Governors don’t usually sign a budget twice in one year. But this is no normal year. Gov. Michelle Lujan Grisham gave her blessing to New Mexico’s revised budget legislation Tuesday, but she also used her veto power to cancel some of the cuts legislators approved during the special session. “We must recalibrate our state’s budget to meet these challenging times,” Lujan Grisham wrote in a letter to the state House of Representatives upon signing House Bill 1. “However, we should not lose sight of the important work that is still needed to create lasting opportunities for all New Mexicans.”
The budget plan uses a combination of spending cuts, reserves and federal funding to deal with a projected $2 billion drop in state revenue for the next fiscal year, which begins Wednesday.
The New Mexico Legislature finished its main task of mending the state’s huge fiscal shortfall Saturday, but the special session wasn’t over as the House of Representatives still had work to do.
The Senate approved 30-12 a modified budget planthat uses a combination of spending cuts, reserves and federal funding to deal with a projected $2 billion drop in state revenue for the next fiscal year. “It’s certainly not the perfect response, but it darn well may be the only response we can give right now,” Sen. John Arthur Smith, chairman of the Senate Finance Committee, told his fellow legislators. After approving the budget, senators adjourned “sine die” and promptly left the Capitol, with several members eager to hit the road home. But the special session continued on. A long debate and dramatic revote on an election reform bill delayed the House’s proceedings, and representatives said they would need to return Monday to finish up.
Proposed cuts to higher education spending in New Mexico could jeopardize some research funding for state universities and lead to a hiring freeze at Santa Fe Community College, advocates say. Universities and colleges in New Mexico are denouncing proposed cuts to higher education spending as lawmakers trim budgets across state government to fill a $2.4 billion budget hole wrought by the COVID-19 pandemic and a devastated oil and gas market. A draft House bill seeking to blend recommendations from Gov. Michelle Lujan Grisham and an influential budget committee would slash roughly 6 percent from research and public service projects at universities and 4 percent for broader university and public college funding from the state. That would represent the steepest reductions for any state-funded department or agency eyeing potential cuts as lawmakers address the budget shortfall. The Legislature is still debating the proposed cuts.
State workers would see a drop in their pay raises for fiscal year 2021 and spending for most agencies would be cut significantly under the draft budget overhaul lawmakers began debating Wednesday. Whittling a record $7.6 billion budget to $7.34 billion — and filling wide spending gaps with cash reserves, pandemic-related aid from the federal government and other measures — is no small task for the New Mexico Legislature as it convenes Thursday for a special session to address a steep decline in projected revenues. Members of the state House and Senate finance committees met Wednesday to review the plan, which would slash higher education spending by 6 percent — the biggest cut for any single agency — and reduce the 4 percent pay raises for state workers, approved earlier this year, to 1.5 percent for those who earn less than $40,000 a year and 0.5 percent for higher earners. Funding for the new Early Childhood Education and Care Department, set to take over all services for young children July 1, would be cut by $3.3 million; the spaceport would lose $600,000; and $17 million would be slashed from the Medicaid program. Lawmakers, however, hope to shift money from the Tobacco Settlement Permanent Fund to fill the Medicaid gap.
New Mexico House Republicans presented a starkly different plan for fixing the state budget Monday, calling for lower spending levels than the governor and a key legislative panel have proposed. Minority Whip Rod Montoya said the state shouldn’t use federal stimulus funding to help mend its huge budget shortfall during the upcoming special session because the U.S. government hasn’t approved the use of those funds for that purpose. “If we do pass this budget in the next several days with that in place, we will have passed an illegal budget,” said Montoya, R-Farmington. The proposal from GOP legislators differs from the solvency plans presented last week by Gov. Michelle Lujan Grisham and the Legislative Finance Committee, which both call for using at least $700 million in federal funding to help the state shore up the shortfall caused by the novel coronavirus pandemic. Guidance issued by the U.S. Treasury Department regarding the coronavirus relief act passed by Congress states the stimulus funding allocated to states must be used to cover costs that “are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019.”
It also says “funds may not be used to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify under the statute” and that “revenue replacement is not a permissible use of fund payments.”
The Legislative Finance Committee and the governor’s office outlined the framework for the budget proposal that will be considered during next weekend’s special legislative session. The consensus revenue estimate, put together by legislative and executive branch analysts, projected a nearly $2 billion drop in revenue from the December 2019 estimate that guided the creation of the budget passed earlier this year.
The special session will begin on June 18. The previous estimate projected the state would have $7.9 billion in revenue, but new estimates say that will drop to $5.9 billion in the coming year. New Mexico, like most states, is required to have a balanced budget and not run a deficit. The state is experiencing an economic crisis, as LFC Director David Abbey referred to the situation, because of plummeting oil and gas prices and the loss of gross receipts tax revenue because of the economic situation from COVID-19 and the response to slow the spread of the disease.
New Mexico has enough from savings plus new money from Washington to help public schools weather looming budget shortages, says Sen. John Arthur Smith, D-Deming, a powerful lawmaker who helps to shape each year’s state budget. “It would be prudent to make some cuts but not deep cuts for the 21 budget,” Smith said Thursday morning of the public education portion of the spending plan for the fiscal year that begins July 1.
On Wednesday during an online update on COVID-19, Gov. Michelle Lujan Grisham expressed a desire to keep spending on public schools intact during a special legislative session she has called for June 18 to tackle a budget hole projected between $1.8 billion and $2.4 billion for the state’s fiscal year that begins July 1.
On Thursday her spokesman, Tripp Stelnicki, reiterated his boss’ position: It’s “premature to talk about cuts. We’ll know when the special session gets closer.”
The significant hit to the state budget is due to a near shutdown of the economy to fight the COVID-19 pandemic, which led to a collapse in consumer spending and global demand for oil and gas, both of which feed New Mexico’s revenue base through wages and taxes.
Smith based his opinion on multiple developments: the lion’s share of $120 million from the recently passed CARES Act in Washington that will go to the state’s 89 school districts and dozens of charter schools. New Mexico’s decision to salt away in savings more than $1.5 billion dollars during the legislative session that ended in February. And $325 million in money that individual school districts have in their own reserves.
State Senate Finance Committee chairman John Arthur Smith was among the many New Mexicans who watched oil prices plummet to unprecedented numbers, as a glut of oil and a precipitous drop in demand sent prices into negative territory for West Texas Intermediate. Smith said he saw oil prices dropping Sunday night, before dropping to $10 when he saw the news Monday morning, then even further as he started his workday. By the end of trading, WTI was trading for -$30 per barrel. In other words, traders would pay people $30 to take their supply. “I’ve just never seen anything like it,” he said.