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

SPONSOR M.P. Garcia

ORIGINAL DATE

LAST UPDATED

1/23/07

HB 121

SHORT TITLE

Low-Income Energy Assistance Funds

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

(10,184.0)

(3,514.0) Recurring General Fund

$10,184.0

$3,514.0 Recurring

Low Income

Home Energy

Assistance Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to Appropriation in the General Appropriation Act

Relates to SJM3, HB372, SB323, SB325

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department (TRD)

Human Services Department (HSD)

Responses Received From

Taxation and Revenue Department (TRD)

Human Services Department (HSD)

SUMMARY

Synopsis of Bill

House Bill 121 creates a low income home energy assistance fund and diverts a portion of oil

and gas emergency school severance tax revenues to the new fund. The amount of distribution

depends on the “surplus" amount from a base year that is defined as fiscal year 2004.

The money in the fund is appropriated to the human services department for expenditure for the

low-income home energy assistance program (LIHEAP).

House Bill 121 – Page

2

HSD:

LIHEAP is a grant from US Department of Health and Human Services (HHS) that helps

NM low-income families meet the costs of home heating and cooling one time per year and

increase energy self-sufficiency and reduce vulnerability resulting from energy needs. House

Bill 121 adds general fund to supplement the federal funds available for this purpose.

There is no effective date so it is assumed that the effective date is June 15, 2007.

FISCAL IMPLICATIONS

House Bill 121 would reduce general fund revenues by $19 million in FY08 and $13 million in

FY09. The reduction would be recurring and depend on the amount of revenue generated by oil

and natural gas mining, which is largely determined by price. The new fund, the low-income

home energy assistance fund, would be positively impacted by the identical amount. The

amount of fiscal impact is determined by the amount above a baseline amount determined by the

FY04 revenues and the consumer price index. The bill requires that the consumer price index for

the calendar year preceding the current fiscal year as published by the US Bureau of Labor

Statistics be used. The 2006 CPI was 210 and the 2003 CPI was 184 (CPI Base 1982-1984 =

100) making the inflation factor 1.14. TRD has provided a table:

Year

2004 School

Tax

Base Year

CPI

CPI

Index

Adjustment

Factor

Base CPI

Adjusted

Estimated

School Tax Base Distribution

2008 $318,229 1.84 2.10 1.14

$362,380 $413,300 $50,920

$10,184

2009 $318,229 1.84 2.13 1.16

$369,229 $386,800 $17,571

$3,514

Source: Taxation and Revenue Department

If the calculated distribution results in a negative number, the amount is zero. As the table

indicates, the amount in FY09 is much less than in FY08. This is due to declining oil and natural

gas prices and declining production. It is not inconceivable that the amount in a future year will

be zero because the revenues have not kept up with inflation. Since the balances at the end of

each fiscal year do not revert to the general fund, there may be some opportunity to accumulate

reserves. However, LIHEAP is already under-funded and considered by many to be chronically

under-funded so the likelihood of any reserves building up is slim.

Continuing Appropriations language

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

with including continuing appropriation language in the statutory provisions for newly created

funds, as earmarking reduces the ability of the legislature to establish spending priorities.

SIGNIFICANT ISSUES

In the 2005 special session, $25 million was appropriated to Human Services Division (HSD) to

administer LIHEAP. The session also created the Gasoline and Home Heating Relief Fund as a

vehicle for contributions, appropriations and gifts but the fund has never had a non-zero balance.

Two important features of the LIHEAP program is that HSD will capture 10 percent of the

appropriation for administration and 15 percent of the appropriation will be expended for

weatherization.

House Bill 121 – Page

3

HSD:

According to 2006 Fisher, Sheehan & Colton publications, the Home Energy Affordability Gap

for low income households is $600. Although only 71,794 NM households received LIHEAP in

FFY 2006, there are approximately 180,530 households that meet the LIHEAP income eligibility

limit of 150% of Poverty (2000 Decennial Census 2/2005). Using the Home Energy

Affordability Gap of $600, the total approximate energy need for 180,530 households is

$108,318,000. Receiving an undetermined amount in general funds would help to reduce the un-

met need.

HSD has provided a table of the payments shown below. This proposal would fit under the $10

million column and depending on the level of “point value option" HSD could serve 33 thousand

to over 100 thousand households. At the FY06 level of benefit of $65 per point, the program

would serve 40,709 households in FY08. A point value is based on the available funding and a

household’s points are determined by income and family size.

ADMINISTRATIVE IMPLICATIONS

TRD reports that there will be only minor changes needed. HSD reports that they will need 10

percent of the appropriation to administer the program.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

The Legislative Finance Committee recommendation for the general appropriation act included a

$4 million appropriation to HSD ($2 million in the base budget and $2 million as a special

appropriation) for LIHEAP and the Executive recommended $1 million in HSD’s budget.

House Bill 121 – Page

4

House Bill 372 appropriates $9 million to HSD for LIHEAP to the gasoline and home heating

relief fund, a fund already established for distribution of heating assistance.

Senate Joint Memorial 3 calls on the Federal government to maintain and increase funding for

LIHEAP.

TECHNICAL ISSUES

TRD:

The overall concept related to recognizing a new fund distribution from the extraction tax

suspense fund is flawed. The Extraction Tax Suspense Fund is basically a “holding deposit

account" whereby the money is further distributed into the main fund accounts or refunded

from the main fund accounts based upon tax detail that is supplied by taxpayers. In reality, no

money should remain in this account if taxpayers filed timely and filed correctly. If money is

needed to support a Low Income Home Energy Assistance Fund account, a better way of

allocating such money is directly from the Oil and Gas Emergency School Tax fund account.

This can be done in the same way 7-1-6.21 handles an allocated amount from the Oil and Gas

Conservation Tax fund into the Oil and Gas Reclamation fund that supports Energy and

Minerals functions of plugging wells and reclaiming oil and gas well sites.

The bill should specify which version of the consumer price index the Department should use

in making calculations (i.e. "consumer price index" means the average of the consumer price

index for all urban consumers published by the United States department of labor for the

twelve-month period ending July 31 of the calendar year.").

OTHER SUBSTANTIVE ISSUES

HSD reports that some of the LIHEAP payments are made directly to recipients and may be

considered income for the purposes of other social assistance programs, particularly the food

stamp program.

ALTERNATIVES

There already exists a Gasoline and Home Heating Relief Fund that can be used for this purpose

though an amendment would be required to allow for distributions from a tax revenue source.

A direct appropriation to HSD or to the gasoline and home heating relief fund is an option that

would maintain legislative authority over appropriations.

POSSIBLE QUESTIONS

Is this the best way to provide funds for LIHEAP.

Is this a sufficient source of revenue that future appropriations will be unnecessary.

NF/csd