At least 41 of New Mexico’s 89 school superintendents stood outside the state Capitol on a windy, bone-chilling Friday afternoon to deliver a message of desperation. The weather was rotten and they said their budgets are in the same condition. Six of the superintendents spoke publicly, and all of them said their districts have cut so much so fast to help resolve the state’s budget crisis that they are reeling. That puts at risk the goal of every kid getting a good education, they said. Veronica García, superintendent of the Santa Fe Public Schools, said Democrats who control both houses of the state Legislature and Republican Gov. Susana Martinez must come together in the spirit of compromise to save the schools and the children they serve.
The state Senate’s leading budget hawk challenged Gov. Susana Martinez on Thursday to reverse course and support proposals for raising taxes and fees or watch essential services get slashed even more. Sen. John Arthur Smith said any vetoes Martinez makes at this stage will force legislators to cut the budgets of public schools and health care as they follow the law to pass a balanced budget. “We’re out of places to find additional dollars,” Smith, D-Deming, said during a brief speech on the floor of the Senate. He spoke hours after the House of Representatives approved a $6.08 billion budget and then moved it to the Senate for consideration. The budget crafted by the Democrat-controlled House would increase state revenue by some $250 million with tax and fee increases.
With the state still running a deficit and reserves depleted, Democrats in the New Mexico House of Representatives have identified four tax or fee increases they say would prevent more cuts to education and put the state on better financial footing. The initiatives — taxing all internet sales, raising the permit fee on heavy trucks, closing a loophole that benefits nonprofit hospitals and increasing the tax on vehicle transfers — could raise more than $200 million in ongoing revenue. Some of it would go to avoid cuts in state agencies and some to beef up reserves. The move to bring together the House Democratic caucus came on the same day as state economists restated a revenue forecast from December that shows the economy has stabilized but reserves are far below the desired level of $300 million, or 5 percent of recurring revenue. The reserve account for the $5.6 billion budget at the end of the fiscal year on June 30 is projected at 1.6 percent.
State lawmakers say revenues are no longer deteriorating but remain flat, and they are moving forward on a 2018 budget with proposals to infuse new revenue — including tax increases — to balance spending and replenish reserves. A new consensus revenue estimate for fiscal year 2018 was expected to be released Wednesday but was pulled back for more study. Still, lawmakers said they do not expect a significant change from December, when economists were forecasting a $125 million deficit for the 2018 fiscal year, which begins July 1. “I don’t believe there’s going to be a material change,” Sen. John Arthur Smith, D-Deming, told the Senate Finance Committee. A forecast presented halfway through last year’s legislative session showed state revenues cratering from the collapse of crude oil prices.
While state lawmakers are pulling out all the stops to find “now money” to plug an expected deficit in the next fiscal year, Rep. Jason Harper has introduced a bill he hopes can put the state on better financial footing for decades to come. Harper, R-Rio Rancho, admits that House Bill 412, the New Mexico Tax Reform Act, is not a quick fix and will not patch the budget in fiscal year 2018 or even 2019. But by restructuring the state gross receipts tax and simplifying income and other tax policies, New Mexico will position itself for more solid growth in the new economy, he said. “It doesn’t help us fix the current budget problem,” Harper said of his bill, “but this hopefully prevents another budget problem.” The measure comes halfway through the 2017 legislative session, when reserve funds have been depleted by efforts to balance budgets for the last fiscal year and the current year, which ends in June, and many lawmakers are focused on raising enough new money to get through the upcoming year.
Ana Ochoa, a freshman studying business administration and accounting at the Santa Fe Community College, is one of thousands of students across New Mexico who depend on the state’s Lottery Scholarship Fund to help pay for school. But she worries about the fund’s dwindling fortunes. She’s not alone. Over the past few years, demand has outpaced supply for the money, and students who once had 100 percent of their tuition paid by the fund have seen that share shrink to 95 percent, and then 90 percent. The share would have sunk even lower if lawmakers had not decided to pull money two years ago from the state’s general fund and alcohol excise tax revenues to supplement the scholarship fund two years ago.
Gov. Susana Martinez signed three bills Tuesday to balance the state’s budget, taking about $46 million from the reserves of public schools. But she vetoed cuts to an economic development program and various accounts in New Mexico government. The bills could raise $190 million for the state’s general fund, closing a deficit that was projected to total about $80 million. The measures also will replenish government reserves, though not nearly to the extent of plans proposed in early January by legislative staff and the governor’s own administration. The package will leave the state’s cash reserves at 1.8 percent, rather than nearly 3 percent as previously proposed.
Three days after Republican Gov. Susana Martinez vetoed funding for the Legislature, lawmakers on Monday approved another measure to pay for the 60-day session and provide emergency cash to pay jurors in the state’s court system. Martinez’s veto demonstrated how even a routine bill that usually passes unanimously at the beginning of each legislative session could become mired in partisan politics this year. Unclear is whether Martinez will sign the latest bill. If she does, it would hearten employees at the Capitol who are expecting a paycheck at the end of this week. But the Senate stripped funding from the bill to pay for the Legislature’s year-round operations, meaning it also unclear whether cuts might still be in store for the offices responsible for analyzing bills, tracking state finances and serving as a watchdog on government.
When state Human Services Secretary Brent Earnest goes before lawmakers to speak about his budget for the Medicaid insurance program, many want to run for cover. One year, he needed as much as $100 million from the general fund to fully pay for all the new enrollees under the federal Affordable Care Act and provide the same level of service. Last fall, he said he needed another $80 million for the fiscal year that begins July 1. On Thursday, he told the House Appropriations and Finance Committee that request had dropped to $42 million. “This is a significantly better picture than you saw in the fall,” Earnest said.
State lawmakers on Wednesday passed the last pieces of a plan to balance New Mexico’s budget for the current fiscal year and rebuild the state’s drained cash reserves, coming to compromises on cuts to education funding and an economic development program. Unclear is whether Republican Gov. Susana Martinez will veto any pieces of the solvency package for fiscal year 2017. She has vowed to protect funding for classroom instruction and the state’s “closing fund” intended to draw prospective investors to the state, but a proposal she preferred would have taken far more money from school districts’ reserve funds than the plan approved by lawmakers. Martinez has three days to act on the bills, and a spokesman said the Governor’s Office will need to closely scrutinize parts of the proposal, echoing the criticisms of House Republicans. “For example, lawmakers chose to protect their personal legislative retirement accounts, while at the same time tried to squeeze money out of other areas of government,” Mike Lonergan said in an email late Wednesday.