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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

1/25/06

HB

SHORT TITLE

AVIATION DIVISION COLLECTION

REVERSIONS

SB 237

ANALYST Schardin

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

960.0

Recurring

State Aviation Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

(960.0)

(2,004.0) Recurring General Fund

960.0

2,004.0 Recurring State Aviation

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HB441.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

Department of Transportation (DOT)

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of Bill

Senate Bill 237 creates a new distribution to the state aviation fund from gross receipts tax reve-

nue that would otherwise go to the general fund. This distribution will be $80 thousand per

month FY07, $167 thousand per month in FY08, and $250 thousand per month in FY09 and be-

Senate Bill 237 – Page

2

yond. These distributions will be used for planning and program administration, construction,

equipment, materials and maintenance of a system of airports, navigation aids and related facili-

ties.

The effective date of these provisions is July 1, 2006.

FISCAL IMPLICATIONS

DOT’s analysis of Senate Bill 237 includes both direct impacts and indirect, or dynamic, impacts

that were estimated using the REMI model.

Direct Fiscal Impact: The bill creates a new monthly distribution to the state aviation fund from

gross receipts tax collections that are distributed to the general fund under current law. The dis-

tribution will total $960 thousand in FY07, $2.0 million in FY08, and $3 million in FY09 and

beyond. All money in the state aviation fund is automatically appropriated to the Aviation Divi-

sion of DOT.

Indirect Fiscal Impact: Additional federal matching funds generated by this bill will be used for

airport construction. While state funds will only pay about 2.5 percent of construction costs, the

effective gross receipts tax rate in municipal areas is 3.775 percent. This means the state could

actually make more money through the gross receipts tax on airport construction than it spends

to secure the additional federal match. In addition to increased gross receipts tax revenues, the

REMI model suggests personal income tax collections will increase due to higher wages and

salaries generated by airport construction activity.

The table below incorporates both the direct and indirect impacts of Senate Bill 237. Including

REMI analysis suggests that the bill will actually have a positive impact on both general fund

revenue and the state aviation fund.

Direct

Impact

Dynamic

Impact

Total

Impact

Direct

Impact

Dynamic

Impact

Total

Impact

Direct

Impact

Dynamic

Impact

Total

Impact

General Fund

-960.0 1,561.4 601.4 -2,004.0 2,207.0 203.0 -3,000.0 3,453.6 453.6

State Aviation Fund 960.0 0.0 960.0 2,004.0 0.0 2,004.0 3,000.0 0.0 3,000.0

FY07

FY08

FY09

Revenue Impact of Senate Bill 237

SIGNIFICANT ISSUES

According to DOT, Senate Bill 237 will help leverage additional matching funds from the Fed-

eral Aviation Administration (FAA) for use on statewide airport construction projects. These air-

port construction projects need only 5 percent in combined state and local funds to earn a 95 per-

cent federal match.

In FY05, New Mexico received about $2.3 million in FAA matching funds, the lowest amount of

all states in the FAA’s southwestern region (Arkansas received $22.3 million, Louisiana received

$51.5 million, Oklahoma received $21.3 million, and Texas received $96.7 million).

DOT reported that New Mexico’s airport infrastructure, excluding the Albuquerque Sunport,

needs over $248 million in improvements between FY03 and FY07. Currently, these projects are

only being addressed with about $16 million per year, so the backlog is growing.

Senate Bill 237 – Page

3

Another consideration is that states that dedicate a reliable revenue stream to aviation improve-

ments may be considered by the FAA for block grant status, which leads to significantly higher

federal funding. Texas, which received $96.7 million in FAA matching funds in FY05, is cur-

rently the only block grant state in the southwestern FAA region.

EDD notes that this bill will allow small airports in New Mexico to continue to improve their

infrastructure, systems and equipment, and navigation aids in order to better serve the communi-

ties throughout the state.

PERFORMANCE IMPLICATIONS

DOT notes that the FAA currently ranks New Mexico as a “poor performer” in terms of provid-

ing airport infrastructure. Without dedicating funding to aviation infrastructure, it will be diffi-

cult for New Mexico to increase its performance ranking and attract additional federal funding

ADMINISTRATIVE IMPLICATIONS

DFA notes that DOT’s Aviation Division currently has seven FTE, and that an influx of funding

provided by this bill may require additional FTE.

OTHER SUBSTANTIVE ISSUES

The bill changes the requirement in Section 64-1-15(B) NMSA 1978 that all state aviation fund

expenditures be made in accordance with budgets approved by DFA so that approval will be

given by DOT. DFA is concerned about this change because of recent findings that state road

fund revenue for the “100 percent state” construction program was not used exclusively for that

purpose.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

DOT suggests that New Mexico’s backlog of airport improvement projects will continue to

grow, and the state’s construction sector will not benefit from the stimulus of federal matching

funds available for airport construction.

SS/nt