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

SPONSOR Harrison

ORIGINAL DATE

LAST UPDATED

2-26-09

HB 1203

SHORT TITLE Trans Fat Restaurant Notices & Limits

SB

ANALYST Aubel

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY07

FY08

FY09 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

Minimal Indeterminate

See

narratives Recurring Food Fees

Fund or

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Health (DOH)

Environment Department (ED)

SUMMARY

Synopsis of Bill

House Bill 1203 enacts the “Trans Fat Act" (Act), which would require restaurants in New

Mexico with three or more locations, owned or managed by a New Mexico resident, to post

trans-fat content and calorie information of all standard menu items on their menus or menu

boards by July 1, 2007. Restaurants would also be required to limit use of trans-fat to 0.5 gram

per serving by July 1, 2008. By July 1, 2007, Environmental Improvement Board (EIB) would

develop rules to regulate trans-fat in restaurants and to establish a system for grading restaurant

compliance.

FISCAL IMPLICATIONS

NMED’s 50 inspectors inspect restaurants, liquid waste systems, and public swimming pools or

spas statewide, except for Albuquerque, which has its own inspection program. Restaurants are

inspected once a year. If the inspections could follow their normal anniversary date, the fiscal

impact from HB 1203 during FY07 would most likely be minimal and relate primarily to

publication and outreach of the new rules to the targeted restaurants. The posting requirement

would simply be an item added to the checklist inspectors review during the restaurant

inspection.

House Bill 1203 – Page

2

However, NMED maintains that the second requirement of limiting trans-fat in food to .5 grams

would require either adding FTEs or contracting for food analysis. In addition, NMED points

out that ensuring the targeted restaurants are maintaining the limit of trans-fat caloric content to

no more than one-half gram per serving in their standard menu items may require more than the

one mandatory restaurant inspection per year. No appropriation or increase in food fees in

included in the bill to fund this anticipated expansion. The exact amount required is interminable

until the number of restaurants affected and the number of times the department would require

trans-fat food analysis to ensure compliance are determined.

NMED’s projection schedule for the Food Service Fee Fund is included as Attachment 1.

SIGNIFICANT ISSUES

DOH provides the following information regarding trans-fats and health:

Heart disease is the number one killer both in the nation and in New Mexico. The annual

death rate for heart disease in New Mexico is 177 per 100,000 people (State of Health in

NM, 2005). At least 60% of New Mexico adults are overweight or obese (Behavioral

Risk Factor Surveillance System, 2005). At least 27% of New Mexico high school

students and 24% of 2 to 5 year olds who participate in federally funded nutrition

programs are overweight or at risk of becoming overweight (2005 New Mexico Youth

Risk & Resiliency Survey, & Special Supplemental Food Program for Women, Infants

and Children data, 2005).

Overweight acquired during childhood and adolescence is

likely to persist into adulthood and increases the risk for a number of chronic diseases.

Evidence suggests that consumption of trans-fat raises LDL (“bad") cholesterol levels

and lowers HDL (“good") cholesterol levels, causing the arteries to become clogged and

increasing the risk of developing heart disease and stroke. Sources of trans-fatty acids

include hydrogenated/partially hydrogenated vegetable oils that are used to make

shortening and commercially prepared baked goods, snack foods, fried foods, and

margarine. Trans-fats are chemically-created and are used because they give oil a longer

shelf life and sustain higher cooking temperatures.

The 2005 Dietary Guidelines for Americans recommend that trans-fatty acid

consumption should be kept as low as possible. The American Heart Association, the

American Diabetes Association, the World Health Organization and the National

Cholesterol Education Program have similar recommendations.

Effective Jan. 1, 2006, the Food and Drug Administration (FDA) requires food

companies to list trans-fat content separately on the Nutrition Facts panel of all packaged

foods. Nutrition labels now list any measurable (at least 0.5 gram/serving) amount of

trans-fat in a separate line in the total fat section under saturated fat. This labeling only

applies to packaged food products, not foods served at restaurants.

(

www.americanheart.org

). However, the FDA points out that labels provide valuable

information, and that better labels enable consumers to make smarter, healthier food

choices.

Lawmakers in at least 13 states and numerous cities have enacted or introduced some

kind of trans-fat legislation. New York City and Philadelphia have banned trans-fat in

House Bill 1203 – Page

3

restaurants. Some restaurant chains have voluntarily eliminated trans-fats, including

McDonalds, KFC, and Starbucks. Other examples of trans-fat elimination include Girl

Scout cookies and the Ohio State University campus.

NMED points out that the FDA requirements relating to commercially processed food are for

products that are prepared the same way each time and, thus, the nutritional facts will be the

same each time the product is prepared. NMED suggests that this is may not be the case for

menu items prepared in a restaurant. Ingredients may vary from week to week or a recipe may

be modified by the different cooks in the same restaurant. Thus, the nutritional content of the

menu items will vary accordingly. However, HB 1203 does limit the calorie and trans-fat

posting requirement to “every standard

menu item." It is logical to assume that the standard

items have some consistency and would not vary widely.

NMED expressed some concerns regarding the costs impacts to restaurants for compliance:

•

The affected restaurants would need to analyze their standard menu items for caloric content

if not already evaluated, which could be costly;

•

Printing the posters would require some expense; and

•

To limit the use of trans-fat, many restaurants would have to choose alternative fats such as

olive or canola oils for their food preparation and cooking. Olive and canola oil products are

generally more expensive than most oils most restaurants use.

NMED maintains that the Act forces restaurants to become accountable for nutrition aspects for

consumers rather than placing the responsibility on the consumers for their own nutrition.

PERFORMANCE IMPLICATIONS

The percent of annual restaurant inspections is a performance measure for the Environmental

Health Program. Inspecting food in restaurants for caloric and trans-fat content has not

previously been part of the NMED Food Program and may negatively impact this measure.

ADMINISTRATIVE IMPLICATIONS

The EIB would be required to develop rules for the regulation of trans-fat in restaurants and

establishing a system for grading a restaurant for it compliance with the Trans Fat Act.

Additional FTEs will most likely be required to assess the trans-fat content of food or maintain

the level of restaurant inspections if the workload is significantly increased.

TECHNICAL ISSUES

DOH suggests that the July 1, 2007 deadline to complete the analyses of the amount of trans-fat

in food items, develop a system to post information, and develop compliance parameters may

lead to difficulties for some restaurants.

House Bill 1203 – Page

4

OTHER SUBSTANTIVE ISSUES

DOH states that obesity and heart disease disproportionately affect persons of lower socio-

economic levels. A report by the New Mexico Food and Agriculture Policy Council noted that

there are numerous fast food restaurants and few grocery stores in many rural, low-income

communities. DOH suggests that HB 1203 could positively impact this population.

If enacting HB 1203 led to healthier eating and healthier New Mexico citizens, future health

costs would be reduced.

ALTERNATIVES

NMED suggests one option would be to educate the restaurant operators on the use of alternative

fats for heart healthier foods and provide economic incentives for using alternative fats.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Requiring restaurants with three or more locations in New Mexico to post trans-fat content and

calorie information of all standard menu items on their menus or menu boards would not be

established. A limit on the amount of trans-fat in these standard menu items would not take

effect.

POSSIBLE QUESTIONS

1.

Could “standard menu item" and “serving size" be defined for clarification.

2.

How many restaurants that would be affected by HB 1203 already post nutritional

contents of their standard menu items.

3.

What would be the fiscal impact to the affected restaurants to comply with HB 1203.

4.

Would a food fee increase be required to fund the program.

ATTACHMENT

MA/csd

House Bill 1203 – Page

5

Attachment 1

Special Revenue Fund: 991 FOOD SERVICE SANITATION ACT

FY05

FY06

FY07

FY08

FY09

FY10

Type Fee

Actuals

Actuals

Projection

Projection

Projection

Projection

Food Permit Fees

700.5

813.3

983.7

1,154.2

1,324.6

1,395.7

(revenues cash)

Projected Revenue

700.5 813.3 983.7 1,154.2 1,324.6 1,395.7

Actual/Projected Revenue

1

700.5

813.3

983.7

1,154.2

1,324.6

1,395.7

Unobligated Fund Balance

(Beginning)

2

992.1

730.0

406.4

249.9

221.8

364.1

Pending BARS

3

Total Expenditures

4

(962.6)

(1,136.9)

(1,140.2)

(1,182.3)

(1,182.3)

(1,182.3)

Total

730.0 406.4 249.9 221.8 364.1 577.5

Through

Nov. 30,

2005 Dec. 1, 2005 Dec. 1, 2006

Dec. 1,

2007 Dec. 1, 2008

Cost Per Permit

$100.00 $125.00 $150.00

$175.00 $200.00

2. From the NMED Trial Balance Fund 991 as of June 30, 2006.

3. Based on current year shortfalls projected.

FY08 projected expenditures are from the base FY08 request with proposed indirect.

FY09 & FY10 projected expenditures are steady from FY 08 projected expenditures.