44TH LEGISLATURE - STATE OF NEW MEXICO - FIRST SESSION, 1999

RELATING TO STATE GOVERNMENT FUNCTIONS; ENACTING THE PRIVATIZATION ACT; PROVIDING REQUIREMENTS AND CONDITIONS FOR PRIVATIZATION EFFORTS; REQUIRING A COST-BENEFIT ANALYSIS OF POTENTIAL PRIVATIZATION; PROVIDING POWERS AND DUTIES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

Section 1. SHORT TITLE.--This act may be cited as the "Privatization Act".

Section 2. LEGISLATIVE FINDINGS AND PURPOSE.--

A. The legislature finds that:

(1) there is a national trend toward smaller government and an increasing trend toward providing governmental services through contract with private sector labor rather than state employees;

(2) while privatization may be cost effective, inappropriate privatization can result in increases in the cost of providing functions and decreases in the quality of delivered functions, as well as additional costs associated with reestablishing the function within an agency; and

(3) the decision to privatize should be based on objective measures of the efficacy of privatization, including lower cost to taxpayers and better delivery of services.

B. The legislature finds further that privatization should be undertaken only when consistent with the constitution of New Mexico and statutes. Without legislative action to eliminate a program, service or regulation or to take other action, an agency is constrained in its ability to delegate its authority and responsibility.

C. The purpose of the Privatization Act is to ensure that privatization is implemented appropriately and cost effectively and will truly benefit the citizens of New Mexico.

Section 3. DEFINITIONS.--As used in the Privatization Act:

A. "agency" means a department, office, agency, board, commission, institution or branch of the state that receives a direct appropriation from the legislature;

B. "appropriate authority" means the governor, attorney general, secretary of state, state auditor, state treasurer, commissioner of public lands, supreme court, board of regents, state board of education or other official that has ultimate control of an agency;

C. "function" means a program, service or activity that an agency has a direct or indirect statutory obligation to administer or perform;

D. "person" means an individual or a business, corporation, association, partnership or similar legal entity; and

E. "privatization" means the supplantation of state or public school employees with a private sector contract to perform an agency function.

Section 4. PRIVATIZATION CONTRACTS.--An agency may propose to privatize any of its functions, but it shall not delegate its authority or responsibility. An agency's contract with a private sector provider shall provide for adequate supervision of the provider's activities to ensure that there is no inappropriate delegation of the agency's authority.

Section 5. PRIVATIZATION--COST-BENEFIT ANALYSIS--REPORT.--

A. An agency that is considering privatizing any of its functions shall conduct a cost-benefit analysis of the action. The analysis shall include the:

(1) potential one-time savings and potential annual recurring savings from privatization;

(2) potential market for privatization;

(3) relative strengths and weaknesses of governmental and private sector customer service mechanisms; and

(4) impact of possible reduced services on the citizens of the state.

B. An agency shall not consider for privatization any of the following:

(1) a function that directly or significantly consists of planning or making public policy;

(2) a function that directly or significantly affects the investigation or prosecution of a criminal act, the operation of a court or the preservation of the public peace or health;

(3) a function that makes judgments or recommendations relative to the fiscal policy of the state or judgments pertaining to the making of rules by which entitlements are granted; and

(4) a function that regulates the business, occupation or profession of a person domiciled or doing business in New Mexico; provided that an agency may recommend to the legislature the elimination of the regulation.

C. The agency shall propose privatization of a function only if the cost-benefit analysis determines that:

(1) a private sector provider can provide the function for less cost than the agency, and that the annual savings will be five percent or more of the agency's most recently completed fiscal year's expenditures for that function; or

(2) a private sector provider can provide the function for an aggregate five percent less than the agency proposes as an aggregate charge for performing the function.

D. The agency shall report its findings, including its working papers and methodology for the cost-benefit analysis, and recommendations for statutory changes to the appropriate authority. If the appropriate authority approves of the findings, it shall transmit a copy of the report to the department of finance and administration and the legislative finance committee by October 1 preceding a regular session of the legislature in which the appropriate authority proposes that a function be privatized.

E. The department of finance and administration and the legislative finance committee shall examine the agency's findings and recommendations and evaluate the cost-benefit analysis. Recommendations of the department and the committee shall be included in the respective budget documents.

F. An agency shall not privatize a function without the approval of the legislature.

Section 6. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 1999.