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F I S C A L I M P A C T R E P O R T
SPONSOR SFC
ORIGINAL DATE
LAST UPDATED
1/24/06
2/15//06 HB
SHORT TITLE Gila Regional Medical Center Cancer Funding
SB 229/SFCS/aHTRC
ANALYST Kehoe/Francis
REVENUE (dollars in thousands)
Estimated Revenue
Recurring
or Non-Rec
Fund
Affected
FY06
FY07
FY08
599.2
593.2 Recurring
Rural County
Cancer Treat-
ment Fund
195.6
193.6 Recurring General Fund
55.6
55.0 Recurring General Fund:
NMFA/CEA
6.9
6.9 Recurring UNM Cancer
Center
7.4
7.3 Recurring NM Finance
Authority
48.0
47.5 Recurring NMFA/UNM
Health Sciences
22.1
21.8 Recurring NMFA/Departm
ent of Health
6.9
6.9 Recurring
County and
Municipal Rec-
reation Fund
7.8
7.8 Recurring
County and
Municipal Ciga-
rette Fund
(Parenthesis ( ) Indicate Expenditure Decreases)
SOURCES OF INFORMATION
LFC Files
New Mexico Finance Authority (NMFA)
Taxation and Revenue Department (TRD)
pg_0002
Senate Bill 229/SFCSaHTRC – Page
2
SUMMARY
Synopsis of HTRC Amendment
The House Taxation and Revenue Committee amended Senate Bill 229 substitute to modify the
discount rates that vendors receive on the purchase of tax stamps. The amendment also makes
some technical changes including requiring serial numbers on tax stamps and stipulating that
only TRD can sell stamps and only to distributors.
Synopsis of Bill
The Senate Finance Committee Substitute for Senate Bill 229 authorizes the New Mexico Fi-
nance Authority (NMFA) to issue additional revenue bonds, payable from a distribution of the
cigarette tax, for the Regional Cancer Treatment Center at the Gila Regional Medical Center in
Grant County. The NMFA, upon a certification of need by the chair of the Board of County
Commissioners of Grant County, may issue and sell revenue bonds in an amount not to exceed
$2.5 million for the purpose of designing, constructing, equipping and furnishing additions and
improvements to the Regional Cancer Treatment Center at the Gila Regional Medical Center in
Grant County. The bond proceeds are to be appropriated to the Local Government Division of
the Department of Finance and Administration for the infrastructure described in this bill.
The bill creates a rural county cancer treatment fund within NMFA comprised of appropriations,
donations, distributions of the cigarette tax, and money earned from investment of the fund and
otherwise accruing to the fund. The money in the fund provides NMFA with a revenue stream to
finance the construction of caner treatment facilities in Class B counties. Balances in the fund at
the end of a fiscal year shall not revert.
The bill also changes the Cigarette Tax Act in two ways. First, it decreases the vendor discount
rate that vendors receive for the purchase of cigarette tax stamps. Second, it alters the distribu-
tions of the cigarette tax revenues for the other beneficiaries to allow a 1 percent distribution to
the rural county cancer treatment fund.
FISCAL IMPLICATIONS
The cigarette tax revenue collection is approximately $60 million annually, of which 55 percent
is transferred to the general fund. This bill proposes distributing 1% of the net receipts, exclu-
sive of penalties and interest, of the cigarette tax to NMFA for the purpose of issuing the bonds.
The fiscal impact is designed to provide revenue for the new fund without decreasing the reve-
nue currently being distributed since much of that revenue is used for bond financing of projects.
The vendor discount rates were lowered as indicated in the table one. This change yielded suffi-
cient revenue for the rural county cancer treatment fund distribution without significantly affect-
ing the other funds. In FY07, the net increase in revenue is $950 thousand and in FY08 it is
$940 thousand.
Table two shows how the distributions change and what the net impact is. The impact on all
beneficiaries will be positive.
pg_0003
Senate Bill 229/SFCSaHTRC – Page
3
Table One: Revenue Impact Due to Change in Vendor Discount Rates
FY07
Less than $1,000
0%
-
0.0%
-
$1,000 to $30,00
4% 1,897,875
1.0%
1,957,184
$30,000 to $60,0
3% 2,250,960
0.8%
2,302,013
Greater than $60
2% 54,825,181
0.5% 55,664,342
Total Revenue
58,974,016
59,923,538
Net Impact
949,522
FY08
Less than $1,000
0%
-
0.0%
-
$1,000 to $30,00
4% 1,878,896
1.0%
1,937,612
$30,000 to $60,0
3% 2,228,450
0.8%
2,278,993
Greater than $60
2% 54,276,928
0.5% 55,107,698
58,384,275
59,324,302
Net Impact
940,027
Current Rates
Proposed New Rates
Proposed New Rates
Current Rates
Table Two: Impacts on Beneficiaries
FY07 Impact
New
Revenue
Impact
C/M Rec Fund
1.36%
802,047
814,960
1.35% 808,968
6.9
C/M Cig Fund
2.72%
1,604,093
1,629,920
2.69% 1,611,943
7.8
UNM Cancer
1.36%
802,047
814,960
1.35% 808,968
6.9
NMFA
2.04%
1,203,070
1,222,440
2.02% 1,210,455
7.4
UNMH
14.52%
8,563,027
8,700,898
14.37% 8,611,012
48.0
NMFA/Dept of Health
6.11%
3,603,312
3,661,328
6.05% 3,625,374
22.1
NMFA/CEA
15.95%
9,406,356
9,557,804
15.79% 9,461,927
55.6
Rural County Cancer Fund
-
-
1.00% 599,235
599.2
General Fund
55.94% 32,990,065
33,521,227
55.38% 33,185,655
195.6
TOTAL
58,974,016
59,923,538
949.5
FY08 Impact
New
Revenue
Impact
C/M Rec Fund
1.36%
794,026
806,811
1.35% 800,878
6.9
C/M Cig Fund
2.72%
1,588,052
1,613,621
2.69% 1,595,824
7.8
UNM Cancer
1.36%
794,026
806,811
1.35% 800,878
6.9
NMFA
2.04%
1,191,039
1,210,216
2.02% 1,198,351
7.3
UNMH
14.52%
8,477,397
8,613,889
14.37% 8,524,902
47.5
NMFA/Dept of Health
6.11%
3,567,279
3,624,715
6.05% 3,589,120
21.8
NMFA/CEA
15.95%
9,312,292
9,462,226
15.79% 9,367,307
55.0
Rural County Cancer Fund
-
-
1.00% 593,243
593.2
General Fund
55.94% 32,660,164
33,186,015
55.38% 32,853,799
193.6
TOTAL
58,384,275
59,324,302
940.0
New
Distribution
Current
Distribution
Current
Distribution
New
Distribution
The provisions of the bill indicated the term of the bond issuance proposed in this bill may not
exceed 20 years. However, NMFA estimates financing could go up to seven years, depending on
pg_0004
Senate Bill 229/SFCSaHTRC – Page
4
interest rates and stability of the cigarette tax revenue collections based on the certain assump-
tions such as: revenue projections based on a two percent decline, the revenue is used to maxi-
mize principal repayment, and no other debt is issued against the proposed distribution.
OTHER SUBSTANTIVE ISSUES
Under provisions of this bill, NMFA estimates financing could go up to seven years depending
on interest rates and the stability of the cigarette tax revenue collection based on the following
assumptions: revenue projections based on a two percent decline, the revenue is used to maxi-
mize principal repayment, and no other debt is issued against the distribution proposed in this
bill.
Current law allows cigarette stamps to be sold to cigarette vendors at a discount. In 2003, the tax
on cigarettes went up from $0.015 per cigarette to $0.0455 per cigarette, or 21 cents per pact to
91 cents per pack of 20 cigarettes. According to TRD, the effective rate of the vendor discount is
2.2 percent which means that most of the stamps are subject to the 2 percent rate. Presumably,
the discount is to compensate vendors for the application and affixing of the cigarette stamps.
Without any change in the volume of stamps, vendors received a discount of $1.4 million after
the tax hike compared to a discount of $313 thousand prior to the tax hike (Table).
Vendor Impact
from Tax Hike
Effective Stamp
Price Before 2003
Hike
Effective Stamp
Price After 2003
Hike
Discount Be-
fore 2003 Hike
Discount After
2003 Hike
0%
0.21
0.91 - -
4%
0.2016
0.8736
(53,116)
(230,169)
3%
0.2037
0.8827
(24,750)
(107,250)
2%
0.2058
0.8918
(235,289) (1,019,586)
Difference
(313,155) (1,357,005)
LMK/mt:nt:yr