Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance

committees of the NM Legislature. The LFC does not assume responsibility for the accuracy of these reports

if they are used for other purposes.

Current FIRs (in HTML & Adobe PDF formats) are a vailable on the NM Legislative Website (legis.state.nm.us).

Adobe PDF versions include all attachments, whereas HTML versions may not. Previously issued FIRs and

attachments may be obtained from the LFC in Suite 101 of the State Capitol Building North.

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

SPONSOR Altamirano

ORIGINAL DATE

LAST UPDATED

2/5/07

HB

SHORT TITLE

Home Heating Relief Fund Distribution

SB 325

ANALYST Francis

Relates to Appropriation in the General Appropriation Act

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($2,050.0)

($22,000.0)

($20,500.0) Recurring General Fund

$2,050.0

$22,000.0

$20,500.0 Recurring

Gasoline and

Home Heating

Relief Fund

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to SJM3, HB372, SB323, HB121

Duplicates HB593

SOURCES OF INFORMATION

LFC Files

Taxation and Revenue Department

Human Services Department

Responses Received From

Taxation and Revenue Department (TRD)

Human Services Department (HSD)

SUMMARY

Synopsis of Bill

Senate bill 325 changes amends Section 6-4-25 NMSA 1978 to allow the gasoline and home

heating relief fund to receive distributions from tax revenues. SB325 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).

There is no effective date so it is assumed that the effective date is June 15, 2007.

Senate Bill 325 – Page

2

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. SB325 redistributes two-thirds

of that amount, or $22 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

$20.5 million.

Since there is no effective date, there is estimated to be a one-month impact in FY07 of $2.05

million distributed to the gasoline and home heating relief fund.

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 $7.7 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. SB325 will allow this fund to receive distributions from the natural gas

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. SB325 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. HB

121 adds general fund to supplement the federal funds available for this purpose.

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.

Senate Bill 325 – Page

3

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 $23

million column and depending on the level of “point value option" HSD could serve 55 thousand

to over 200 thousand households. At the FY06 level of benefit of $65 per point, the program

would serve 68,402 households in FY08. A point value is based on the available funding and a

household’s points are determined by income and family size.

Senate Bill 325 – 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

The Legislative Finance Committee recommendation for the general appropriation act included a

$4 million appropriation to HSD ($2 million in the base budget and $2 million as a special

appropriation) for LIHEAP and the Executive recommended $1 million in HSD’s budget.

House bill 372 and Senate bill 323 appropriate $9 million to HSD for LIHEAP to the gasoline

and home heating relief fund, a fund already established for distribution of heating assistance.

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

LIHEAP.

House bill 539 is a duplicate.

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.

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