February 19, 2019

Budget bill with higher spending heads to House floor

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A key committee in the state House of Representatives approved a $7 billion budget proposal on Monday, calling for a nearly 11 percent increase in spending over the current fiscal year as New Mexico rides an oil boom that is filling its coffers and Democratic legislators pledge to significantly boost funding for public education.

The budget that cleared the House Appropriations and Finance Committee would still leave nearly $1.6 billion of the state’s general fund in reserves, or about 22 percent. That level, not seen in years, would provide the sort of financial cushion that some economists have recommended given the state’s reliance on the boom-and-bust oil industry, particularly in the wake of tax cuts that have winnowed other streams of revenue for the government.

But the increase in spending includes nearly a half-billion dollars in additional money for public education as the state faces a court order to improve the quality of schooling provided to many at-risk students. School employees would see a 6 percent pay raise.

And the proposal would allow Gov. Michelle Lujan Grisham to forge ahead with a number of priorities, including paying off at least some of the tax credits owed to the film industry and hiring more staff at an embattled Children, Youth and Families Department.

“I think this strikes a very positive balance and invests at a critical time improving programs,” Rep. Nathan Small, D-Las Cruces, told the committee.

But Republicans argued the budget is too much, too fast, and warned that, despite the state’s bright revenue outlook, the increased spending is sure to mean higher taxes for some.

“This level of spending is reckless, unsustainable and will only lead to tax increases on all New Mexico families this year and cuts to education in the future,” Rep. Jason Harper, R-Rio Rancho, said after the vote.

The budget goes next before the full House, likely later this week, and then to the state Senate.

The added funding for public education would amount to a 16 percent boost over the current budget.

Many public employees would get a 4 percent raise, too, under the proposed budget, with more for school employees and judges.

State funding for Medicaid would increase by 4.8 percent, mostly to cover a reduction in the federal government’s share of the cost to cover adults who enrolled in the program under the Affordable Care Act.

The proposed budget would also provide a 10.4 percent boost in funds for the Children, Youth and Families Department, with a particular focus on child protective services. A document written by the governor’s transition team and obtained by The New Mexican through the state’s open records law said bluntly that children are dying preventable deaths and it had been normalized within the agency.

The House committee also approved $150 million to pay off tax credits owed to the film industry. The Lujan Grisham administration has suggested the state might owe as much as $300 million. But legislators have questioned the state tax agency’s data and countered that less money may be necessary. Some lawmakers have also argued it’s not necessary for the state to pay off the backlogged tax credits all at once.

Though the state would still have a larger share of its budget in reserves than it has for years, Democrats cautioned that the volatility in revenue demands lawmakers also find ways of steadying the funding for schools as well as other services.

“We need to have a very specific, ongoing revenue source, particularly for the education piece” of the budget, said Rep. Patricia Lundstrom, a Democrat from Gallup who chairs the House Appropriations and Finance Committee.

That is bound to mean higher taxes on some products or on some households.

Lawmakers have mulled raising the tax on gasoline this year and raising personal income taxes, among other things. Sen. John Arthur Smith, D-Deming, has filed legislation to repeal a gross-receipts tax exemption for groceries.

A revamped bill to overhaul sections of the state’s tax code is expected later this week.

Meanwhile, Republicans plan to roll out their own version of a state budget in coming days.