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

SPONSOR B. M. Sanchez

ORIGINAL DATE

LAST UPDATED

1/23/2007

3/14/2007 HB

SHORT TITLE NMSU Chile Industry Research

SB 196/aSCORC

ANALYST McOlash

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

$7,000.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates HB 136, except for the title.

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico State University – College of Agriculture & Home Economics (NMSU-CAHE)

Higher Education Department (HED)

SUMMARY

Synopsis of Senate Corporations and Transportation Committee Amendment

The Corporations and Transportation Committee amended the bill to clarify that research in-

cludes research “design" and research “implementation."

Synopsis of the Original Bill

Senate Bill 196 appropriates $7.0 million from the General Fund to the Board of Regents of New

Mexico State University for expenditure in FY 2008 and subsequent fiscal years for research to

support the chile industry in New Mexico.

FISCAL IMPLICATIONS

The appropriation of $7.0 million contained in this bill is a recurring expense to the General

Fund. Any unexpended or unencumbered balance remaining at the end of a fiscal year shall not

revert.

Senate Bill 196/aSCORC – Page

2

SIGNIFICANT ISSUES

The passage of recent international trade laws has impacted the New Mexico chile industry re-

sulting in loss of market share. According to the New Mexico Chile Institute, 80% of chile con

sumed in the United States is imported. The imported chile comes from countries which have

significantly lower labor and production costs than New Mexico. At this time, the largest pro-

ducers are China, Peru, and India.

New Mexico is the leading chile producer in the United States. Chile production also ranks first

in horticultural crop cash receipts for New Mexico. In order to maintain the industry’s economic

viability, new technologies need to be developed to address production and labor costs and to

increase crop yields.

New Mexico State University reports the chile industry in Dońa Ana, Luna and Hidalgo counties

generates $418 million annually in economic activity. This economic activity includes 10,000 to

15,000 part-time harvesting jobs and 5,322 permanent jobs created directly in the chile industry

and indirectly in other business sectors. Chile is a vital, high-value component of the region’s

cropping system. It provides financial stability in the cropping system rotation that includes cot-

ton, alfalfa, silage, onions and other vegetables. Chile’s loss could jeopardize banks’ willingness

to provide financing to farming operations. Quality-of-life benefits are tied to a healthy farm

economy and to the cultural significance of the crop. Locally and statewide, chile’s cultural sig-

nificance has a direct impact on the tourism industry and niche product markets.

The proposed funding is intended to play a role in the avoidance of the devastation that results

from farms, businesses, jobs, and income lost to foreign competition through 1) improvement of

management practices; 2) reduction of costs through harvesting system mechanization; and 3)

expansion of market opportunities.

This request was not on the list of priority projects submitted by New Mexico State University to

the HED for review and was not included in the Department’s funding recommendation for

FY08.

PERFORMANCE IMPLICATIONS

The Higher Education Department recommends that NMSU submit a plan for program evalua-

tion, including specific program goals and criteria for assessing program effectiveness to the

Legislative Finance Committee and the New Mexico Higher Education Department by August 1,

2007. The institution shall also submit a program evaluation to the Legislative Finance Commit-

tee and the New Mexico Higher Education Department by June 30, 2010 detailing the benefits to

the State of New Mexico from having this program implemented for a three-year period.

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