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.

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

SPONSOR HBIC

ORIGINAL DATE

LAST UPDATED

2/8/08

2/12/08 HB 262/aSCORC/HBICS

SHORT TITLE New Mexico Research Applications Act

SB

ANALYST Aubel

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY08 FY09 FY10 3 Year

Total Cost

Recurring or

Non-Rec

Fund

Affected

Total

See Narrative

See Narrative General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to Appropriations in the General Appropriation Act

Relates to SB165

Relates to SB53, Technology Development Act

SOURCES OF INFORMATION

LFC Files

Responses Received From*

Office of the State Auditor (OSA)

Higher Education Department (HED)

Public Education Department (PED)

Department of Information Technology (DoIT)

Economic Development Department (EDD)

Workforce Solutions Department (WSD)

General Services Department (GSD)

Department of Finance and Administration (DFA)

*Where applicable, prior responses to HB262 are utilized for the HBIC Substitute.

SUMMARY

Synopsis of SCORC Amendment

The Senate Corporations and Transportation Committee amendment changes the composition of

the Board of Directors, as follows:

•

The governor’s science advisor shall serve as Chair of the Board; and

•

The governor shall appoint six members, provided that at least one member is from each

congressional district and no more than three members are from a single congressional

district.

House Bill 262/HBICS/aSCORC – Page

2

The Legislature appoints six members, as follows:

•

The Speaker of the House of Representatives (House) appoints one member;

•

The Majority Leader of the House appoints one member;

•

The Minority Leader of the House appoints one member;

•

The President Pro Tempore of the Senate appoints one member;

•

The Majority Leader of the Senate appoints one member; and

•

The Minority Leader of the Senate appoints one member.

Language regarding terms for board positions are realigned to this schedule of appointees.

Synopsis of Original Bill

The House Business and Industry Committee Substitute for House Bill 262 enacts the New

Mexico Research Applications Act (Act) that establishes a nonprofit corporation to interact with

business and government agencies, universities, private foundations and national laboratories to

foster economic development in the areas of technology and intellectual property. The nonprofit

corporation is related to the New Mexico Computing Applications Center initiative, or

“supercomputer."

The Act establishes a 13-member Board of Directors, which shall be appointed as follows:

The governor shall appoint seven members, one of which will act as Chair of the Board with the

advice and consent of the Senate.

The Legislature shall appoint six members as follows:

•

Two members appointed by the Speaker of the House of Representatives;

•

Two members appointed by the President Pro Tempore of the Senate;

•

One members appointed by the Minority Leader in the House of Representatives; and

•

One member appointed by the Minority Leader of the Senate.

The bill specifies that the Board will not receive compensation except for per diem and mileage,

subject to availability of funds.

Section 4 (F) specifies that all meetings, minutes and reports of Board—except for business-

sensitive information—shall be available and open to the public. In addition, minutes and

reports of the Research Applications Center (RAC) shall be provided to the LFC and other

interim or standing committees within one month.

Section 5 specifies the powers of the RAC, as directed by the Board, to carry out its business –

such as acquiring land and equipment, enter into contracts, enter into business arrangements, deal

with property (including intellectual property), enter into license agreements, employ officers

and employees, insure against loss, and receive and invest funds.

Section 6 identifies the applicability of others laws to the RAC, as follows:

•

Except as otherwise provided in the Act, the RAC shall not be subject to state laws relating

to personnel, procurement of goods and services, meetings of the Board, gross receipts

taxes, dealing with property transfers;

House Bill 262/HBICS/aSCORC – Page

3

•

The RAC will be deemed an agency of the state when applying laws relating to furnishing

goods and services to the state or any other agency, political subdivision or institution of

the state; and

•

The RAC will be considered a governmental entity for purposes of the Tort Claims Act,

provided the RAC may enter into agreements with insurance carriers to mitigate risk.

In addition to an annual audit, Section 7 requires that the Board provide an annual report of the

activities during the previous fiscal year to the LFC at least 90 days in advance of each regular

legislative session. In addition, upon request from the appropriate committee, the Board – or any

Board of Directors of any corporation formed by the RAC – shall appear before any interim

committee or standing legislative committee to account for all activities.

Section 8 specifies conflict of interest requirements.

Section 9 limits contracts with public employees to $20 thousand unless the governor or designee

makes a written determination that the services are of higher quality or less expensive than

otherwise available.

Section 10 establishes how the transfer of technology developed by an officer or employee from

the RAC to commercial and industrial enterprises for economic development, including

establishing and maintaining a substantial interest in a private entity that provides or receives

equipment, material, supplies or services in connection with the RAC – subject to the approval of

the Secretary of EDD under certain conditions.

The last 4 sections amend existing statutes - §10-16-7, §13-1-190, §21-1-17 and §21-1-35. Each

of the amended sections relates to existing conflict of interest laws.

The HBIC Substitute for HB 262 contains an Emergency Clause.

FISCAL IMPLICATIONS

While no appropriations are made in the HB 262, appropriations for the supercomputer initiative

totaled approximately $14 million in the 2007 legislative session. The third fastest computer in

the world was brought “on-line" January 12, 2008 at a cost of $11 million. For the 2008

legislative session, the initiative includes a capital outlay request for $1.8 million for additional

equipment to fund “gateways" and a special appropriation to the Department of Information

Technology for $4 million for first year operating expenses. The business plan for the

supercomputer initiative includes state support over the next five years until sustainability is

projected after FY12.

Most likely the EDD will incur some expense with regard to the creation of the Center; however

the amount is unknown.

SIGNIFICANT ISSUES

The business plan for the New Mexico Computing Applications Center (NMCAC) states its

mission as follows:

House Bill 262/HBICS/aSCORC – Page

4

The New Mexico Computing Applications Center will apply the power of supercomputing

to drive high tech business and job growth in New Mexico. The Center will also address

important State needs in energy, environment, water, and health. And just as important,

the Center will support science and technology education throughout our State.

This bill provides the mechanism to “stand up" the Center by requiring the Economic

Development Department to establish a nonprofit corporation, in similar fashion to the Economic

Development Corporation. A Board of Directors will be appointed that reflects relevant

experience from state government, local governments, businesses, universities, private

foundations, national laboratories and investment advisors.

The NMCAC identifies the following major core components:

•

Educational outreach, particularly in science, technology, engineering, and mathematics

(STEM);

•

Workforce development in high technology;

•

Public policy and planning using visualization, modeling and simulation;

•

Federal, university, private foundation, and national labs research applications; and

•

A unique focus on selling “cycles" or time on the supercomputer for commercial

applications.

The New Mexico Information Technology & Software Association summarizes the Center’s

potential as follows:

The NMCAC open-user model catalyzes the New Mexico industrial, scientific, and

educational communities with access and computing power. This new model is essential

to optimizing New Mexico’s full potential in the next generation of supercomputing

utilities.

Metrics to measure NMCAC’s achievements toward actualizing this potential, including interim

start-up goals, are provided as Attachment A.

PERFORMANCE IMPLICATIONS

EDD notes that the proposed Act is compatible with the department’s overarching goals of

attracting new investment and new business start-ups by targeting specific initiatives that

promise significant return on investment to the State.

The RAC is required to annually report to the LFC on its prior year’s activities. The RAC Board

is required to account for its activities upon the request of the appropriate legislative committee.

ADMINISTRATIVE IMPLICATIONS

EDD would establish the nonprofit corporation. The Secretary of EDD would continue to have

certain duties relating to the RAC.

The Office of the State auditor (OSA) states that if public funds are appropriated to the nonprofit

Board, the Board will be required to comply with Governmental Accounting and Financial

House Bill 262/HBICS/aSCORC – Page

5

Reporting Standards (GAAP), the State Audit Act, NMSA 12-6-1 to 12-6-14, the State Auditor

Rule, 2.2.2 NMAC, and applicable state and federal laws and regulations. Part of that

requirement is that an annual financial audit be conducted according to the State Audit Act. This

bill includes both the financial audit and an annual “activities" or performance report.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

Relates to special appropriations in the General Appropriation Act and requests for capital outlay

appropriations.

Relates to Senate Bill 53, Technology Development Act.

OTHER SUBSTANTIVE ISSUES

GSD notes that under Subsection B (2) of Section 6, the Center may choose to purchase liability

insurance from the Risk Management Division (RMD) of GSD or insure its risks directly with a

private sector insurance carrier. GSD maintains that an ordinary private entity that is investing in

technology ventures will be exposed to high dollar risks related to allegations of business torts.

The Tort Claims Act excludes many otherwise viable actions, including most intentional torts,

and limits recovery on actions the immunity from which the statute waives. GSD concludes that

private entities transacting business with the NMCAC may find these limitations affect the cost

of doing business.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

EDD maintains that failure to pass this bill would mean that the New Mexico Computing

Applications Center could not be established as a separate entity. Consequently, that would mean

the Computing Center would not be able to accept revenues from external sources and would

never be able to achieve self-sustainability. That would inevitably lead to failure of the Center

with very limited return on the $14 million investment the State has already made toward this

initiative. Furthermore, EDD predicts that failure to pass this bill would limit the ability of the

EDD to create future initiatives in technology areas that offer the promise of significant

economic growth in New Mexico.

AMENDMENTS

Section 8, Part B (page 11) discusses material relating to issuing bonds. However, because the

Act does not include a provision for the RAC to issue revenue bonds, then it would appear that

this section could be eliminated.

MA/bb