[LWVNM Action] NM faces difficult choices in budget redo

[Richard Mason]

We will need to develop our priorities for the special session.

Dick Mason
Chair of the Action Committee

*NM faces difficult choices in budget redo*

*By *Dan Boyd / Journal Capitol Bureau Chief  *Wednesday, April 8th, 2020
at 9:21pm*

*Copyright © 2020 Albuquerque Journal*

SANTA FE – New Mexico’s budget surpluses are receding in the rearview
mirror, with the state staggering from a one-two punch of falling oil
prices and a business slowdown due to the coronavirus.

That double whammy has top-ranking lawmakers bracing for difficult budget
decisions during a special legislative session that’s expected to be called
this summer.

“We’re going to have to do some major recalibration on the budget,” said
House Appropriations and Finance Committee Chairwoman Patricia Lundstrom,
D-Gallup, adding that lawmakers will likely have to address a revenue
downturn of at least $1 billion.

“Everything is going to have to be on the table,” Lundstrom added.

That could mean spending cuts, drawing down the reserve levels and the
clawing back of proposed one-time spending – including $320 million for a
new early childhood trust fund and $180 million for statewide road repairs.

However, Lundstrom told the Journal a pared-back spending plan would likely
not include across-the-board cuts, saying she would favor keeping funding
levels intact for health care programs and economic development initiatives.

“What we’re trying to do is make sure we’re not cutting things that are
critical,” Lundstrom said.

But approved pay raises for teachers, judges and other state workers that
are now scheduled to take effect July 1 could be reduced – or put on hold.

“All the things we hoped for, they’re back on the table,” said Sen. Steven
Neville, R-Aztec.

Neville said there are many “unknowns” about the budget situation,
including how quickly businesses can bounce back once a state-mandated
closure order is lifted and whether the federal government will approve
additional stimulus funds for states.

But it appears increasingly clear that a $7.6 billion budget plan approved
by lawmakers in February for the fiscal year that starts in July will have
to be scaled back significantly.

That budget plan calls for state spending to increase by roughly $535
million – or about 7.5% – over current levels.

Gov. Michelle Lujan Grisham said last month that a special session to bring
spending levels for the coming budget year in line with reduced revenues is
inevitable.

But she said her administration wanted more clarity on federal relief
funding and new state revenue estimates before setting a session date.

Top lawmakers now say they expect the special session will take place in
mid-June.

*Rainy day fund*

A silver lining for New Mexico amid the increasingly gloomy financial
outlook is found in the state’s reserves.

In December, the state was projected to have $1.7 billion in reserves at
the end of the current budget year in June, or nearly 25% of state spending.

Even if that number ultimately ends up being smaller, there should still be
enough money in reserves to avoid emergency budget-balancing measures for
the current budget year, which ends June 30, leading legislators say.


That’s largely due to 2017 legislation sponsored by the late Rep. Lorenzo
“Larry” Larrañaga that called for a certain amount of oil and natural gas
taxes and royalties to be set aside in cash-flush years.

That rainy day fund, technically known as the tax stabilization reserve
fund, has grown rapidly in the past several years – when oil production
levels skyrocketed – and is projected to have more than $1.3 billion in it
at the end of the current fiscal year.

Given that backdrop, a Tax Foundation report released this week found New
Mexico was one of the “best prepared” states for the crisis – along with
Wyoming, Alaska, North Dakota and West Virginia.

But the report also noted several of those states could be hit particularly
hard due to their reliance on oil and gas-related revenue.

“States like Wyoming, Alaska, North Dakota and New Mexico have rainy day
funds that would be the envy of the nation were it not for the unique
challenges resource-dependent states face as energy prices plummet,” the
report by the nonpartisan group said.

Unlike some other reserve accounts, New Mexico’s rainy day fund can be
accessed only by a two-thirds vote in both the House and Senate, an action
that could be necessary during the special session.

*Outlook unclear*

Lujan Grisham said this week that her administration is expecting
coronavirus cases to spike in New Mexico by the end of this month or early
May.

Once infection rates subside, the governor suggested there would likely be
a gradual lifting of the business closure order by sector, but she said no
firm plan is in place and said she could not predict exactly when that
might happen.

“We have to get the economy going again,” Lujan Grisham said during a
Tuesday meeting of the State Investment Council that was conducted by
telephone.

Federal funds could help in that effort, and a $2 trillion stimulus package
approved by Congress last month included an estimated $1.25 billion for New
Mexico. But that money cannot be directly used to backfill state programs,
according to the Legislative Finance Committee.

Instead, the money will be spent on expanding unemployment benefits and
one-time $1,200 checks for most state residents, though some New Mexicans
may not get those funds for weeks.

Meanwhile, Lundstrom said lawmakers may pass a budget adjustment package
during the special session, then do more budget-balancing work during the
60-day session that starts in January 2021.

“Our world has changed, and nobody could have guessed it a month or so
ago,” Lundstrom said.
-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.swcp.com/pipermail/action/attachments/20200409/f9164f91/attachment.htm>