January 24, 2017

Disputes linger on where to scrounge funds for state budget fix

While lawmakers say measures to patch an unconstitutional budget hole are the 2017 Legislature’s first priority, disagreements over a solvency package Tuesday kept most of the plan from moving forward to the governor.

Four bills together would roll back some capital construction projects, sweep money from cash balances, including dollars earmarked for education reforms and economic development, and tap into reserve funds squirreled away by school districts and charter schools.

“No one’s happy about having to cut the public schools in the middle of the year,” said Sen. Mimi Stewart, D-Albuquerque.

The exact amount of money that lawmakers scrape together will depend on the final version, but the legislation would beef up state government’s $6 billion general operating fund by adding some $260 million. If signed by Gov. Susana Martinez, as expected, the solvency plan would close a $70 million deficit for the fiscal year that ends June 30. It also would replenish state reserves to equal between 2 and 3 percent of the budget, which is important for avoiding further downgrades to the state’s credit rating.

One of the bills, HB 4, which would pull $89 million into the general fund from insurance accounts for fire departments and law enforcement, was sent to the governor for her signature.

But slightly different versions of the three other solvency bills cleared the House and Senate and still must be reconciled. In order for a bill to pass the Legislature, both chambers must approve identical language.

A conference committee of House and Senate members was set to convene Tuesday night to negotiate a compromise. But the meeting was called off while House Democrats remained in a strategy session.

“We think we’re going to be able to resolve all those issues very quickly,” said Sen. Carlos Cisneros of Questa, one of the Democrats on the conference panel.

The bills include:

— HB5, which would use $40 million from general fund capital construction projects. A dispute remains over allocations for water, colonias, and tribal infrastructure.

— SB 113, which would reduce appropriations by about $100 million. The most contentious part of this plan is taking money earmarked for the Local Economic Development Act, a fund intended to promote business expansion. Only $8 million to $11 million of surplus dollars would be transferred, but Republicans, led by Rep. Larry Larrañaga of Albuquerque, want the entire $50 million fund protected.

Another dispute over this bill is how much money should be sliced from so-called “below the line” education programs. Republicans argued for protecting a larger share of this money, which is used for special initiatives such as Advanced Placement counseling, breakfast programs and teacher merit pay. Rep. Dennis Roch, who serves as a school administrator in Logan, said these programs have proven themselves. “Once we see success we don’t want to cut it,” he said.

— SB 114, which targets school district cash balances. Gov. Martinez originally proposed taking more than $100 million from these reserve accounts. The House and Senate are arguing over whether to sweep $50 million, or an amount between $40 and $45 million, into the general fund. The House wants to avoid leaving a school district with a cash balance below 4 percent.

Senators from both parties say the solvency package was well-crafted so that programs throughout state government share the pain. “The reality is nobody likes to make cuts for any purpose,” said Cisneros. “If we don’t resolve this now we’re going to have to rework it” while crafting the budget for the fiscal year that begins July 1.

Lawmakers at a special session in October cut spending for state agencies by more than 5 percent and tried to balance spending with falling revenue. That solvency package was changed by Gov. Martinez when she used her line-item veto power to restore some capital projects.

At a breakfast meeting Tuesday, Rep. Nate Gentry of Albuquerque, the Republican floor leader, said keeping Local Economic Development Act funding at $50 million is important so New Mexico can keep its commitments to the business community and that Martinez likely would veto any effort to reduce these funds.

“She has the veto pen and, hopefully, she will use it if that is included,” he said.

Contact Bruce Krasnow at 986-3034 or brucek@sfnewmexican.com