SOCORRO — The era of budget austerity might not be over, but New Mexico appears to have weathered the worst of a lengthy economic downturn.
Driven by higher-than-expected gross receipts tax revenues and energy royalties, the state is on pace to have a $120 million revenue surplus for the just-started budget year, according to estimates released Thursday by economists working for the governor and Legislature.
However, Gov. Susana Martinez’s budget chief said the positive revenue news doesn’t erase ongoing cost concerns, including spiraling Medicaid costs, underfunded public employee pension plans and uncertainty in federal budget negotiations.
“We do not believe this is any time for a spending spree,” Finance and Administration Secretary Rick May told New Mexico legislators during a Thursday hearing at New Mexico Tech.
Revenue growth would be nearly 5 percent for the fiscal year that started July 1 if the revenue estimates prove accurate.
It would also mean state employees and teachers would have to pay increased amounts into their retirement plans only for the current year — instead of into the future — as part of a budget-balancing plan adopted this year.
Despite the challenges on the horizon, the revenue surplus could still mean stability, if not more money, for cash-strapped state programs during next year’s legislative session.
Even with the help of federal stimulus dollars, New Mexico has had three straight years of budget cuts that have reduced state spending from about $6 billion in 2008 to $5.4 billion this year.
Many lobbyists and state program directors are already approaching legislators about increased funding, said Rep. Luciano “Lucky” Varela, D-Santa Fe, vice chairman of the Legislative Finance Committee.
“They’re already knocking on our doors, saying, ‘Here’s what we would like,’ ” Varela said.
The revenue estimates presented Thursday project that the state will have $370 million in cash reserves when final calculations are made on the just-ended budget year. That money can be used as a buffer in case of natural disasters and other unexpected costs.
Meanwhile, if revenue projections hold up for the current budget year and the next, the Legislature could have more than $360 million in “new money” to appropriate when it convenes in January to prepare a budget for the fiscal year, beginning in July 2012, according to an Associated Press estimate.
Despite a shaky labor situation, personal income and wages grew more than expected during the just-ended budget year, Taxation and Revenue Secretary Demesia Padilla said.
Preliminary data show that personal income in New Mexico grew by slightly more than 4 percent in the year that ended June 30, Padilla said.
Tobacco tax revenue has also increased, due in part to a 2010 cigarette tax increase.
Forty-four state government workers were laid off last month, but top-ranking lawmakers said Thursday that the budget pain has been spread evenly.
“We’ve weathered this storm over the last five years better than most states,” said Sen. John Arthur Smith, D-Deming, the LFC’s chairman.
New Mexico’s budget picture is also expected to benefit, at least in the short term, from a newly imposed cap on film rebates that Martinez pushed for during this year’s legislative session.
The cap imposed a $50 million annual limit on film rebates. A rush by film companies to file for the incentives before the new law took effect July 1 boosted the price tag for rebates to $102 million in the just-ended budget year.