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Sunday, November 01, 2009
Richardson Considers Budget Measure
By Dan Boyd
Copyright © 2009 Albuquerque Journal
Journal Capitol Bureau
SANTA FE — Twelve days and counting.
That's how much time Gov. Bill Richardson has to decide whether to sign off on the lawmakers' blueprint for solving the state's $650 million deficit for this year.
The governor — unhappy that the Legislature did not approve his budget-balancing plan during its recent special session — has described the state agency budget cuts approved by lawmakers as poorly crafted, potentially harmful and rife with unintended consequences.
His executive agencies have supported that position, last week trotting out warnings of dire consequences should Richardson sign off on the cuts: Medicaid benefits will be slashed. Federal money will be lost. Two prisons may have to close, and hundreds of inmates could be released early. State parks may have to close.
Many legislators say the fears are being overblown.
"It's just playing politics with people's lives," said House Minority Whip Keith Gardner, R-Roswell. "The bottom line is we've got to cut spending."
So how far apart are the two plans for solving the deficit? And what would be the impact of either plan?
Different plans
At issue is how to come up with a little less than $100 million of the $650 million predicted shortfall. The remainder of the deficit is being covered through agreed-to proposals such as using reserves and moving untapped money into the general fund.
Lawmakers are seeking an average of 7.6 percent cuts for most state agencies, which would raise $93.7 million. Richardson's plan calls for 3.5 percent, or about $43 million, in such cuts. He has suggested much of the difference could be made up by slashing stalled capital projects and using that money for operational costs.
"I had a good plan," Richardson told reporters last week. "My big concern is they protected their pork projects. We had them on the cutting floor. ... Instead, no action was taken."
Lawmakers have argued that plugging too much of the current deficit with nonrecurring revenue will make it that much harder to deal with next year's budget.
They argue that slowing core state government spending — which has increased by about 40 percent in the past six years under Richardson — is the right thing to do.
"At what point in time do we stop making decisions based on what's politically correct and start making them based on what's pragmatic?" said Sen. John Sapien, D-Corrales. "That's the million-dollar question."
Governor's discretion?
The legislation doesn't specify how much should be cut from each agency, and lawmakers have pointed out that Richardson retains the authority to enact the cuts as he deems fit.
Yet a Richardson spokesman disputed the assertion that the governor has "discretion," and claimed the governor's budget-balancing plan included both "responsible cuts" and the voidance of capital outlay projects worth $110 million.
"The Legislature did not provide any discretion," spokesman Gilbert Gallegos said Friday. "They passed a poorly drafted bill with no concept of its effect on critical services."
Several agencies, such as the New Mexico State Police and the Public Defender's Office, were specifically singled out by lawmakers and face smaller budget cuts of 2 percent.
Public school spending cuts, while included in the budget-cutting bill, were kept to less than 1 percent.
Rep. Luciano "Lucky" Varela, D-Santa Fe, chairman of the Legislative Finance Committee, said he's not opposed to revisiting the budget cuts in January — when lawmakers will convene in Santa Fe for a 30-day legislative session. But he defended the Legislature's budget-balancing package in the face of guidelines handed down by Richardson that ruled out tax increases and called for minimal education cuts.
"We did the best we could, given what the governor proposed to us," he said.
Difficult choices
Richardson could face a stark scenario if he vetoes some or all of the budget cuts: How does New Mexico balance a budget that has seen revenues decrease by more than $1 billion in the past year without significantly paring back state spending?
One answer could be tax increases, which the Democratic governor has agreed to consider during the regular legislative session that begins in January, when they will have to tackle next year's budget.
But even with the 7.6 percent average state agency cuts, only about one-third of the state's deficit — about $206 million out of $650 million — would be plugged by recurring, or year-after-year, spending reductions.
In addition to the budget cuts, lawmakers also approved other revenue measures during the special session, such as "sweeping" $116 million from various state funds into the state's general fund, shifting $136 million allocated to more than 200 capital outlay projects from general fund spending to severance tax bonding and approving the use of cash reserves.
Richardson said he plans to travel the state to talk to more New Mexicans before deciding how he'll act on the budget bills. He has until Nov. 12 to take action.
A dispute over 'pork'
In all, a recent legislative analysis shows there's about $1.3 billion in money appropriated to capital outlay projects statewide that hasn't been spent.
The reasons for not spending the funding range from not having enough money to complete the projects to having money appropriated for projects that weren't requested by city or county leaders.
In the budget-cutting bill they passed, lawmakers did add an amendment directing that a list of capital outlay projects with values adding up to $150 million be compiled before the January session.
Lt. Gov. Diane Denish cast the tiebreaking vote in favor of the amendment in the Senate, and last week she sent out a statement applauding Richardson for freezing the stalled projects.
"As we approach the next legislative session, I believe we must move toward reforming the entire capital outlay process before anyone starts talking about cutting services," Denish said.
Earlier this week, Richardson ordered a freeze on infrastructure projects that don't have contracts in place, with the goal of saving as much as $150 million. Richardson staffers said Friday they're working on contacting state agencies and local governments, which would then have to inform the Department of Finance and Administration about which projects under their control are actually in motion.
"We need to see what action he's going to take," said Varela. "We were waiting, and are still waiting, for the governor's list."
But Sapien warned Friday that voiding a large chunk of the infrastructure projects could stifle future economic development.
"Could we use $150 million in capital outlay? Sure, absolutely," Sapien said "But you bring into question current (state government) jobs versus jobs being created by capital outlay. It's either pay me now or pay me later."
The outcome?
After meeting with Gov. Bill Richardson last week, state agencies began outlining the potential impact of 7.6 percent budget cuts. Lawmakers contend some of the projections are exaggerated, and that it's a fearmongering campaign designed to gain political leverage.
The agencies assert the cuts would cause:
• The closing of prisons in Grants and Hagerman, and the release up to 660 inmates.
• The partial closing of an unspecified number of state parks.
• The furloughing hundreds of state employees.
• The trimming of mental health and substance abuse services for low-income New Mexicans.
• A decrease in medical assistance to uninsured children.
In response, lawmakers insist Richardson has the authority to determine which agencies will suffer the deepest cuts and could administer them in such a way to prevent some of the above actions.
They also point out that the governor's mandate to not raise taxes or cut education funding necessitated the deeper cuts.
And legislative analysts say the latter two — involving Medicaid services for low-income New Mexicans — were not intended to be in the budget cuts.
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