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

SPONSOR

Tripp

ORIGINAL DATE

LAST UPDATED

8/16/08

8/17/08

HB

15

SHORT TITLE

Temporarily Suspend Gasoline Tax

SB

ANALYST

White

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY09

FY10

$255,094.0

Non-Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY09

FY10

FY11

($107,787.0)

($35,929.0)

Non- Recurring Gasoline Tax

Receipts*

($83,538.0)

($27,840.0)

Non-Recurring Special Fuel

Tax Receipts*

$143,716.0

Non-Recurring

Gasoline Tax

Replacement

Fund

$111,380.0

Non-Recurring

Special Fuel

Tax

Replacement

Fund

(Parenthesis ( ) Indicate Revenue Decreases)

*See disbursement explanation in Significant Issues below.

SOURCES OF INFORMATION

LFC Files

Responses Received From

Taxation and Revenue Department (TRD)

No Response Received From

Department of Transportation (DOT)

House Bill 15 – Page

2

SUMMARY

Synopsis of Bill

House Bill15 creates a one-year exemption for the $0.17 per gallon gasoline excise tax and the

$0.21 per gallon special fuels excise tax effective October 1, 2008 to September 30, 2009. The

bill also ensures that these fuels will remain exempt from the gross receipts tax; under current

law, fuel on which the gasoline excise or special fuels tax is imposed is exempt from gross

receipts and compensating taxes.

The bill creates two new funds, the gasoline tax replacement fund and the special fuel tax re-

placement fund, which will receive monthly transfers from the General Fund which may only be

used to make distributions to ordinary recipients of the gasoline and special fuels excise taxes. In

each of the twelve months that the gasoline excise tax is exempt, the gasoline tax replacement

fund will receive one twelfth of 101.225 percent of total FY08 gasoline tax collections. In each

of the twelve months that the special fuels excise tax is exempt, the special fuel tax replacement

fund will receive one twelfth of 101.225 percent of total FY05 special fuel tax collections. These

two new funds will revert to the General Fund after the last distributions are made in November

2009.

FISCAL IMPLICATIONS

Preliminary gasoline excise tax collections from DOT totaled about $141.977 million in FY08.

Multiplied by 101.225 percent, the General Fund transfer to the gasoline tax replacement fund

will be about $143.716 million.

Preliminary special fuels tax collections from DOT totaled about $110 million in FY08.

Multiplied by 101.225 percent, the General Fund transfer to the special fuel replacement fund

will be about $111.38 million. HB15 would transfer one-twelfth of this amount per month to the

special fuel replacement fund.

SIGNIFICANT ISSUES

The gasoline excise tax is imposed for the privilege of receiving gasoline in New Mexico. The

tax liability is owed by the gasoline distributor or rack operator. As a rule, distributors pass the

gasoline tax to consumers in the form of higher retail gasoline prices. The rate of the gas excise

tax has fluctuated from as little as $0.14 per gallon in FY89 to as much as $0.22 per gallon in

FY94. The last rate change to $0.17 per gallon became effective in FY96.Gasoline excise tax

collections are distributed to the state road fund, the General Fund, tribal governments, and

several different county and municipality funds. Local government distributions are earmarked

for road-related expenditures.

Retail prices of gasoline have skyrocketed over the last year due primarily in part to the recent

spike in crude oil prices. The table below shows how the price of West Texas Intermediate

(WTI) crude oil futures prices as traded on the New York Mercantile Exchange (NYMEX) has

spiked since November, 2007.

House Bill 15 – Page

3

West T exas Intermediate NYMEX F utures Prices

80

90

100

110

120

130

140

150

11/1/07 12/31/07 2/29/08 4/29/08

6/28/08

Date

At its peak in July of this year when WTI was trading at over $140 per barrel the average price

for regular unleaded gasoline in the State of New Mexico was $4.078 close to an all time high.

Higher gasoline prices reduce the amount of disposable income New Mexicans have to spend on

other goods and services. Therefore temporary suspension of the state gas tax would have a

positive short-term effect upon New Mexico disposable income.

ADMINISTRATIVE IMPLICATIONS

TRD notes the bill will require moderate changes to systems and changes in reporting procedures

and that passage of the bill could delay implementation of a new program for tracking and re-

porting gasoline and special fuels excise taxes

OTHER SUBSTANTIVE ISSUES

The suspension of gasoline excise and special fuel taxes could be potentially harmful to the

ratings of some State bonds which are secured by gasoline excise taxes. Although language in

the bill specifically states that distributions from the gasoline tax replacement fund are intended

to “avoid any impairment of outstanding bonds secured by a pledge of revenues from the

gasoline tax,” bond ratings agencies may not view these temporary revenues the same. By not

having an underlying tax pledged to secure these bonds, credit ratings agencies could potentially

downgrade these bonds despite the fact that the debt will still be serviced by state monies. A

downgrade of this kind is more likely now than in the past due to recent credit market conditions

and the increased scrutiny of credit ratings agencies.

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

New Mexican’s will continue to pay the gasoline excise and special fuels taxes.

DW/svb