently projects general fund reserves to total $1.039 billion at the end of FY06, in-

cluding $358.6 in FY06 “excess revenue” that will be transferred to the general fund operating

reserve. Both the LFC and the governor have adopted a target of keeping general reserves at 10

percent of recurring appropriations, which equals $471 million in FY06. Transferring $1 billion

to the LGPF would reduce general fund reserves to a level of $43.8 million, or slightly less than

1 percent of recurring appropriations.

The LGPF is owned by several entities, which are listed in the table below. Each entity receives

a distribution from the LGPF in proportion to their percent ownership.

LGPF Beneficiaries

Percent

Ownership

General Fund/Public Schools

82.86%

N.M. Military Institute

3.55%

N.M. School for the Deaf

2.14%

N.M. School for the Visually Hdcp.

2.13%

Penitentiary of N.M.

2.07%

University of N.M.

1.69%

Public Buildings at Capital

1.21%

Miners Hospital of N.M.

1.12%

Water Reservoirs

1.03%

Charitable Penal and Reform

0.81%

N.M. State University

0.45%

Im provem ent of the Rio Grande

0.33%

N.M. State Hospital

0.24%

N.M. Institute of Mining and Tech.

0.20%

Eastern N.M. University

0.10%

Western N.M. University

0.03%

N.M. Highlands University

0.03%

Northern N.M. State School

0.02%

UNM Saline Lands

0.01%

N.M. Boys School

0.01%

TOTAL

100%

Senate Bill 66 – Page

3

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Relates to House Bill 41 and House Bill 47. These bills would transfer $200 million and $125

million in excess FY06 revenues to the STPF, respectively.

TECHNICAL ISSUES

According to the December 2005 consensus revenue estimate, nonrecurring revenue in FY06 is

scheduled to total -$105.5 million, meaning that non-recurring revenue is insufficient to make

the transfer. Amend the bill to read “$1 billion of the general fund remaining at the end of fiscal

year 2006 shall be transferred to the land grant permanent funds…”

Senate Bill 66 violates Sections 6-4-2.1, 6-4-2.2, and 6-4-2.3 NMSA 1978, which prohibit ex-

penditure of reserves unless specific conditions are met.

SS/mt