A bill that would make it easier for the Legislature to tap into rainy day funds cleared the Senate on Thursday over the objections of Republicans who accused Democrats of being fiscally irresponsible.
Senate Bill 135, which passed 24-15 after an hourlong debate, changes transfers between the more restrictive Tax Stabilization Reserve and the less restrictive operating reserve.
Under current law, when operating reserves exceed 8 percent of the prior year’s appropriations, the excess is transferred to the Tax Stabilization Reserve, said Sen. Siah Correa Hemphill, D-Silver City, who sponsored the measure.
The bill would “keep that provision in place but it provides for the transfer to occur only if the balance of the Tax Stabilization Reserve is less than 20 percent of appropriations,” she said. “When the balance … exceeds 20 percent, no transfer will occur and the funds will stay in the less restrictive operating reserve.”
Correa Hemphill said the existing relationship between the two rainy day funds limits the Legislature’s ability to have the “flexibility” to deal with important needs when they arise.
“Our reserve target currently creates a risk of growing more restrictive reserve accounts at the expense of less restrictive ones,” she said.
The bill would slow the growth of the less accessible stabilization fund and allow more funds to accumulate in the operating reserve, “which is more readily available for one-time spending by the Legislature,” according to a fiscal impact report.
Money in the Tax Stabilization Reserve can only be spent “if the governor declares it necessary because of a shortfall” and both the House and Senate approve of the appropriation with a two-thirds vote in each chamber, the report states.
A December revenue forecast projected a transfer of $484.3 million into the Tax Stabilization Reserve in the upcoming fiscal year.
Since the tax stabilization fund is already over 20 percent of recurring appropriations, however, that money would remain in the operating reserve under the proposed legislation. As a result, the tax fund would lose an estimated $17.4 million in investment returns annually.
Sen. Craig Brandt, R-Rio Rancho, said the proposal is designed to give politicians easy access to rainy day funds.
“I wish we could get someone in the state that could tell us how to actually diversify our income, but unfortunately, we just have political agendas that try to spend money to get people reelected,” he said. “That’s what we’re doing here, is we’re trying to free up money so that someone can make a political investment, [and] the only return on that investment will be votes.”
Other Republicans also urged the chamber to leave the transfer formula alone, saying the state could once again face financial turmoil in the near future if oil and gas prices plummet.
“This particular fund was built so that when we had those giant swings in the industry that pays all the bills,” the state wouldn’t have to make drastic cuts, said Sen. Bill Sharer, R-Farmington.
“This fund was specifically built so that we didn’t have to slash agency budgets,” he said. “We tried to make it just difficult enough [to tap into the Tax Stabilization Reserve] so that we didn’t get our little greedy paws on it.”