The state budget situation was the backdrop of so many other stories this year and will remain a large story that NM Political Report and others will continue to cover in 2017 and beyond. Due in large part to the state’s reliance on oil and gas revenues to fund the government, New Mexico earlier this year found itself facing a large budget deficit amid plummeting oil prices. The state constitution does not allow the state to run a deficit; every year, the Legislature must pass a balanced budget. Previously: Top ten stories of 2016: 10-6; #5: NM Dems buck national trend, retake House; #4: Demesia Padilla resigns; #3: AG clears final behavioral health providers
During the 30-day regular session, the state House passed a version of the budget worth $6.32 billion, which actually included $30 million in new money. But by the time the Senate began discussing the budget, the situation worsened and the state braced for a whopping $359 million less in revenue than projected.
Gov. Susana Martinez signed a bill passed during the recently-completed legislative special session that cut spending in most state agencies, but used her line-item veto authority to spare “below-the-line” funding for the Public Education Department. The bill was part of the effort to solve a budget problem that is estimated to leave the state hundreds of millions of dollars in the hole. This education funding, which restored the $22 million the version passed by the Legislature, goes towards projects of PED that are not part of the state equalization guarantee, the formula that seeks to provide equal funding per student across the state. These funds go towards programs like the controversial merit pay program as well as popular programs like “breakfast after the bell” and after-school programs.
Democrats and Martinez’s administration have clashed over some of the funding since she was first sworn in. Martinez slammed the Legislature for passing the bill with those education cuts intact (though the House version subtracted the cuts from $25 million to $22 million).
Lawmakers questioned the State Auditor and the Superintendent of Insurance for the first time after the release of an audit that showed the state failed to collect nearly $200 million in taxes from insurance companies. The pointed questions from the Legislative Finance Committee were all directed at the State Superintendent of Insurance John Franchini. Franchini said he saw the audit that showed $193 million in uncollected taxes was constructive. “We are able to take the recommendations into consideration and incorporate into our organization’s restructuring,” Franchini said of the Office of the Superintendent of Insurance (OSI). He also said it should not be called an audit, instead a “review of our premium tax department.”
Meanwhile, Deputy State Auditor Sanjay Bhakta flatly contradicted several points Franchini made during his presentation to the legislators about problems with premium tax collection from insurance companies.
The Administrative Office of the Courts announced cost-cutting measures designed to help balance the state budget amid the current crisis. Further cuts, however, would be painful and impact the courts, according to the state Supreme Court Chief Justice. The announcement Tuesday said the judiciary will reduce spending by about $500,000 by dropping the mileage reimbursement for travel. The reduced reimbursements will affect “judges, staff, jurors, interpreters and court-ordered witnesses,” according to the press release. Beginning Oct.
Delaying or freezing corporate income tax cuts and across-the-board budget cuts are two of the most popular proposals for bridging the state’s large budget deficit. That comes from a poll conducted by Public Policy Polling for NM Political Report. Respondents were asked to choose from a list of five options for balancing the budget. The options were “Delaying or freezing corporate income tax cuts,” “bringing back taxes on food and medicine,” “increasing the state gasoline tax,” “cutting education spending” and “enacting across-the-board spending cuts.”
After choosing their top choice, respondents were also asked to choose a second-best option from the same list. In both cases, respondents saw delaying incoming corporate income tax cuts delay and enacting across-the-board spending cuts as the two most popular choices.
RED RIVER — The state is facing a big hole when it comes to the state budget, lawmakers were told at the latest meeting of the interim Legislative Finance Committee. The projected $325 million deficit for the current year’s budget comes in part because state revenue projections from January were off by more than half a billion dollars. A larger-than-expected downturn in the oil and gas industry made a big part of the decline. This year, the state House of Representatives passed a budget based on the January projections, but the state Senate drastically slashed that budget before sending it back to the House. But even the big cuts in the final budget for this year leave a lot to be done.
There’s still no word on if or when Gov. Susana Martinez will call a special session to address the state’s money shortfall, but one nonprofit group wants lawmakers to consider a tax increase on alcohol sales as a way to increase state revenues. Peter DeBenedittis, director of the group Alcohol Taxes Save Lives & Money said he’s been speaking with lawmakers as he tries to increase taxes on alcohol sales in order to supplement public substance abuse treatment programs. While DeBenedittis said he has been working with lawmakers for a while, he wants to gain support from the general public now. “Were just trying to start the conversation publicly,” DeBenedittis said of the campaign. Key players in the legislature said in recent weeks there is a need to shore up the state budget before the next regular session in January. DeBenedittis said the state can save serious money by holding those who abuse alcohol accountable for treatment costs.
Oil prices are tracking with the January projections but many other indicators show potential trouble for New Mexico’s budget situation. That was the news from Monday’s meeting of the Legislative Finance Committee, the first such meeting since the end of the legislative session. Taxation and Revenue Department officials were quick to mention that this was not another projection, but rather a review of January predictions. The January projections had a sharp reduction in prices from previous estimates and resulted in a lean budget that relied on tapping reserves and sweeping money from various funds with the hopes that future revenues would be able to fill those holes. Oil and gas
While oil saw the glimmer of good news with prices, the dropping drilling activity and even a winter storm put a damper on that news.
A budget that is smaller than the previous year’s for the first time in years is now law. Gov. Susana Martinez signed the budget bill into law on Monday. Martinez did not hold a press conference, but did announce she signed the budget when speaking to a crowd of businesspeople in Albuquerque. The budget is approximately $6.2 billion in all. Legislators originally thought they would have new money to spend, but instead ended up cutting funds because oil and gas prices plummeted and continued to stay lower than originally projected.
While much of the legislation that came from the House in the the 30-day seemed to focus on crime and tougher penalties, lawmakers did, in fact, pass a budget—albeit one that did not make anyone completely happy. The House passed their version of a budget amid news of falling oil prices on a 38-31, nearly party-line vote. The $6.32 billion plan relied on sweeping more that $70 million from other state accounts such as the tobacco settlement fund and the local DWI grant fund into the state general fund. Most House Democrats voted against the bill, citing cuts to areas they said needed more money and increases to areas such as the corrections department. That budget was largely scrapped as the economic situation grew worse.