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

SPONSOR Chasey

ORIGINAL DATE

LAST UPDATED

2/02/08

2/05/08 HB 583

SHORT TITLE TV And Video Game Excise Tax

SB

ANALYST Francis

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

46.0

Recurring

TRD operating

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

FY10

926.0

1,963.0 Recurring Leave No Child

Inside Fund

(Parenthesis ( ) Indicate Revenue Decreases)

ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT (dollars in thousands)

FY08

FY09

FY10 3 Year

Total Cost

Recurring

or Non-Rec

Fund

Affected

Total

220.0

140.0

360.0 Recurring TRD

Budget

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Energy Minerals and Natural Resources Department (EMNRD)

Public Education Department (PED)

Taxation and Revenue Department (TRD)

House Bill 583– Page

2

SUMMARY

Synopsis of Bill

House Bill 583 enacts the “Leave No Child Inside Act" which levies a one percent excise tax on

televisions, video games or video game equipment and creates the “Leave No Child Inside Fund"

(LNCI) to be used to

•

Develop curriculum-based programs for teachers to use on public lands and at other outdoor

learning sites for outdoor education;

•

Develop hands-on teaching materials;

•

Provide transportation for children to experience outdoor programs;

•

Provide substantial and frequent outdoor experiences for children; and

•

Increase outdoor nature-oriented physical activity programs for school age children.

The fund shall be administered by the Energy Minerals and Natural Resources Department

(EMNRD). Ninety five percent of the excise tax goes into the LNCI and the balance is

appropriated to TRD for administrative costs relating to administering the excise tax.

FISCAL IMPLICATIONS

According to TRD, the estimated sales of video games and televisions in New Mexico are $185

million so a one percent excise tax would generate $1.85 million annually. Since it takes effect

on January 1, 2009, only half of the impact is in FY09.

TRD:

The estimated revenue impact reflects the “television tax" taking effect on January 1,

2009, and therefore shows a half year of revenue for fiscal year 2009. According to

industry groups who track U.S. retail sales there were $9.9 billion of video game console

and software equipment sales in 2004, and $18.2 billion of television sales in 2006. This

estimate assumes sales grow at 6% a year. The U.S. sales were allocated to New Mexico

using the ratio of New Mexico to U.S. population and the ratio of New Mexico to U.S.

2006 median annual household income. This calculation results in an estimated $115

million of retail television sales and $70 million of retail video game and video game

equipment sales in New Mexico in fiscal year 2009.

This bill creates a new fund and provides for continuing appropriations. The LFC has concerns

with including continuing appropriation language in the statutory provisions for newly created

funds, as earmarking reduces the ability of the legislature to establish spending priorities.

SIGNIFICANT ISSUES

The American Institutes of Research conducted a study for California on a program that provided

outdoor education to inner city youth. The study found that the children in the program exhibited

gains in cooperation and conflict resolution skills and teachers found that the children made

gains in self esteem, peer relationships, problem solving and classroom behavior.

(

http://www.seer.org/pages/research/AIROutdoorSchool2005.pdf

).

EMNRD (State Parks Division – SPD):

HB 583 addresses the recommendations from a joint study prepared by SPD and PED

House Bill 583– Page

3

required by SJM 24, which passed the Legislature in 2005. SJM 24 requested SPD and

PED evaluate opportunities for collaboration. This study, “Making New Mexico Schools

Work Outdoors—Educación al Aire Libre", was presented to the Legislative Education

Study Committee in October 2005.

The PED/SPD study recommended the establishment of the “New Mexico Outdoor

Classroom" initiative and indicated the need for funding to maintain and coordinate such

programs. The Outdoor Classroom Program (OCP) received non-recurring funding from

the Legislature in FY08. The Legislature provided $250,000.00 to PED to fund the pilot

phase of the program. A portion of that funding was transferred from PED to SPD in

order to fully implement the program. SPD also received an additional $45,000.00 to

support OCP efforts in Doña Ana County and northeastern N.M. The Legislative

Education Study Committee endorsed recurring funding for the Outdoor Classroom

Program in FY09 at the level of $500,000.00.

HB 583 would establish the Leave No Child Inside Fund as a dedicated revenue source to

support educational and interpretation programs in state parks and increase educational

programs for school children that utilize state parks and other outdoor classroom sites,

such as local, state, and federal lands (city open space, national parks, national forests,

national wildlife refuges, etc.); ranches; nature centers, and other similar locations. SPD

would be responsible for administering the fund.

Currently, grants are being distributed to school districts by the Rural Education Bureau

of PED to schools statewide. PED has held teacher trainings for outdoor classroom

programs through the Math and Science Bureau. Online resources are also being

developed both by PED and SPD. SPD is in the process of creating curriculum guides

and establishing a teacher training network -- it is anticipated that up to 300 teachers will

be trained in outdoor classroom programs in FY08. Regarding transportation for students

to outdoor classrooms, SPD is working with multiple school districts statewide in FY08.

For example, all 5th graders in Doña Ana County will get an OCP experience from a

$20,000 special FY08 appropriation. (Transportation costs = $8/student)

All of these programs will be evaluated by SPD and PED. A more extensive evaluation

process will also be defined in FY08 to document the impacts of outdoor classroom

programs on student academic achievement. At the end of FY08, a report as to the

success of the outdoor classroom program will be issued.

PED:

There is a growing focus on developing standards-based outdoor education programs

among non-profit and governmental non-formal educators (e.g., Audubon Society,

Forestry Division, U.S. National Parks, etc.). The PED’s Rural Education Division and

the Math and Science Bureau have been working with the State Parks to implement pilot

outdoor classroom projects with $250.0 that was appropriated to the PED in 2007 through

HB2, page 241, lines 4-7. Those funds are being used to provide student transportation to

state parks, teacher professional development on the use of state parks as outdoor

classrooms and implementing outdoor classroom small projects in rural schools. If this

recurring funding source becomes available, the New Mexico State Parks could be

positioned as a key partner in coordinating the educational efforts of many governmental

and non-governmental entities to provide more coherent, consistent outdoor education for

school children and their teachers.

House Bill 583– Page

4

This legislation supports Goal 1 of PED’s A Strategic Action Plan for Advancing Math

and Science Education in New Mexico 2007-2010 : “Increase student interest,

participation and achievement in math and science" and Goal 3: “Establish effective

collaborations with internal and external partners".

(PED, 2007).

References

PED. (2007). A strategic action plan for advancing math and science education in New

Mexico 2007-2010. Santa Fe, NM: Public Education Department. Retrieved January 18,

2008, http://www.ped.state.nm.us/div/math_science/dl/MathSciStrategicPlan%20fv.pdf.

PED. (2005). Making schools work outdoors: Educacion al aire libre. Santa Fe, NM:

Public Education Dept.

TECHNICAL ISSUES

TRD:

The bill exempts instrumentalities of the armed forces but does not address purchases

made by NM governmental agencies such as schools, or purchases by nonprofits.

The bill requires filing and payment of the tax following the occurrence of the taxable

event. If a taxpayer files no return, the assumption is that they did not have a taxable

transaction. This precludes the Department from sending out non-filer notices and makes

it difficult to audit. Gross receipts taxpayers must file a return in each report period after

they are registered even if they have no tax liability in that reporting period.

EMNRD:

Section 7.A. appropriates money and income of the Leave No Child Inside Fund to the

Energy, Minerals and Natural Resources Department “for its state parks division, in

conjunction with the public education department" to accomplish certain activities.

Because appropriations are not made in conjunction with another department, it is

recommended the sentence be clarified by adding the words “to conduct" before “in

conjunction."

ADMINISTRATIVE IMPACT

According to TRD, this proposal will have a large administrative impact. The initial setup of this

new tax program is estimated to cost approximately $150,000. New “television tax" report

forms, and instructions will have to be created and published. Initiation of intense taxpayer

education will be required, which will include a publication mailed out to all current taxpayers

that might be affected. Equipment used to process and image returns will be reconfigured and

programmed to handle the new “television tax" returns. Systems will be required to program the

new tax program into the GenTax system. DFA will create the new Leave No Child Inside fund

requiring distribution program changes in the Taxation and Revenue Department’s Financial

Distributions Bureau. Monthly processing and filing will require 6 FTEs in TRD’s Revenue

Processing Division at a cost of approximately $140,000.

ALTERNATIVES

EMNRD recommends that on page 4, line 3, before the words, “in conjunction," add the words

“to conduct".

NF/mt:bb