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

SPONSOR Salazar

ORIGINAL DATE

LAST UPDATED

1/26/07

HB 284

SHORT TITLE Small Business Corp. Distributions

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

$11,000.0

$12,500.0 Recurring

Small Business

Investment

Corporation

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

State Investment Council (SIC)

Economic Development Department (EDD)

SUMMARY

Synopsis of Bill

House Bill 284 increases the State Investment Council’s (SIC) investment from the severance tax

permanent fund (STPF) in the Small Business Investment Corporation (SBIC) to one percent

from 0.75 percent.

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

FISCAL IMPLICATIONS

The balance of the STPF at the end of calendar year 2006 was $4.4 billion and the level of

investment in the SBIC by SIC was $30 million, slightly below the target of 0.75 percent. Due

to the shifting nature of investments, the level at any single point in time will likely not be

exactly on target and it is reviewed on July 1

st

of each year to rebalance the investment. The

target amount of investment is $32.9 million so by raising the percentage of the fund that gets

House Bill 284 – Page

2

invested to 1 percent, the new target level is $43.8 million. The FY07 impact than is $11 million

in increased investment in SBIC. In FY08, it is assumed that the STPF grows by 8 percent and

the SBIC new investment of $11 million grows by 5.9 percent making the fiscal impact $12.5

million ($11.8 million in SIC investment and $646 thousand in SBIC interest on $11 million).

The only fiscal impact felt by SIC is any lower return that may result from increasing the

investment in SBIC rather than investing that amount in other financial assets. The fiscal impact

could be positive or negative though economically targeted investments like SBIC do not have

market return as their primary goal. ETIs are investments in New Mexico banks, companies, and

other activities with the goal of promoting and developing New Mexico resources.

Economic Development Department (EDD):

The Small Business Investment Corporation is a non-profit, public corporation that assists

companies in creating jobs and increasing capital investment in communities by making

equity or debt investments in small businesses. SBIC invests in ventures capital funds that

target business in disadvantaged communities in New Mexico. These companies are

predominantly located in rural New Mexico. Two funds that are part of the Homefield

Advantage Program, New Mexico Community Capital and Mesa Ventures, target traditional

New Mexico businesses that need capital to expand.

Additionally, the SBIC has investments in micro-lenders that target disadvantaged businesses

and entrepreneurs. These micro lenders will businesses capital from $200 to $100,000 for

working capital, inventory and equipment.

NF/csd