May 26, 2023

LFC reports $3.1 billion in outstanding capital outlay funds

Santa Fe Roundhouse

Nicole Maxwell/New Mexico Political Report

Santa Fe Roundhouse

A legislative report found about $3.1 billion in unused capital outlay funds for FY23’s third quarter. 

This is according to the Legislative Finance Committee’s quarterly capital outlay reports, which were presented by LFC analyst Cally Carswell on May 23.

The outstanding capital funds includes $1.8 billion in unspent funds for projects authorized by the legislature through 2022 which do not include the 2023 funds, Carswell said.

Other unused capital funds include $158 million in balances and earmark funds for projects funded by the Water Trust Board, the Colonias Infrastructure Fund  and the Tribal Infrastructure Fund.

There was also $463.8 million from supplemental severance tax bonds for public schools and $605.8 million for special appropriations to capital projects from 202 and 2022, according to the report.

“The balances are distributed over roughly 4,000 active projects in the state and we expect that number, as well as the balances, to get bigger when funding becomes available for the projects you all appropriated to this last session, and that will happen in July,” Carswell said.

Capital outlay projects are broken down into three categories: statewide projects, local projects and higher education projects.

Statewide projects are for state agencies or for things like major water projects on rivers, Carswell said.

Local projects are funded through legislators and the governor’s discretionary spending and benefit local governments. These projects can include fixing a wastewater system or a water crossing over a creek that regularly washes out.

Higher education projects were not discussed as much since they also rely on general obligation bond funding which just became available, the report stated.

Local projects tend to have the most outstanding capital outlay funds for several reasons, Carswell explained.

“(These reasons include) lack of planning prior to funding, lack of capacity at the local level to piece together funding for projects and to execute them and piecemeal funding,” Carswell said. “(And) while you might think that the revenue spikes that we’ve seen recently, would help this problem, there’s actually kind of an equal chance that it could just exacerbate it.”

If funding is not used, it can be reverted back to the state’s general fund, Carswell said.

“I wanted to make sure you were aware of a provision that has existed in the capital bill for several years for general fund projects. Specifically, it requires projects funded with general funds who encumbered at least 5 percent of the appropriation within the first fiscal year and if that doesn’t happen, the funds are supposed to revert to the general fund,” Carswell said. 

Which means that at the end of FY23, there are 22 projects at risk of funding reverting back to the general fund, Carswell said.