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

SPONSOR Campos

ORIGINAL DATE

LAST UPDATED

1-26-2006

HB

SHORT TITLE Forest Workers’ Compensation Fund

SB 286

ANALYST Dearing

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$4,200.0 Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

SUMMARY

Synopsis of Bill

Senate Bill 286 appropriates $4,200,000 from the general fund to create an entirely new fund es-

tablished for the purpose of contributing toward the workers’ compensation insurance premiums

for those forest workers that have earned a “safety certification.” The initial, non-recurring ap-

propriation would create this fund, to be administered by the Insurance Division of the Public

Regulatory Commission. All premiums to be paid by these “safety certified” forest workers

would be paid from this established fund over a three-year period beginning July 1, 2006, and

ending June 30, 2009.

FISCAL IMPLICATIONS

The appropriation of $4,200,000 contained in this bill is a non-recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at June 30, 2009 shall revert to the

general fund.

According to the Public Regulatory Commission, it is in large part up to the discretion of the Su-

perintendent of Insurance as to how much of the $4.2 million appropriation to spend during the

three-year period.

Senate Bill 286 – Page

2

SIGNIFICANT ISSUES

According to the Energy, Minerals & Natural Resources Department (EMNRD), New Mexico’s

workers’ compensation insurance rates are higher than other western states. Currently, workers’

compensation insurance premiums for forest workers are $79 per $100 of payroll, which in-

creases the per-acre cost to land managers who are working on forest and watershed health pro-

jects. While New Mexico requires all of its forest worker contractors to carry workers’ compen-

sation insurance, many New Mexico forest workers are currently uninsured due to these pre-

mium costs.

A “Forest Worker Safety Certification Program” has been created and will offer a forest worker

safety certificate to any woods worker who completes the required training courses. In return,

forest workers who complete the certification program will be eligible for lower insurance rates,

offered by the Public Regulation Commission as a “state specific code”. The state specific code

will bring rates for safety certified workers down to $50 per $100.

This bill will bring rates down another 20% to a competitive level with out of state contractors,

which is around $30 per $100 of payroll. Employers and workers who are safety certified will

receive a price-break on their premiums. At the year-end audit where premiums are calculated

based on actual payroll, payments will be made from the Insurance Division trust to the carriers.

Workers’ compensation rates are based on a three-year average, so three years of incentives will

be sufficient to stabilize the pool size and establish the lower rates.

According to the Workers’ Compensation Administration, this bill has no impact on the Work-

ers’ Compensation Act therefore it would not have to go before the Workers’ Compensation Ad-

visory Council.

Although not stated in the bill, it is our understanding that the purpose of this bill is to promote

the logging of dead trees in order to reduce the threat of forest fires in New Mexico. This effort

is currently impeded by high workers compensation costs for logging in New Mexico. A non-

profit New Mexico organization called the Forest Guild has been working in cooperation with

the Insurance Division and the National Council on Compensation Insurance to design a safety

certification program and a corresponding new workers’ compensation logging classification that

will have a substantially lower premium rate than logging in general.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

There is a possibility that this bill violates the anti-donation clause of the New Mexico Constitu-

tion, New Mexico Constitution, Article IV., Section 31, Appropriations for Charitable, Educa-

tional, etc. purposes.

ALTERNATIVES

Increasing the contract service fees paid to those individuals performing forest clearing activities

in order to decrease the premium to payroll ratio to levels in-line with other western states.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Workers’ Compensation Insurance premiums for “safety-certified” forest workers would not be

subsidized over the July 1, 2006-June 30, 2009 interval.

Senate Bill 286 – Page

3

POSSIBLE QUESTIONS

Does this bill violate the anti-donation clause of the New Mexico Constitution, New Mexico

Constitution, Article IV., Section 31, Appropriations for Charitable, Educational, etc. purposes.

PD/mt:nt