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

SPONSOR Lujan, B.

ORIGINAL DATE

LAST UPDATED

1/30/07

3/5/07 HB 539/aHTRC

SHORT TITLE

Home Heating Relief Fund Distributions

SB

ANALYST Francis

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($11,000.0)

($10,267.0) Recurring General Fund

$11,000.0

$10,267.0 Recurring

Gasoline and

Home Heating

Relief Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to SJM3, HB372, SB323, HB121, 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)

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of HTRC Amendment

The House Taxation and Revenue Committee amends House Bill 539 to remove the sunset

clause, fix a technical reference, and change the distribution of the natural gas processors tax to

33.33 percent from 67.67 percent. The original bill allowed the distribution until the end of

FY12; this end date is removed by the HTRC amendment.

Synopsis of Original Bill

House Bill 539 changes amends Section 6-4-25 NMSA 1978 to allow the gasoline and home

House Bill 539/aHTRC – Page

2

heating relief fund to receive distributions from tax revenues. HB539 redistributes the two thirds

of natural gas processors tax revenue to the fund. The distribution to the fund is appropriated to

Human Services Department (HSD) for the low income home energy assistance program

(LIHEAP).

The distribution start July 1, 2007, and cease June 30, 2012.

FISCAL IMPLICATIONS

Under current law, all distributions of the natural gas processor tax goes to the general fund. In

FY08, the consensus revenue estimate for this tax is $33 million. HB539 as amended

redistributes one-thirds of that amount, or $11 million, to the home heating and relief fund which

is also a reduction in general fund revenue. In FY09, due to falling natural gas prices, the

amount of revenue generated is expected to be $30.8 million making the distribution to the home

heating relief fund $10.3 million. There is no longer an end date for the distribution so this

results in a general fund reduction of about $10 million per year.

FY08 FY09 FY10 FY11 FY12

NG Processors - Consensus Estimate 33,000.0

30,800.0

30500 30200 29,898.0

Current Distribution

General Fund

33,000.0

30,800.0

30,500.0

30,200.0

29,898.0

HB539 Distribution

General Fund

22,000.0

20,533.3

20,333.3

20,133.3

19,932.0

Gasoline and Home Heating Relief Fund 11,000.0

10,266.7

10,166.7

10,066.7

9,966.0

The natural gas processors tax is based on the value of natural gas processed which means that

this is a volatile revenue source for continuing appropriations. In the near term, it appears to be

sufficient revenue to cover the needs of LIHEAP but the total revenue has been as low as $11.5

million which would mean only $3.8 million for LIHEAP. However, when prices are low, there

may be less need for home energy assistance but the prices paid in NM are not always correlated

with the prices received by NM production.

Continuing Appropriations language

This bill provides for continuing appropriations. The LFC has concerns with including

continuing appropriation language in the statutory provisions for inactive 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.

The original intent of the fund was a place where oil and natural gas companies could donate a

portion of their windfall profits but this never occurred and there was never an appropriation

made to the fund. HB539 will allow this fund to receive distributions from the natural gas

House Bill 539/aHTRC – Page

3

processors tax. The fund can be appropriated from for three reasons: to provide gasoline price

rebates to New Mexico taxpayers, to provide economic relief for rapidly increasing home heating

costs and for LIHEAP. HB539 clearly appropriates the revenues to the fund for LIHEAP.

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.

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

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

weatherization.

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.

[Gasoline and home heating relief fund] monies for this purpose may be credited toward the

Temporary Assistance for Needy Families (TANF) Maintenance of effort (MOE) when used

to serve low-income households with dependent children. Over $5 million in Temporary

Assistance for Needy Families (TANF) Maintenance of Effort (MOE) was claimed in FFY

2206 using LIHEAP GF from the 2005 fall special session.

Using any state appropriation, HSD would request additional federal leverage funds. HSD

currently uses the PNM Good Neighbor Fund to leverage additional Federal funds. In FFY

2006 HSD received over $15 thousand. In FFY 2007 HSD expects to use more of the GF

from the 2005 fall special session.

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 139 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.

House Bill 539/aHTRC – Page

4

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

House bill 372 as amended and Senate bill 323 as amended appropriate $6 million to HSD for

LIHEAP to the gasoline and home heating relief fund, a fund already established for distribution

of heating assistance. The HAFC substitute for House bill 2 includes $6 million for LIHEAP but

the Senate amended version does not include this appropriation since SB323 has passed the

Senate.

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

LIHEAP.

SB 325 is a duplicate bill.

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.

House Bill 539/aHTRC – Page

5

ALTERNATIVES

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/nt