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 Leavell

ORIGINAL DATE

LAST UPDATED

1/23/08

HB

SHORT TITLE Business Incubator Programs

SB 86

ANALYST Earnest

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY08

FY09

$1,000.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to Appropriation in the General Appropriation Act for the Economic Development

Department operating budget.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Economic Development Department (EDD)

SUMMARY

Synopsis of Bill

Senate Bill 86 appropriates $1 million from the general fund to the Economic Development

Department to support business incubators in three stages:

1.

$50 thousand for communities to research and plan for new business incubators

2.

$350 thousand for communities to implement business incubator plans, and

3.

$600 thousand for operating expenses of existing business incubators.

FISCAL IMPLICATIONS

The appropriation of $1 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 revert

to the general fund.

SIGNIFICANT ISSUES

Laws 2005, Chapter 67 (HB 54), set conditions for state expenditures for business incubators.

To receive state funds business incubators must pass a certification program administered by

Senate Bill 86 – Page

2

the Economic Development Department (EDD). Incubator applications are evaluated by a

nine-member advisory committee set up by EDD. The criteria are:

•

A mission statement defining the incubators role in business growth

•

A feasibility study for proposed incubators or a business plan for existing incubators

•

An effective governing or oversight advisory board

•

Qualified management and staff

•

Ongoing business assistance program

•

Appropriate facility

•

A screening and selection process for prospective businesses and a graduation policy

•

System for program evaluation

•

Membership in the National Business Incubation Association (NBIA)

To circumvent this certification process, some business centers avoid using the term

“incubators".

According to EDD, the three phases of funding in this bill track the three step process put in

place by the Incubator Program:

1.

The first step for a community considering a business incubator is research.

Business incubator feasibility studies identify potential clients for a new

incubator, or lack thereof; assess the availability of resources for the clients;

identify obstacles to the incubator’s success; and provide an implementation plan

for the incubator development.

2.

Once the research is completed a community must address the obstacles to

building a sustainable incubator and organize its resources to build or renovate a

facility and provide the necessary services to incubate its clients.

3.

Finally, successful business incubators need subsidies to maintain their

momentum and accomplish their mission. Without these subsidies the incubator

would need to charge market rates for the facility and client programs, negating

the concept and purpose of the incubator.

According to EDD: business incubators report to NBIA that 87 percent of their clients remain in

business after graduating – a much higher success rate than business start-ups who “go it alone."

And, 84 percent of their clients remain in the community after graduation. Finally, NBIA

research has shown that for every $1 of estimated public operating subsidy provided the

incubator, clients and graduates of NBIA member incubators generate approximately $30 in

local tax revenue alone.

PERFORMANCE IMPLICATIONS

EDD reports that New Mexico’s certified business incubators have assisted more than 100

companies in the creation of over 700 jobs, with a revenue and capital generation approaching

$100 million. In addition, business incubators contribute to several of EDD’s performance

measures, including rural and urban job creation, and number of business expansions. The

incubators also assist their clients in accessing Job Training Incentive Program funds and other

state incentive programs.

Senate Bill 86 – Page

3

ADMINISTRATIVE IMPLICATIONS

None identified.

CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP

The bill relates to an appropriation in the General Appropriation Act for the Economic

Development Department’s operating budget. The GAA includes $110 thousand, in recurring

funds, for the business incubator program, although the amount is not earmarked.

OTHER SUBSTANTIVE ISSUES

In addition to incubators, small business development centers (SBDC), funded through

universities, also provide services to businesses in all stages of growth, duplicating some work of

incubators. Small business development centers are affiliated with the federal Small Business

Administration. There are 19 SBDCs in New Mexico, and the General Appropriation Act

(House Bill 2) includes $4.7 million for SBDCs statewide.

BE/bb