If the federal government defaults on its debt for a prolonged period of time, New Mexico could lose up to 37,500 jobs, according to a new report by Moody’s Analytics released May 10. This report details two possible outcomes: should the U.S. default and then correct itself in the immediate aftermath and in the event of a prolonged default.
“We now assign a 10 percent probability to a breach,” the report states. “If there is a breach, it is much more likely to be a short one than a prolonged one. But even a lengthy standoff no longer has a zero probability. What once seemed unimaginable now seems a real threat.”
The expected deadline to prevent default is June 8 although due to the nature of economics, the date is subject to change, the report states.
Two dueling bills in Congress attempt to address the debt ceiling and these actions could include harsh cuts that may affect New Mexicans. One of the bills would eliminate the debt ceiling altogether while the other expands the debt ceiling and imposes deep cuts, including to social programs like food assistance. These proposed cuts in the Limit, Save, Grow Act of 2023, which was proposed by House Speaker Kevin McCarthy, a California Republican, on April 19, include recalling unspent pandemic-related funding, ending President Joe Biden’s student loan forgiveness plan, repealing green tax credits, cutting funding to the IRS and limiting other discretionary spending. The bill’s cuts seek to save taxpayers $45 trillion. “The spending limits are not draconian.
State lawmakers say revenues are no longer deteriorating but remain flat, and they are moving forward on a 2018 budget with proposals to infuse new revenue — including tax increases — to balance spending and replenish reserves. A new consensus revenue estimate for fiscal year 2018 was expected to be released Wednesday but was pulled back for more study. Still, lawmakers said they do not expect a significant change from December, when economists were forecasting a $125 million deficit for the 2018 fiscal year, which begins July 1. “I don’t believe there’s going to be a material change,” Sen. John Arthur Smith, D-Deming, told the Senate Finance Committee. A forecast presented halfway through last year’s legislative session showed state revenues cratering from the collapse of crude oil prices.
Decades worth of warnings about the danger of underfunding public defenders finally came to a climax last month, when a district court judge held Chief Public Defender Bennett Baur in contempt of court after Baur, the agency head, said he could not ethically take a handful of cases in rural New Mexico. New Mexico’s continued weak budget suggests that the state’s Law Offices of the Public Defender is unlikely to receive more resources any time soon. But according to leading criminal defense attorneys, public defenders were never a priority in the state budget even during better economic times. The recent flashpoint was when Baur showed up to the 5th Judicial District Court in Lovington to represent Michelle Sosa. Sosa was on probation for a previous aggravated battery conviction and tested positive for methamphetamines.
The House sent the one bill truly necessary during this year’s special session back to the Senate with some changes. The bill would find unused money in reserves and “sweep” them to the general fund, to pay the rest of the deficit in an already-concluded budget year and to cut much of the current year’s deficit. In all, it would add $316 million, the bulk of which comes from the tobacco settlement permanent fund, to fix the budget deficit. In the bill, $131 million will go to the budget year that ended on June 30. Another $88 million from that would go toward the current fiscal year for this year’s budget gap.
A new proposal from House Republican leaders to fix the state budget deficit would cut the same amount of money—$89.6 million—as the Senate Democratic leaders’ plan. But House Speaker Don Tripp, R-Socorro, Majority Leader Nate Gentry, R-Albuquerque, and state Rep. Jason Harper, R-Rio Rancho, emphasized different priorities in the House Republicans’ plan, which they presented to reporters Monday morning in a press conference. Namely, Republicans said their plan swaps cuts proposed in the Senate bill to K-12 education, the state Children, Youth and Families Department, the Department of Public Safety and services for sexual assault victims in the state Department of Health budget for deeper cuts in higher education. House Republicans also emphasized that their proposal raises no taxes. “The last part is very important because New Mexicans cannot afford to pay more taxes,” Tripp told reporters while announcing the proposal.