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 B. Lujan

ORIGINAL DATE

LAST UPDATED

1/18/08

HB 8

SHORT TITLE Development Training Board and Projects

SB

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

$10,000.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Duplicates Appropriation in the General Appropriation Act

SOURCES OF INFORMATION

LFC Files

Responses Received From

Economic Development Department (EDD)

SUMMARY

Synopsis of Bill

House Bill 8 appropriates $10 million from the general fund to the development training fund for

the Job Training Incentive Program (JTIP), administered by EDD, to provide incentives for

companies to relocate or expand operations in New Mexico.

The bill also makes technical amendments to the development training act (Section 21-19-7

through 21-19-13). In particular, the bill changes a requirement that one-third of development

training appropriations be expended in rural areas; under this bill, at least one-third of

development training projects must be located in rural areas.

FISCAL IMPLICATIONS

The appropriation of $10 million contained in this bill is a recurring expense to the general fund.

Any unexpended or unencumbered balance remaining at the end of fiscal year 2009 shall no

revert to the general fund.

The General Appropriation Act (House Bill 2) includes $6 million for this purpose, as

recommended by LFC. The executive recommended $8 million.

House Bill 8 – Page

2

SIGNIFICANT ISSUES

The Job Training Incentive Program (JTIP) is primarily a company recruitment tool. EDD and

the Economic Development Partnership, a private nonprofit created in statute, market the

program to prospective companies as an incentive to relocate to or expand operations in New

Mexico. JTIP reimburses companies 50 percent to 80 percent of the wages paid to newly hired

employees for up to six months. This training incentive is commonly considered one of the most

generous in the country.

As of December 4, 2007, the development training fund had a cash balance of $16.9 million. Of

this amount, $15.9 million is encumbered, dedicated for film projects, or already obligated,

leaving a balance of about $1 million. About half of the amounts awarded (and encumbered) to

companies is returned to the fund when jobs are not filled as anticipated. Assuming similar usage

rates, about $7 million will be reverted to the fund.

According to EDD:

JTIP is a major incentive tool for job creation in New Mexico, both for existing New

Mexico companies and companies considering relocating to New Mexico. In 2007, JTIP

has assisted in the creation of 2,500 jobs at an average wage of $13.90. Since 2003, the

Industrial Training board has obligated an average of $10.5 million per year. The overall

demand for JTIP funds from companies expanding in New Mexico and re-locating to

New Mexico has increased and the project volume (number of projects funded) annually

has increased from 25 in 2002 to 77 in 2007. Additional funding is required to continue

job creation and economic growth.

While the New Mexico Economic Development Department (NMEDD) administers the

Job Training Incentive Program (JTIP), the Industrial Training Board establishes policies

and makes expenditure decisions at monthly meetings. HB8 updates the designation of

Industrial Training Board members to reflect changes in agencies which have occurred

recently; i.e. the creation of the New Mexico Department of Workforce Solutions from

the New Mexico Department of Labor and the Governor’s Office of Training &

Development. The bill further allows certain members of the Industrial Training Board

to appoint designees. This provision provides flexibility which makes achievement of a

quorum at monthly funding meetings and broadens representation from various agencies

and organizations.

PERFORMANCE IMPLICATIONS

In December 2006, EDD conducted a job retention study. The JTIP survey of 89 businesses that

participated in the program from 2002 to 2006 found 34 percent of trainees were still employed

by the company that received JTIP funds. These results are not distinguishably different from a

similar study in 2003. EDD also reports on the number of projects funded, the average wage

funded jobs, and the total amount of grants.

According to EDD:

Current legislation defines performance measures based on the dollar amount

appropriated in rural and urban areas, requiring one-third of the appropriate to be used in

House Bill 8 – Page

3

rural areas. By their nature, rural communities have smaller populations and thus smaller

workforces which cannot support the large companies which are located and seek to

locate in urban areas. Because rural projects are smaller, the amount expended per

project is often less than for urban projects. While the amount awarded to rural projects

may be less, the impact on the community is often equal to or greater than the impact in

an urban area. Adding three new jobs in a small community has a greater impact than

adding ten in an urban community. Measuring performance based on projects, rather

than jobs is a more appropriate standard.

The Economic Development Department has focused on promoting incentive tools to

rural business and thus, the number of projects funded in rural areas has increased. Rural

job creation through JTIP has increased by 71% from 2005 to 2007 (from 313 jobs in

2005 to 538 jobs in 2007). In 2006, of the total projects funded, 21% were in rural areas

of the state. In 2007, 36% of the projects funded were in rural areas. Further, the

Industrial Training Board has increased reimbursement rates from 60% to 65% for rural

areas and has created a “frontier" area, where businesses in communities with population

less than 15,000 can be reimbursed at a 70% rate.

Additionally, NMEDD spun-off an incumbent worker training program called Step-Up to

provide funding only to rural businesses. So far, four projects have been funded using

the Step-Up program, providing enhanced skills training to 63 employees of companies

located in Farmington, Bloomfield (2), and Santa Teresa. With additional funds,

NMEDD intends to ramp up marketing efforts to continue to improve utilization rates of

the Step-Up Program.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

The General Appropriation Act (House Bill 2) includes $6 million for this purpose, as

recommended by LFC. The executive recommended $8 million.

ANA/bb