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

SPONSOR Stewart

ORIGINAL DATE

LAST UPDATED

2/07/07

HB 529

SHORT TITLE Media Arts and Entertainment Department Act

SB

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$500.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

House Bill 529 duplicates Senate Bill 525.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Economic Development Department (EDD)

Department of Finance and Administration (DFA)

State Investment Council (SIC)\

Responses Not Received From

Cultural Affairs Department

SUMMARY

Synopsis of Bill

House Bill 529 creates a new sub-cabinet level department to consolidate state functions to de-

velop a media arts and entertainment industry in New Mexico. An executive director would lead

the department, which is composed of four divisions and seven bureaus. The act creates a new

fund for the film museum.

The bill would transfer all functions, personnel, appropriations, money, obligations, and other

property from the NM Film Division of the Economic Development Department and from NM

Film Museum and its board of trustees from the Cultural Affairs Department to the new Media

Arms and Entertainment Department.

House Bill 529 – Page

2

The bill reconciles multiple amendments to the same section of the law of laws 2005, amending,

enacting and recompiling sections of NMSA 1978.

The bill appropriates $500 thousand to the DFA to establish the department.

FISCAL IMPLICATIONS

The appropriation of $500 thousand contained in this bill is a recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of fiscal year 2008 shall

revert to the general fund.

Continuing Appropriations language

Section 20 of 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

The new department would be organized in four divisions and seven bureaus, as follows:

A.

Administrative Services Division

B.

Film Division

a.

Production Services Bureau

b.

NM Filmmakers Bureau

c.

Film Museum Bureau

C.

General Media Arts and Entertainment Division

a.

Corporate services bureau

b.

Games and animation bureau

c.

Digital imaging technologies bureau

d.

Music bureau

D.

Media Arts education Division

All divisions would be headed by directors exempt from the state personnel act, and all bureaus

would be headed by chiefs exempt from the personnel act.

The FY07 operating budget for the Film Division of EDD includes about $800 thousand and au-

thorization of 12 FTE. Including the Film Office, the Film Museum, and the FTE and appro-

priations contained in this bill, the new department would have a budget of about $1.5 million

and employ at least 19 people. Two boards – “Governor’s Council on Film and Media Indus-

tries" and the Board of Trustees of the NM Film Museum – would advise the new department.

According to the Film Office, this act is in reaction to the rapid growth and expansion of New

Mexico’s film industry and the emergence of digital media (animation, visual effects, games, and

applications of digital media into the medical and security fields) in the state. The Film Office

also states that “the act addresses the need to secure and service digital media companies that are

currently shopping for the ideal domestic headquarters for their operations and are leaning to-

wards New Mexico. Expertise and resources are needed to maximize these opportunities." The

House Bill 529 – Page

3

Film Office, however, does not address why a new department is needed to cultivate this exper-

tise and recruit these companies.

The growth of the film industry in the state is due largely to the 25 percent film production tax

credit and the diligent services provided by the Film Office to production companies. In the first

quarter of FY07, the state approved $5.7 million in tax refunds to production companies. At that

rate, the state will likely return to companies more than $24 million from the general fund. Other

subsidies the state provides to the industry include wage reimbursement for employees through

the Job Training Incentive Program (JTIP) and zero-interest loans from the State Investment

Council. The state has also invested more than $16 million in capital outlay appropriations for

media production education programs at New Mexico’s colleges and universities.

There is strong potential for significant growth of the digital media industry in the state. The

Mesa del Sol development group and the state attracted Culver Studios to expand into New Mex-

ico. Their new facilities – Albuquerque Studios – in conjunction with state incentives may help

attract digital media companies and post-production facilities to the development.

PERFORMANCE IMPLICATIONS

The New Mexico Film Office has exceeded the performance measures every year for four years.

The office tracks worker days, economic impact and number of productions, and has already ex-

ceeded its FY07 performance targets in the first six months of the year:

•

Worker days are 97,803, well over the target of 75,000; and

•

Economic impact* is stated at $200 million, exceeding the FY07 target of $140 million.

*Economic impact is calculated by multiplying company expenditures by three – an approxima-

tion that EDD believes to be an industry standard.

ADMINISTRATIVE IMPLICATIONS

EDD notes that the workload created by the large number of film productions coming into the

state requires a disproportionate percentage of EDD’s marketing, administrative services and le-

gal staff resources. EDD’s Public Information Officer is not currently handling the New Mexico

Film Office’s massive amount of press inquiries, press releases, or press opportunities. This

function has been incorporated into NMFO’s staff responsibilities (who do not have the expertise

or time to handle this important element.) Creating this new agency would take the burden off of

EDD to handle these administrative needs.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

House Bill 529 duplicates Senate Bill 525.

ALTERNATIVES

Instead of creating a new department, the Legislature could give more authority and resources to

the existing film office of the Economic Development Department, which is the principal busi-

ness recruitment and retention arm of the state.

BE/sb