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

SPONSOR Smith

ORIGINAL DATE

LAST UPDATED

2/17/07

HB

SHORT TITLE Law Enforcement Protection Fund Increase

SB 1023

ANALYST Propst

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

($4,430)

($4,793) Recurring General Fund

$4,430 Recurring Local Fund

(LEPF)

(Parenthesis ( ) Indicate Revenue Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

SUMMARY

Synopsis of Bill

Senate Bill 1023 amends the current Law Enforcement Protection Fund (LEPF or Fund) and

improves the level of funding generated to participating tribal police departments, municipal and

university police, and county sheriff's departments across New Mexico.

FISCAL IMPLICATIONS

At present, all municipal police and county sheriff's departments are rated by class in accordance

with populations established by the most recently completed decennial census. The current rate

of distribution to which a municipal police or county sheriff's department is modified by SB

1023 in the following manner:

CLASS POPULATION CURRENT DISTRIBUTION REVISED

1 0 to 20,000 $20,000 $40,000

2 20,001 to 160,000 $30,000 $60,000

3 160,001 to 1,280,000 $40,000 $80,000

Senate Bill 1023 – Page

2

Other changes in SB 1023 include:

The base amounts to university police departments are increased from $17,000 to $34,000.

Tribal police departments, municipal and university police, and county sheriff's departments are

entitled to an increase from $600 to $1,000 for each police officer or sheriff's deputy employed

full time by his department who has been certified by the New Mexico law enforcement

academy as a police officer or has been authorized to act as a New Mexico peace officer.

Language in SB 1023 provides for additional modifications in the distribution process beginning

in 2009, adjusting the distribution based on prior year fund receipts.

According to DFA, the proposed distributions roughly double the current amounts. To illustrate

the potential impact to the fund, in FY06, DFA distributed a total of $4,988,200 in LEPF

revenues. By utilizing the number of participating law enforcement agencies and the total

number of certified officers in the FY07 allocation and implementing the changes from SB 1023,

the total distribution increases by $4,271,800 to a grand total of $9,260,000. This represents a

potential increase of 85.6%.

Assuming that the average 1.83% annual increase in distributions will hold for the future, and

that the 86% increase as calculated for FY06 will also hold, then the full distribution increase

amounts are as shown.

After FY09, the bill distributes all revenue increases received in the LEPF to the local law

enforcement agencies, with only a small amount reverting to the General Fund. The amount of

reversion for Law Enforcement Protection Fund shown in the December 2006 General Fund

revenue estimate is in error.

The recorded revenue into the LEPF has been highly variable over the last few years. This may

be a reporting issue rather than a money issue. The reversion posted to the General Fund for FY

04 was $4,520.0, for FY05 $2,689.0 and for FY06 $8,930.0. If the recurring amount is similar to

the FY06 amount then the proposed distributions would be fully funded. However, if the

recurring amount is similar to the FY05 amount, then current distributions could not be fully

funded. Modeling done in the last few days has resulted in a better estimate of revenues and

Current Law

FY05

FY06

FY07

FY08

FY09

FY10

FY11

Law Enforcement

Beginning Balance $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000

Income

$8,991,832 $10,100,373 $10,341,409 $10,799,321 $11,257,233 $11,715,145 $12,173,057

Distribution

$4,870,000 $4,988,200 $5,080,656 $5,175,369 $5,270,082 $5,364,795 $5,459,509

Gen Fund Reversion

$2,689,392 $8,592,712

$5,260,753 $5,623,952 $5,987,151 $6,350,350 $6,713,549

Ending Balance

$100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000

Proposed Law

FY05

FY06

FY07

FY08

FY09

FY10

FY11

Law Enforcement

Beginning Balance $100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000

Income

$8,991,832 $10,100,373 $10,341,409 $10,799,321 $11,257,233 $11,715,145 $12,173,057

Distribution

$4,870,000 $4,988,200 $5,080,656 $9,605,484 $10,063,397 $10,521,309 $10,979,221

Gen Fund Reversion $2,689,392 $8,592,712 $5,260,753 $1,193,836

$1,193,836

$1,193,836

$1,193,836

Ending Balance

$100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000

Gen Fund Revenue

Impact

$0 -$4,430,116 -$4,793,315 -$5,156,513 -$5,519,712

Senate Bill 1023 – Page

3

distributions. These estimates are shown in the table above. DFA notes that the expected level of

revenues will fully cover the statutory increase in revenues

The impact on the General Fund is calculated as of June 30, whereas the distributions to the local

governments are sent out in July. The reversion from the LEPF to the General Fund is based on

June ending balances, minus a reserve, minus the amounts calculated to be sent out in July of the

following fiscal year.

Another revision from the original FIR is that the bill has an effective date of July 1, 2007. Thus,

the distribution in July 2007, which is calculated based on entitlements calculated in April 2007,

would not be affected by this bill. The timing shown in the revenue chart above is correct.

When the annual LEPF distribution is made to local governments, any balance in excess of

$100,000 is transferred to the General Fund. The proposed increases to the LEPF distribution

will reduce the transfer to the General Fund to a fixed amount each year, providing that revenues

continue to grow in excess of the amount required to fully fund the statutory distributions.

Approximately 22 law enforcement officers have been killed in the line of duty over the past 10

years. The current payment to the families of family members of a peace officer killed in the line

of duty is $50,000, although SB 433 in this session would increase that amount to $100,000. In

any event, an average of $110,000 per year in survivor’s benefits will not materially distort this

distribution.

SIGNIFICANT ISSUES

The Law Enforcement Protection Fund Act provides an equitable distribution of money to

municipal police, university police, tribal police and county sheriff's departments for use in the

maintenance and improvement of those departments to enhance the efficiency and effectiveness

of law enforcement services. The Fund also provides payments to surviving eligible family

members of a peace officer killed in the line of duty.

The current revenue source for the Fund is generated from 10% of all money received for fees,

licenses, penalties and taxes from life, general casualty and title insurance business pursuant to

the New Mexico Insurance Code, except for money received from the health insurance premium

surtax, are paid monthly to the State Treasurer and credited to the Fund. On or before June 30 of

each year, the State Treasurer transfers to the General Fund any balance in the Fund in excess of

$100,000 that is not obligated and that is in excess of the amount certified by the Local

Government Division of DFA to be distributed from that Fund.

Many law enforcement agencies utilize the funds made available to apply and receive loans from

the New Mexico Finance Authority. This strategy generates more cash for larger assets and the

amendments noted in SB 1023 would further enhance the ability of agencies to do this.

ADMINISTRATIVE IMPLICATIONS

The LGD currently determines the distributions of the Law Enforcement Protection Fund and the

amendments outlined in SB 1023 will not increase the impact on the Division.

Senate Bill 1023 – Page

4

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Senate Bill 1023 is a duplication of House Bill 861.

OTHER SUBSTANTIVE ISSUES

Local law enforcement agencies seek funding from many sources as needs for equipment and

advanced training increase. Reduction in Federal Law Enforcement grants have placed

additional strains on many communities resulting in decreased revenues. The Fund is an

essential element of all current public safety operating budgets and the amendments proposed in

SB 1023 would provide an infusion of needed revenue into the fund.

WEP/csd