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

SPONSOR Cisneros

ORIGINAL DATE

LAST UPDATED

2-18-07

HB

SHORT TITLE Liquid Waste Fund Purpose & Distributions

SB 921

ANALYST Aubel

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

($0.01)

Recurring

Liquid Waste Fund

See narrative

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to Appropriation in the General Appropriation Act

Relates to SB 702, SB 920, SB 919, HB 859, HB 1130

Duplicates HB 858

SOURCES OF INFORMATION

LFC Files

Responses Received From

New Mexico Environment Department (NMED)

SUMMARY

Synopsis of Bill

Senate Bill 921 sets limits on how the liquid waste fund could be utilized by the New Mexico

Environment Department and requires an annual budget for the fund, as well as an annual audit

by the Legislative Finance Committee (LFC). The bill would limit NMED expenditures from

the fund to 12 percent for administration of liquid waste rules and to 38 percent for a liquid waste

certification program and a public awareness education program.

FISCAL IMPLICATIONS

Fees from liquid waste permits are deposited in the liquid waste fund, which is used to run the

Liquid Waste Program. In FY06, expenditures were $1.2 million and fee revenues were $845.8

thousand. Therefore, the cost to operate the Liquid Waste Program throughout the state ex-

ceeded the liquid waste fee revenue collected. For the program to continue, any reduction in its

Senate Bill 921 – Page

2

current funding source would require replacement from the general fund. Because a fund balance

date is not specified, the exact amount of general fund that would be required indeterminate. The

unrestricted fund balance as of June 30, 2006 was $15.5 thousand.

SIGNIFICANT ISSUES

Most of the expenditures in any fiscal year are for program administration functions of the liquid

waste rules, including permitting, inspections, and enforcement. Other administrative program

functions include program planning, training and development (including development of a certi-

fication program), regulation review and amendment, and public outreach and education.

Timely permit reviews and a high percentage of inspections are critical services that NMED pro-

vides to the taxpayers. Any reduction in the delivery of those services would be detrimental to

New Mexico. Illegal or improper liquid waste systems can pose imminent public safety hazards

related to entrapment, asphyxiation and drowning, and can create public health hazards related to

surfacing sewage and pollution of both private and public drinking water supplies.

HB 858 proposes an expenditure limit of 38 percent of the liquid waste fund for a liquid waste

“certification program and a public awareness education program." NMED has been developing

its certification program and conducts extensive public education.

NMED’s revenue and expenditure records for the liquid waste fund are already subject to review

by LFC and DFA. NMED notes that it welcomes any additional examination or audit that the

Legislature deems appropriate.

NMED has determined that substandard and failed septic tanks and illegal cesspools are the lead-

ing contributor to groundwater combination in the state.

PERFORMANCE IMPLICATIONS

NMED maintains that SB 921 would have a detrimental impact on performance of the Liquid

Waste Program if the funding is not provided. In that case, the timeliness of permit reviews and

the number of inspections conducted would be decreased, and NMED’s ability to prevent and

eliminate public safety and health hazards from violations of liquid waste rules would be im-

paired. The Liquid Waste Program would not meet its performance measures because inspec-

tions for systems throughout the state would be curtailed.

ADMINISTRATIVE IMPLICATIONS

HB 858 would create additional administrative work for NMED related to accounting for differ-

ent activities funded by the liquid waste fund and concludes that the financial recording for

tracking limitations on program activities would be substantial.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Duplicates HB 858.

Relates to funds appropriated to NMED in the General Appropriations Act

Relates to SB 702, SB 920, SB 919, HB 859, HB 1130, all which are legislative efforts directed

Senate Bill 921 – Page

3

at reducing the impact of substandard, on-site liquid waste systems on groundwater.

TECHNICAL ISSUES

The percentages for establishing expenditure limits are based on fund balance, which can fluctu-

ate.

OTHER SUBSTANTIVE ISSUES

NMED points out that the potential decreases in program performance could result in tort liabil-

ity claims against the state caused by injuries and illness and by damages to water quality and

property rights.

ALTERNATIVES

One option would be to establish a periodic schedule of audits for all special funds managed by

NMED.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

NMED will continue the liquid waste program as currently managed. Most likely no LFC audit

will be performed, although such an audit can always be made part of a future work plan since

this does not require additional legislative authority.

POSSIBLE QUESTIONS

1.

What is the benefit of restricting the fund’s use for specified activities.

2.

What is the cost of achieving those benefits.

MA/nt