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
Sen. Campos/
Reps. Sanchez, Gonzales and Vincen
t
LAST UPDATED
ORIGINAL DATE 2/17/25
SHORT TITLE Zero-Interest Natural Disaster Loans
BILL
NUMBER Senate Bill 31/ec
ANALYST Davidson/Torres
APPROPRIATION*
(dollars in thousands)
FY25 FY26
Recurring or
Nonrecurring
Fund
Affected
$150,000.0 Recurring General Fund
Parentheses ( ) indicate expenditure 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
DFA
Indeterminate
but minimal
Up to $266.0 Up to $266.0 Up to $532.0 Recurring General Fund
Parentheses ( ) indicate expenditure decreases.
*Amounts reflect most recent analysis of this legislation.
Conflicts with Senate Bill 134
Sources of Information
LFC Files
Agency Analysis Received From
Department of Finance Administration (DFA)
New Mexico Municipal League (NMML)
Department of Homeland Security and Emergency Management (DHSEM)
SUMMARY
Synopsis of Senate Bill 31
Senate Bill 31 (SB31) establishes the natural disaster revolving fund to provide zero-interest
loans to political subdivisions of the state and electric cooperatives that have been approved for
Federal Emergency Management Agency (FEMA) public assistance funding following a
federally declared natural disaster. The bill directs the Department of Finance and
Administration (DFA) to administer the loan program in consultation with the Department of Senate Bill 31/ec – Page 2
Homeland Security and Emergency Management (DHSEM) and requires loan recipients to enter
into reimbursement contracts to repay the state once FEMA funds are received.
The bill also creates the federal reimbursement revolving fund, which states the purpose is to use
federal reimbursements for state emergency response expenditures and ensure continued support
for future disaster recovery efforts. The bill designates both funds as part of state reserves and
establishes an annual transfer mechanism from the appropriation contingency fund to the natural
disaster revolving fund to maintain a balance of up to $150 million in the natural disaster
revolving fund.
A $150 million appropriation from the general fund is made to the natural disaster revolving
fund with unexpended funds remaining available in future fiscal years.
This bill contains an emergency clause and would become effective immediately on signature by
the governor.
FISCAL IMPLICATIONS
Earmarks and Reserves
This bill establishes a new fund and provides for continuing appropriations. LFC has concerns
regarding the inclusion of earmarks for up to $150 million for the revolving fund and the
continuing appropriation language included in the statutory provisions. These provisions limit
the Legislature’s ability to set spending priorities and allocate resources based on emerging fiscal
needs.
The appropriation of $150 million contained in this bill is a recurring expense to the general
fund. Any unexpended or unencumbered balance remaining at the end of FY26 shall not revert to
the general fund. From FY25 through FY28, the bill directs an appropriation from the
appropriation contingency fund (ACF) to maintain a balance of $150 million in the newly
created natural disaster revolving fund. However, the bill also stipulates that any balance
exceeding $150 million at the end of a fiscal year must revert to the ACF, while simultaneously
requiring a transfer from the ACF to restore the revolving fund’s balance to $150 million. This
conflicting language should be addressed to ensure clarity and consistency in fund management;
see “Technical Issues” for further details.
Senate Bill 134 amends statutory definitions of state reserve funds, introducing a centralized
classification where none previously existed. Currently, state statutes define reserves through
individual fund statutes rather than a single, cohesive framework. This bill designates the
government results and opportunity expendable trust and the newly created natural disaster
revolving loan fund and federal reimbursement revolving fund as reserve funds.
Under existing law, the state will count the government results and opportunity expendable trust
as a reserve fund only for FY25. This bill makes that designation permanent, increasing reported
reserves by at least $500 million in FY26, depending on final revenues and spending decisions
made in the 2025 and 2026 legislative sessions. This would increase the total reserve percentage
by at least five percent. However, the fiscal impact of adding the natural disaster revolving loan
fund to the reserve calculation is uncertain due to conflicting statutory provisions governing fund
distributions. If the fund maintains a zero balance, its inclusion in the reserve calculation would Senate Bill 31/ec – Page 3
be unnecessary and would not contribute to the state’s bottom-line reserves.
Agency Fiscal Implications
The Department of Finance Administration (DFA) anticipates implementation of the bill would
increase the agency’s workload by 5,736 hours, which the agency estimates can be covered
through three new full-time positions. DFA analysis also anticipates implementation of the bill
would increase the workload of the agency’s Administrative Services and Financial Controls
Division by 630 hours, with 330 of the hours due to initial implementation and a recurring
additional 300 hours of work each year.
The bill allows up to $250 thousand a year of the natural disaster revolving fund can be used by
DFA for the implementation of the fund, provided the funds are used for that express purpose.
Given DFA’s estimate that the bill would increase the agency’s workload by 5,736 hours or
roughly three additional positions at $172 thousand a year, LFC estimates implementation of the
bill could cost an additional $266 thousand, to cover the remainder of what the bill gives to DFA
for administrative costs.
SIGNIFICANT ISSUES
Federal Reimbursements
Current federal reimbursement practices do not provide the state with the flexibility and speed
necessary to respond to natural disasters. Research done by Pew Charitable Trusts on the state’s
current budgeting and tracking of wildfire suppression and recovery notes gaps in accessibility
and transparency of the data, data the state could utilize to plan and budget for disasters.
Pew’s research recommended comparing actual spending versus expected spending, assessing
threats for disasters, and implementing tools, like the federal reimbursement revolving fund, to
enhance the state’s ability to monitor and budget for disaster suppression and recovery. Further,
Pew research notes this enhanced tracking will make spending data on disasters and federal
reimbursements more accessible, transparent, and comprehensive.
Implementation of the federal reimbursement revolving fund, which will act as a clearinghouse
for the state’s federal reimbursements and clear up current administrative hurdles regarding
access to and storage of reimbursement funds, has the potential to bolster the state’s natural
disaster recovery abilities.
The DHSEM notes the inclusion of electric cooperatives as eligible for zero-interest loans has
the potential enable infrastructure providers the ability to respond quickly and recover faster
from disasters. Analysis from DHSEM notes the creation of a federal reimbursement revolving
fund will enhance the state’s ability to monitor federal funding for disasters with greater
transparency while also providing a smoother outlet for the funds, which could speed up the
distribution of them.
Reserves
The New Mexico Constitution mandates a balanced budget, requiring the state to maintain Senate Bill 31/ec – Page 4
general fund reserves to offset potential shortfalls in revenue or unexpected expenditure
increases. These reserves serve as a safeguard to ensure fiscal stability and continuity of
government operations.
Best practices outlined by the Pew Charitable Trusts and the Volcker Alliance recommend
reserve funds be highly liquid and subject to controlled obligations to ensure their effectiveness
in mitigating fiscal risk. Most of the funds designated as reserves in this bill meet these criteria.
However, the federal reimbursement revolving fund, the government results and opportunity
expendable trust, and the natural disaster revolving loan fund do not adhere to these standards
due to their significant distributions for programmatic uses and appropriations.
Because these funds experience large inflows and outflows, their balances could fluctuate
substantially, leading to volatility in the state's reported reserves. This variability may create the
appearance of financial instability, potentially affecting the state’s creditworthiness as perceived
by bond rating agencies, bond buyers, and the public. Given the unpredictability of fund balances
and the absence of restrictions ensuring their availability solely for reserve purposes, these funds
do not align with national best practices for state reserve management.
Timeliness
DHSEM notes that, currently, political subdivisions affected by natural disasters must wait for
FEMA reimbursements, a process that can last months. Senate Bill 31 has the potential to act as
a bridge between recovery and reimbursement. Due to the complex nature of disaster recovery,
analysis from DHSEM notes timely access to funds is necessary to provide funding for actions,
such as debris removal, infrastructure repair, and emergency services; while federal funding is
typically available for actions like these, funding is often delayed or difficult to immediately
spend.
Analysis from DHSEM for Senate Bill 134, a bill similar to SB31, notes the state’s most recent
natural disaster event required up to $70 million in the first five days. While this cost was
distributed across multiple entities, the total alone shows how expensive natural disasters can be.
Potential Litigation
Analysis from the New Mexico Attorney General (NMAG) on Senate Bill 134 notes, while the
bill allows for the Department of Finance Administration to work and consult DHSEM regarding
loans, it does not require it. This issue is mirrored in SB31. This has the potential of requiring the
courts to have to interpret the scope of DHSEM and its role regarding awarding loans.
Structural Considerations
Analysis from DFA notes the success of a loan program hinges on the timely repayment of loans
by political subdivisions. If there are delays or failures in securing federal public assistance
funding, repayment issues could occur and could impact the fund’s sustainability and impact the
state’s financial exposure. DFA analysis recommends the fund be used as an available credit
facility to minimize these risks:
By obligating the funds as a facility rather than a traditional loan, the state will be
allowed to keep the funds in the treasury unless and until the political subdivision creates Senate Bill 31/ec – Page 5
a shovel ready project and submits adequate draw requests in accordance with the loan
agreement.
DFA analysis notes due to the bill creating interest penalties for noncompliance on loan terms,
the agency will be required to create rules, standard terms, and conditions to set an appropriate
default interest rate and provide disincentives for arbitrage based on fluctuations in interest rates.
DFA notes enforcement and determination of these new penalties could be complex and could
lead to political subdivisions being under increased financial strain if they are unable to meet
expenditure and repayment deadlines.
Analysis from DHSEM recommends the bill move the cap within the federal reimbursement
revolving fund from $150 million to $500 million, due to how high the costs for disaster
recovery can be.
Analysis from the New Mexico Municipal League notes the bill’s current language has the
potential to create a timing issue where a political subdivision has become eligible for
reimbursement but has yet to receive anything for reimbursement, resulting in the subdivision
being required to repay a loan when the amount is not yet available. Due to how long the Federal
Emergency Management Administration process can be regarding reimbursement, this issue
could occur frequently. Having language addressing this issue could aid in implementation of the
bill.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
SB31 relates to Senate Bill 134, both creating a natural disaster revolving fund and amending
sections of the state’s appropriation contingency fund. Passage of both bills would conflict in
distribution amounts and definitions of reserves.
TECHNICAL ISSUES
Section 2 subsection E states unexpended and unencumbered balances at the end of the fiscal
year shall both revert to the appropriation contingency fund and be included in the calculation of
state reserves. If the balance is transferred to the appropriation contingency fund, the balance will
be zero and cannot be included in the calculation of reserves. Because there will be no balance
and the appropriation contingency fund is a state reserve fund, the sentence “any unexpended or
unencumbered balance remaining at the end of a fiscal year shall be included in the calculation
of state reserves” should be deleted.
Section 3 requires a transfer from the appropriation contingency fund to the natural disaster
revolving fund necessary to reach a balance of $100 million in the natural disaster revolving
fund. Because the revolving fund reverts to the appropriation contingency fund, the funds may
move back and forth with an unclear ending balance, depending on when the Department of
Finance and Administration makes each transfer. Recommend clarifying which transfer occurs
first.
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