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 Padilla
LAST UPDATED
ORIGINAL DATE 2/09/2025
SHORT TITLE Increase Rural Service Fund Allocations
BILL
NUMBER Senate Bill 126
ANALYST Rodriguez/Hilla
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
Surcharge $0.0 $10.0 $10. 0 $10.0 $10.0 Recurring
State Rural
Universal
Service Fund
Parentheses ( ) indicate revenue decreases.
*Amounts reflect most recent analysis of this legislation.
ESTIMATED ADDITIONAL OPERATING BUDGET IMPACT*
(dollars in thousands)
Agency/Program
FY25 FY26 FY27
3 Year
Total Cost
Recurring or
Nonrecurring
Fund
Affected
PRC
Indeterminate
but minimal
Indeterminate
but minimal
Indeterminate
but minimal
Indeterminate
but minimal
Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Sources of Information
LFC Files
Agency Analysis Received From
Public Regulation Commission (PRC) Department of Finance and Administration (DFA)
Office of Broadband Access and Expansion (OBAE)
SUMMARY
Synopsis of Senate Bill 126
Senate Bill 126 (SB126) amends the Rural Telecommunications Act (RTA) (Chapter 63, Article
9H NMSA 1978) and increases the statutory total obligation cap of the state rural universal
service fund (SRUSF) from $30 million to $40 million. The bill also increases the amount
dedicated to the broadband program from SRUSF from $30 million to $40 million, less the
amounts expended for the other programs pursuant to the act.
The effective date of this bill is July 1, 2025.
FISCAL IMPLICATIONS Senate Bill 126 – Page 2
SB126 would require PRC to increase its surcharge rate for the SRUSF to raise an additional $10
million. The Department of Finance and Administration (DFA) estimates the surcharge rate
would need to increase by 25 percent to raise the additional funds.
The proposed changes in SB126 are not expected to create any additional fiscal impact on the
state because the fund's administration is already in place.
SIGNIFICANT ISSUES
State Rural Universal Service Fund
The state rural universal services fund (SRUSF), funded through assessments on
telecommunications providers, was created to support rural telecommunications providers in
expanding and maintaining infrastructure. Funding provides financial assistance to eligible
telecommunication carriers operating in rural areas to cover the high costs of infrastructure
development and maintenance to help reduce the financial burden on rural consumers. While
originally focused on traditional telephone services, the act has been adapted to support
broadband internet expansion.
The fund supports four programs and payments, in addition to legal, administrative, and audit
fees:
Access reduction support (ARS) provides reimbursements to rural local exchange carriers
for revenue lost when the act required them to substantially reduce the access charges
that they charged other carriers to complete calls using their “last mile” wires. In 2023,
RTA was amended to cap the amount of ARS payments and eliminates ARS payments
completely after 2026.
Comparable carrier support is financial assistance to ensure that certain
telecommunications carriers receive funding for access charge reductions. Only one
company receives this type of assistance in New Mexico.
The Low Income Telephone Assistance Program (LITAP) provides financial assistance
to low-income customers on monthly voice service charges. PRC notes there has been a
steady reduction in LITAP needs.
The Broadband Program provides funding to eligible telecommunications carriers for the
construction and maintenance of broadband infrastructure that connect unserved
locations or augment existing broadband capabilities. Projects are awarded in
collaboration with the Office of Broadband Access and Expansion (OBAE) and the
Connect New Mexico Council (CNMC) and align with the New Mexico Broadband
Plan. An increase in the SRUSF cap, as proposed in SB126, would increase the amount
of funding available to award in the Broadband Program.
In 2024, the most recent public fund distribution showed that ARS payments accounted for over
half of the total available funds, while the broadband program received approximately 40 percent
of the funds. As noted above, a 2023 bill eliminates ARS payments completely after 2026. In
accordance with Section 63-9H-6(S), PRC has opened a proceeding to hear from stakeholders
regarding recommendations to provide the Legislature regarding the repurposing of ARS and to
determine whether ARS payments should fund the broadband program. The outcome of that
proceeding will be relayed to the Legislature in the PRC’s next annual report near the end of Senate Bill 126 – Page 3
2025.
In its 2021 report to the Legislature regarding the SRUSF, PRC recommended temporarily
increasing the cap for the broadband program from $30 million to $40 million to address the
demand for broadband and stated, “The RTA’s $30 million cap is preventing the Broadband
Program from being fully responsive to the urgent broadband access needs generated by the
pandemic. Thus, the Commission believes that the cap is temporarily interfering with the
Broadband Program’s purposes.”
Recent Surcharges
The fund is financed by a surcharge on intrastate retail telecommunications services per
communication connection. A "communication connection" includes landlines, wireless voice
connections, voice over internet protocol (VoIP) services, or equivalent services. PRC
determines and approves the amount of the fund and the surcharge rate necessary to finance the
fund on or before November 20 of each year. The current surcharge for the SRUSF is 79 cents,
and the Department of Finance and Administration (DFA) states the 2025 fund balance is $28.3
million. Below is a summary of recent per-communication connection surcharges, as established
by PRC.
Yea
r Communication Connection Rate
2025 $0.79
2024 $1.13
2023 $0.97
2022 $0.95
2021 $1.08
Funding for Broadband Projects in New Mexico
While OBAE continues to obligate funding to internet service providers, tribal, and local
governments for broadband expansion, because broadband deployment is capital in nature,
expenditure of funds has seen slow. OBAE currently has $97.9 million in unexpended and
unencumbered funds from state funds.
In January 2025, OBAE opened its applications for the state’s $675 million federal award for
the Broadband Equity Access and Deployment (BEAD) program. The application is open for 29
entities to apply. OBAE has until July 2025 to get the final awardee list approved federally
before funding can be released. OBAE will have seen almost $942.1 million across state and
federal funds flow through the office since its creation in 2021. Despite the funding the office is
expected to receive, it anticipates a $2.1 billion gap in funding for broadband deployment. In its
updated three-year state plan, OBAE states that 60 percent of internet access will be via
broadband fiber, and the 40 percent would be aerial connections such as satellite. The LFC
recommendation supports the reauthorization of the $97.9 million unencumbered and
unexpended balance for OBAE.
ADMINISTRATIVE IMPLICATIONS
PRC notes an increase in the SRUSF cap will likely bring an increase in applications for funding,
and PRC’s Telecommunications staff will have to absorb the additional work. However, the
administration supporting this program already exists so the proposed changes in this bill would
not likely create an additional fiscal impact. Senate Bill 126 – Page 4
JR/hj/hg