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

SPONSOR Altamirano

ORIGINAL DATE

LAST UPDATED

2/6/06

HB

SHORT TITLE Higher Education Capital Outlay Act

SB 220

ANALYST Kehoe

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$100,000.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

$100,000.0

Recurring Higher Education

Capital Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Higher Education Department (HED)

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of Bill

Senate Bill 220 enacts the Higher Education Capital Outlay Act, creates the Higher Education

Capital Council and higher education capital outlay fund, and makes an appropriation.

Senate Bill 220 – Page

2

FISCAL IMPLICATIONS

Senate Bill 220 appropriates $100 million from the general fund to the proposed higher educa-

tion capital outlay fund for expenditure in fiscal year 2007 and subsequent fiscal years. Money

in the fund, including earned income, will be credited to the fund and shall not be transferred or

reverted to any other fund at the end of a fiscal year. The money in the fund is appropriated to

the newly created Higher Education Capital Council for the purpose of making grants to institu-

tions for capital outlay projects approved by the Council.

The proposed 2006 General Appropriation Act, as passed out of the House of Representatives,

contains $60 million intended for “deferred maintenance” for institutions of higher education fa-

cilities.

SIGNIFICANT ISSUES

Senate Bill 220 creates a Higher Education Capital Council similar to the Public School Capital

Outlay Task Force. The Council shall consist of the secretary of the Department of Finance and

Administration, the governor, the director of the Legislative Finance Committee, the director of

the Legislative Council Service, the secretary of Higher Education Department, or their desig-

nees; and a representative of a two-year and four-year institution, appointed by the governor.

The Council is required to investigate all applications for assistance from the fund and certify the

approved applications for allocations from the fund.

OTHER SUBSTANTIVE ISSUES

One of New Mexico’s most significant capital obligations is its investment in the campuses of

higher education and special schools. The fixed assets of land, buildings, infrastructure, and

equipment at the campuses within the public post secondary education system are instrumental to

the institutions of higher education fulfilling their mission to deliver education, training, and

other services to its students and communities.

The Legislature has authorized $316.5 million for post-secondary and special school facilities

between 1998 and 2005. At least 70 percent of the funding has been for infrastructure and reno-

vation, American with Disability Act improvements, information technology and equipment, and

at least 30 percent for new construction.

The Legislature authorizes the funding of larger, more costly capital improvements for higher

education projects from general obligation bond capacity available only in even-years. Local

funds, which are usually local general obligation bonds issued by the two-year colleges, have

contributed significantly towards capital needs at their campuses to pay for campus improve-

ments such as childcare centers, student activity buildings and student recreational facilities.

University system revenue bonds are generally used to pay for projects such as dormitories, stu-

dent union buildings, stadiums, parking garages, UNM Hospital, other revenue-generating facili-

ties or for capital improvements.

Each institution’s operating budget includes an annual allotment for building renewal and re-

placement (BR&R). BR&R is determined by a formula based upon square footage, age, and past

improvements made to the instructional and administrative buildings on the campus. National

Senate Bill 220 – Page

3

guidelines and standards recommend institutions set aside from two to three percent of the re-

placement cost of buildings for determining the cost for keeping facilities in good operating con-

dition which would require $36 million annually for the state’s facilities. However, the current

BR&R formula only generates 40 percent of the recommended funding.

The buildings and infrastructure at the state’s campuses require a substantial investment for “de-

ferred maintenance and renewal,” a term that refers to the slow deterioration of facilities along

with a backlog of necessary repairs and maintenance. Most campuses require extensive infra-

structure replacements or improvements for heating and cooling, water and sewer improvements,

metering and energy management systems, electrical distribution systems, fiber optic cabling and

other communications systems, and other improvements to eliminate fire and safety code

deficiencies.

The backlog of repairs and renovations along with the lack of adequate funding has resulted in

the minimum performance of repairs and maintenance necessary to keep buildings at a “safe and

healthy” level for students and staff. More and more campuses are suffering from frequent util-

ity outages, unusable classrooms, a loss of students, and discouraged faculty members.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

This bill duplicates Senate Bill 262 in its entirety.

LMK/nt