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

SPONSOR Varela

ORIGINAL DATE

LAST UPDATED

1-27-2007

2-22-2007 HB 531/aHEC

SHORT TITLE Teacher Loan Repayment Act

SB

ANALYST Dearing

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$400.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates House Bill 531/aSEC

Relates to Appropriation in the General Appropriation Act

SOURCES OF INFORMATION

LFC Files

Responses Received From

Higher Education Department (HED)

SUMMARY

Synopsis of HEC Amendment

The House Education Committee amends House Bill 531 such that;

1. On page 1, line 19, after "of" insert "public school".

2. On page 2, line 10, after the first "teacher" insert "in a public school".

3. On page 2, line 22, after "teach" insert "in a public school".

4. On page 3, line 12, after "in" insert "a public school in".

5. On page 3, line 16, after "the" insert "public school".,

House Education Committee amendments make minor changes to the proposed legislation,

thereby clarifying its intention. The intent of the changes are such that the term “teacher in a

public school" is specified through-out the bill, for language clarification.

Senate Bill 531/aHEC – Page

2

Synopsis of Original Bill

House Bill 531 enacts the Teacher Loan Repayment Act and appropriates $400 thousand from

the general fund to a newly-created non-reverting fund to be administered by the New Mexico

Higher Education Department (NMHED) for expenditure in FY08 and subsequent fiscal years to

carry out the provisions of the Act. House Bill 531 creates the Teacher Loan Repayment Fund,

establishes framework for teachers’ loans for service provided to the state of New Mexico,

mandates annual reporting of the program’s status to the Executive and Legislature, and provides

penalties for service loans in default.

FISCAL IMPLICATIONS

The appropriation of $400 thousand contained in this bill is a recurring expense to the General

Fund. Any unexpended or unencumbered balance remaining at the end of FY08 shall not revert

to the General Fund.

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

A similar program currently exists and receives annual funding through the Higher Education

department’s Student Financial Aid program budget. Existing sections 21-22E-1 through 21-

22E-1 NMSA 1978, "Teacher Loan for Service Act" provide a similar loan servicing program.

FY06 actuals and FY08 budget amounts were $350 thousand for this program.

The significant difference between the existing Loan for Service Act and this proposed

Repayment Act is that students participating in the existing program must be enrolled or accepted

in a New Mexico postsecondary institution’s teacher preparation program. Under the Loan

program, upon graduation and entry into service in a New Mexico school, principle and accrued

interest of loans taken out to fund participating students’ education are incrementally retired or

repaid with successive years of service. The interest on Teacher Loan for Service loans accrues

at 7 percent while in a teacher preparation program and 18 percent if in non-compliance with the

terms and (contract) default occurs. Again, only New Mexico residents entering an accredited

NM program are eligible for the Teacher Loan for Service program.

The proposed legislation would instead provide repayment for service after the debt is incurred.

Participating teachers would have at minimum a 2-year service commitment. Contract terms

would be determined, and the Higher Education department would then establish a yearly service

credit value. In the event that a participant failed to comply with the terms of the agreement, a

maximum penalty of up to 3 times the principle plus 18 percent interest could be assessed.

House Bill 531 as written allows variable amounts for the yearly service credit value, increasing

it both for difficult to fill locations as well as skill-sets and certifications. The proposed program

would make it easier to recruit teachers from outside the state, as well as positioning teachers in

underserved rural areas. New Mexico residents and teachers from non-profit postsecondary

institutions could receive preference.

Senate Bill 531/aHEC – Page

3

Other loan or repayments for service programs include the following programs.

Medical Student Loans, 21-22-1 through 21-22-10

Osteopathic Medical Student Loans, 21-22A-1 through 21-22A-10

Nursing Student Loans, 21-22B-1 through 21-22B-10

Allied Health Student Loan for Service, 21-22C-1 through 21-22C-10

Health Professional Loan Repayment, 21-22D-1 through 21-22D-10

Public Service Law Loan Repayment Act, 21-22F-1 through 21-22F-11

While the terms of these existing programs vary, the Health Professional and Public Service Law

programs have penalties and contract terms similar to the proposed program. Many existing

programs have clauses specifying participants’ graduation or enrollment from New Mexico

postsecondary institutions. The proposed legislation could encourage recruitment of teachers

with specialty skills from other states. An important consideration of House Bill 531 is the

ability to effectively apply a bonus to entice teaching professionals to the areas with teacher

shortages, and direct specialty certified professionals where they are needed.

If enacted, the legislation could promote relocation of teachers to underserved rural areas, as well

as underperforming districts needing specialty language or teachings skills.

PERFORMANCE IMPLICATIONS

The department will make annual reports to the governor and to the legislature regarding

repayment award grants, current information on participants, and the status of participants

serving in designated teacher shortage areas.

DUPLICATION;

House Bill 531 Duplicates Senate Bill 560

RELATIONSHIP

House Bill 531 relates to 21-22E-1 NMSA 1978, "Teacher Loan for Service Act." Relationship

is described in detail in the significant issues narrative.

TECHNICAL ISSUES

Revenue from penalties and program-default repayment shall be credited back to the fund.

PD/mt