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

SPONSOR Grubesic

ORIGINAL DATE

LAST UPDATED

1/31/2006

HB

SHORT TITLE Prohibit Profiteering During Emergencies

SB 445

ANALYST McOlash

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$1,000.0

Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates: HB 392

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

FY08

$1,000.0

Non-Recurring Anti-Profiteering

Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Financial Institutions Division of the Regulation and Licensing Department (FID)

Administrative Office of the Courts (AOC)

Office of the Attorney General (AGO)

Department of Finance and Administration – General Counsel (DFA/GC)

SUMMARY

Synopsis of Bill

Senate Bill 445 amends the Unfair Practices Act to prohibit unconscionable trade practices that

result in prices that grossly exceed the prices of similar goods or services readily obtainable in

similar transactions by similar persons. The bill defines disasters, necessary properties or ser

Senate Bill 445 - Page

2

vices, and profiteering and adds new material to the Act to prohibit such profiteering during

these emergencies or disasters.

The bill creates an Antiprofiteering Fund in the State Treasury and appropriates $1,000,000 to

the Fund for use by the AGO in FY 2006 and subsequent fiscal years for the investigation and

prosecution of violations of the antiprofiteering provisions.

Section 3 provides for a civil penalty of up to $1,000 per violation, with an aggregate total of

$25,000 for any 24-hour period. The bill also allows a court to suspend or revoke business li-

censes or certificates for continuous and willful violations.

Section 6 (Severability) provides that if any part or application of the Act is held invalid, the re-

mainder or its application to other situations or persons shall not be affected.

The bill contains an emergency clause.

FISCAL IMPLICATIONS

This bill creates a new fund and provides for a one-time, non-reverting, appropriation for use in

FY 2006 and subsequent fiscal years. The fiscal impact, overall, will be proportionate to the en-

forcement of this law. New laws, amendments to existing laws, and new hearings have the poten-

tial to increase court caseloads, thus requiring additional resources.

Continuing Appropriations language

This bill creates a new fund and provides for continuing appropriations. The LFC has concerns with in-

cluding continuing appropriation language in the statutory provisions for newly created funds, as earmark-

ing reduces the ability of the legislature to establish spending priorities.

SIGNIFICANT ISSUES

New Mexico does not have a “price-gouging” law and, presumably, SB 445 will fill this need as

a reaction to the perceived price-gouging after Hurricane Katrina.

Senate Bill 445 allows for the establishment of price controls for certain goods and services dur-

ing times of emergency or disaster. The price controls allow sellers of emergency goods or ser-

vices to charge:

1.

the pre-emergency price plus a reasonable profit;

2.

the average price for similar goods and services in the area plus a reasonable profit; or

3.

the seller’s actual cost.

The reasonable profit margin cannot exceed 20%, unless allowed by a court.

Current statute (Section 57-12-10 NMSA 1978) includes provisions allowing any person who

suffers any loss of money or property, real or personal, under the Unfair Practices Act to bring an

action to recover damages.

PERFORMANCE IMPLICATIONS

The courts are participants in performance-based budgeting. The bill will have an impact on the

Senate Bill 445 - Page

3

cases disposed of as a percentage of cases filed; the percentage change in case filings by type;

and clearance rates.

POSSIBLE QUESTIONS

What does it mean to “grossly exceed’ a price.

How is the “time of a state of emergency or disaster” defined. Only as declared by the President

or Governor. Can a court find that an event constitutes a disaster in absence of a declaration.

Does 57-12-10 NMSA 1978 apply to cases of profiteering.

BMC/mt