NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

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(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to HB269, Duplicates HB720.

SOURCES OF INFORMATION

LFC Files

Economic Development Department (EDD)

Department of Labor (DOL)

Commission on Higher Education (CHE)

State Department of Education (SDE)

SUMMARY

Synopsis of Bill

The bill would provide an exception to the requirement that training applicants in the industrial development (in-plant) training program be New Mexico residents for a minimum one year prior to participation in the training program. This requirement would be waived until July 1, 2004 for projects within New Mexico communities located within fifty miles of the state border for projects that 1) employ more than 1,500 employees, 2) the resident labor force within a fifty mile radius of the project location is not sufficient to fill the full-time-equivalent position requirements of the project as determined by the NM Department of Labor, 3) give preference to New Mexico residents for training, and 4) no less than 50 percent of the project's work force are New Mexico residents.

Significant Issues

This bill is designed to promote economic development in New Mexico's border areas by allowing use of in-plant training funds to train employees of new industries, located within 50 miles of the state border, who are not New Mexico residents. New Mexico's border regions tend to be rural areas with relatively high unemployment. This proposal would be particularly useful in attracting a uranium enrichment plant to Lea County which would provide as many as 2,000 jobs. This plant would give a strong economic boost to a county where the unemployment rate has almost doubled in the past year. Given the prospective location of this plant, it is likely that many of these jobs would be filled by Texans. According to SDE, the economic benefits to the state of a multi-billion dollar business would far outweigh the expenditure of in-plant training funds. Unless a qualified labor market can be guaranteed, such a business is not likely to locate in New Mexico.

There may be concerns about use of New Mexico state tax money to subsidize employment for non-New Mexicans. Neighboring states could also be encouraged to contribute to the pot of incentives offered to companies which would employ substantial numbers of their citizens.

CHE indicated that, to assure balance in each annual appropriation, the bill might be modified to require that, in each year of funding, no less than 50% of the project's work force be New Mexico residents.

CHE also indicated that it would be important to clarify that all classroom training be provided by public New Mexico postsecondary institutions. Additionally, CHE recommended that an annual report on implementation of this bill be provided to the appropriate legislative committee.

FISCAL IMPLICATIONS

No fiscal impact is projected for this bill, because it would not increase the amount of funding available for the in-plant training program. However, the broader eligibility criteria might result in accelerated expenditure of in-plant funds, resulting in a lack of uncommitted funds earlier in each fiscal year. EDD does not anticipate a need for additional resources to administer the changes in this bill.

ADMINISTRATIVE IMPLICATIONS

EDD does not anticipate a substantial administrative impact from this bill.

CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP

This bill is a duplicate of HB720 by the same sponsor.

OTHER SUBSTANTIVE ISSUES

According to DOL, the residency requirement under existing statute may be illegal. The U.S. Supreme Court has ruled that states cannot set a duration of residency in order to qualify for welfare benefits. DOL recommends that the one-year residency requirement be reviewed in light of these rulings and be considered for elimination altogether.

POSSIBLE QUESTIONS

1) If a project benefits the residents of both New Mexico and a neighboring state, should EDD be encouraged to seek support (in terms of business incentives) from the neighboring state? How does EDD collaborate with neighboring states to attract projects in border areas?

DH/njw