Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Romero, A/Chandler/Roybal Caballero
LAST UPDATED
ORIGINAL DATE 2/16/2025
SHORT TITLE Vibrant Communities Act
BILL
NUMBER House Bill 290
ANALYST Carswell
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected Capital Outlay
Appropriations to
Local and Tribal
Governments and
Political
Subdivisions
No fiscal impact No fiscal impact
See Fiscal
Implications
See Fiscal
Implications
Recurring
Other state
funds
Department of
Finance and
Administration
No fiscal impact No fiscal impact Up to $1,500.0 Up to $1,500.0 Recurring General Fund
Office of the State
Auditor
No fiscal impact No fiscal impact Up to $1,000.0 Up to $1,000.0 Recurring General Fund
Secretary of State No fiscal impact No fiscal impact $50.0 $50.0 Nonrecurring General Fund
Total No fiscal impact No fiscal impact Up to $1,550.0 Up to $1,550.0 Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Relates to House Joint Resolution 11
Sources of Information
LFC Files
Agency Analysis Received From
New Mexico Attorney General (NMAG) Office of the State Auditor (OSA) Department of Finance and Administration (DFA)
State Ethics Commission (SEC)
Indian Affairs Department (IAD)
Department of Health (DOH)
SUMMARY
Synopsis of House Bill 290
House Bill 290 (HB290) enacts the Vibrant Communities Act, creates the Vibrant Communities
Program within the Department of Finance and Administration (DFA), and provides direction to
the department on implementing the program. The act is enabling legislation for House Joint House Bill 290 – Page 2
Resolution 11 (HJR11) , which would repeal and replace the Anti-Donation Clause of the New
Mexico Constitution, removing specific exceptions previously approved by voters and replacing
them with a broad exception for donations to private entities to accomplish a “public purpose”
for the benefit of public health, safety, or welfare.
HB290 defines “public purpose” as providing facilities or services for the benefit of the public
health, safety, or welfare, and defines “public purpose project” as a project proposed and
performed by a qualifying entity to address a public purpose within the community in which the
project would be located. “Qualified entities” are defined in the bill as entities that have been
granted federal income tax exemptions under Section 501(c)(3) or Section 501(c)(12) of the U.S.
Internal Revenue Code.
HB290 directs DFA to promulgate rules for the Vibrant Communities Program to ensure the
protection of public funds and specifies that public assistance pursuant to the act shall be
provided subject to legislative appropriation. The bill directs DFA to establish an application
process for funds through the program and to provide recommendations to the Legislature for
funding proposed projects. The bill specific that legislative appropriations for the program shall
be for specific purposes and amount for each public purpose project. DFA would administer
contracts consistent with those appropriations. The bill further requires DFA to report annually to
the governor, the Legislature, and the Legislative Finance Committee (LFC) on public assistance
provided through the program, whether public purpose projects are considered fully funded,
services being provided by the projects, and recommended changes to the Vibrant Communities
Act to safeguard public funds, if warranted.
The effective date of this bill is contingent on voter approval of the constitutional amendment
proposed by HJR11.
FISCAL IMPLICATIONS
The Vibrant Communities Act could create a significant new source of demand for capital outlay
appropriations by removing an existing barrier to making capital appropriations directly to
nonprofits for privately owned facilities. However, it would not impact revenues to the capital
program—which are determined by annual severance tax revenues and may be supplemented by
general funds at the Legislature’s discretion—and it is unlikely to increase overall funding
available for capital outlay. The source of potential appropriations to private entities is likely to
be the discretionary capital outlay funds individual legislators and the governor currently
appropriate mostly to local and tribal governments and political subdivisions. Thus, any increase
in capital appropriations to private entities resulting from HJR11 and HB290 would
proportionally decrease capital appropriations to local and tribal governments and political
subdivisions.
Capital appropriations are already made to benefit non-profits operating out of publicly owned
facilities through a public fiscal agent. While it is difficult to precisely identify the portion of
current capital appropriations used in this manner, DFA and LFC estimate it is no more than 5
percent of local capital appropriations, or up to $26 million annually based on recent local capital
spending. This fiscal analysis assumes the changes under HJR11 and HB290 would result in, at
most, a doubling of annual capital appropriations to nonprofits, resulting in a proportional
decrease to local public entities that would otherwise receive those dollars. This analysis assumes
the impact to the capital outlay program would begin in FY28, at the earliest. House Bill 290 – Page 3
The operating budget impacts to agencies impacted administratively by HJR11 and its enabling
legislation are estimated based on analysis submitted by the agencies.
SIGNIFICANT ISSUES
Analysis submitted by the Attorney General’s office explains the legal implications of HJR11
and its companion enabling legislation, HB290:
As currently written, unless there is an applicable exception, the Anti-Donation Clause
limits donations to the exchange of goods, which means that such funds are tied to a set
exchange of goods or services for the appropriations or funds of the state. Accordingly,
the anti-donation clause currently does not prohibit all donations of public funds. The
specific exceptions currently carved out would likely be classified as “public purposes”
under HJR11’s proposed language.
Under the current law, government agencies may still (i) expend appropriated funds on
service contracts with nonprofits; and (ii) expend capital outlay appropriation for
government buildings and lease those structures to nonprofits on favorable terms.
As proposed, HJR11, in concert with HB290, would eliminate this current legal
framework and instead permit the transfer of public funds to private nonprofits so long as
the transfers comply with the “Vibrant Communities Program” established by HB290.
HB290 provides for an administrative program run by the DFA with “public purpose
projects” funded by the Legislature.
Although HB290 attempts to centralize government donations under DFA and the
Legislature, the impact of this framework on other political subdivisions of the state, such
as counties and municipalities, is unclear. HB290 is silent as to requests for donations
from private entities that are made directly to political subdivisions, meaning there is
neither an express authorization nor an express prohibition applicable to such direct
requests.
This has implications for municipalities and counties because of the Home Rule
Amendment (Section 6 of Article X of the New Mexico Constitution). For non-home-rule
counties and cities, this silence would likely operate as a prohibition, because non-home-
rule counties and cities typically require an express grant of authority from the
Legislature to act. In contrast, home-rule counties and cities would presumably be able to
receive such requests and make donations because their authority exists unless prohibited
by the Legislature.
Home-rule counties and municipalities receiving donation requests would be in the
position of having to interpret the broad meaning of the terms “public purpose” and
“public health, safety, or welfare.” It is very likely that there would be pressure to include
the activities of some groups and exclude others. For example, a frequent request that
tests the current anti-donation clause is the free use of public facilities. Under a new
HJR11/HB290 framework, would a boy’s little league baseball organization meet the
definition of a public purpose because it promotes public health, safety, or welfare? What
about the Girl and Boy scouts? What about a religious-based drug rehabilitation group?
The possibilities abound and without more legislative guidance, home-rule counties and House Bill 290 – Page 4
cities would likely make different determinations of “public purpose” based on local
preferences, requiring the courts to be called upon to delineate what is and what is not a
public purpose.
For the state, HRJ11 could put pressure on ethics and disclosure laws in New Mexico.
Unconstrained subsidies could pressure state laws limiting gifts, quid pro quo, conflicts
of interest, and require financial disclosures. Few laws exist at the local level to combat
these issues. Additionally, there could be risks of governments subsidizing nonprofits at
scale.
Subsidies to nonprofits (for land, capital expenses, operating expenses) could allow
government bodies to use nonprofits to bypass the state laws regarding disclosure,
procurement, and conflicts of interest.
Lastly, HJR11 would propose repealing Section 31 of Article IV of the New Mexico
Constitution, subject to a vote of the people as in the previous section. This repeal would
be required for the “Vibrant Communities Program” proposed by HB290, because
Section 31 of Article IV requires the Legislature to appropriate to entities “under the
absolute control of the state.” The state Supreme Court has ruled in Moses v. Ruszkowski,
2019-NMSC-003, that Section 31 of Article IV imposes limits on the Legislature’s
authority to appropriate money. The amendment would remove those limits permitting
the distribution of funds to private entities contemplated by HB290. This potentially
opens a new avenue for fraud and corruption.
The State Ethics Commissions adds that, if amended as proposed in HJR11, the gift clause of the
constitution would “operate less as a constitutional constraint on subsidies of public funds to
private organizations, and more as a general authorization for the Legislature to allow or require
state agencies, counties, municipalities, and school districts to donate public funds or property”
to private entities. Additionally, the Ethics Commission notes the broad exemption in HJR11
interferes with voters’ ability to approve each specific permissible category of exemption from
the anti-donation clause, as has occurred to date.
ADMINISTRATIVE IMPLICATIONS
DFA anticipates a significant increase in its administrative workload to carry out its duties under
HB290. The agency states its Infrastructure Planning and Development Division, Administrative
Services Division, Financial Control Division, and the Board of Finance would all be
significantly impacted. The department states a new division could be necessary to stand up the
Vibrant Communities Program: however, it is likely positions could be added to an existing
division, such as the Local Government or Infrastructure divisions, to administer the program.
DFA’s analysis details the cost and work hours required in each impacted division in its analysis,
totaling roughly $3 million per year.
Additionally, DFA notes, “Utilizing tax-exempt bond proceeds to fund private organizations’
projects creates risk for the state that the bonds’ tax-exempt status may be forfeited.” Tax-
exempt bonds are the typical source of funding for capital appropriations. The Board of Finance
may instead need to explore using taxable bonds for projects authorized through the Vibrant
Communities Program.
House Bill 290 – Page 5
The Office of the State Auditor (OSA) states it opposes HJR11 and HB290, which it says would
trigger a provision of the Audit Act that could significantly expand the scope of the State
Auditor’s work. Charitable organizations receiving state appropriations are included in the
definition of agencies subject to the Audit Act, according to OSA, but the agency has not
previously exercised authority over these entities due to the Anti-Donation Clause.
The State Ethics Commission (SEC) notes HB290 subjects the public purpose entities and their
employees to the Governmental Conduct Act, which could cause some administrative and fiscal
impact to SEC by expanding the individuals under its jurisdiction. However, the commission
does not anticipate a significant impact.
PERFORMANCE IMPLICATIONS
DFA notes the broad definition of public purpose proposed in the bill could make it difficult to
evaluate the value of proposed projects and to ensure the public purpose is fulfilled:
While approve public projects may be well-intended, they may ultimately not produce
any benefit to the public. If no public benefit was achieved, how would DFA ensure the
project complies with HJR 11’s proposed changes to (the constitution)? HB290 does not
identify or provide any process for evaluation of public benefit from a public purpose
project or set a minimum public benefit a project must meet to qualify for (the proposed
constitutional exemption).
TECHNICAL ISSUES
The Attorney General’s Office notes the bill’s definition of “qualifying entity” may include
religious organizations, which may qualify for 501(c)(3) tax exemptions. The office states,
“Under HB290 the Legislature could give support to a religious organization potentially raising
separation of church and state questions under the First Amendment of the U.S. Constitution or
Section 11 of Article II of the New Mexico Constitution.”
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
HB290 relates to HJR11, a proposed constitutional amendment that must be approved by voters
for HB290 to become effective.
CC/hg/sgs