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Saturday, October 18, 2008

Gov. Proposes Sweeping Cuts

By Dan Boyd
Journal Capitol Bureau
       SANTA FE — Gov. Bill Richardson brought out the scalpel Friday to make sweeping cuts to state spending in the face of a national economic downturn and financial crisis.
    Richardson, who had been quiet on the issue for weeks, unveiled a plan to save as much as $440 million by taking money from stalled infrastructure projects, freezing state hires and pay increases and implementing cuts in agency budgets for "nonessential" operations. State lawmakers will have to approve some of the moves.
    However, the approach won't mean higher taxes or the use of the state's cash reserves, the governor's office said.
    "New Mexico is still outperforming the national economy and is much more financially sound than many other states where people are being laid off to balance the budget," Richardson said in a Friday statement. "But the reality is that the global financial crisis is hitting us all, and we must tighten our belts and budget responsibly."
    The governor's plan includes:
    n An immediate freeze on nonessential overtime for state employees.
    n A freeze on hiring and pay increases that goes into effect Nov. 15.
    n Saving $2 million by conserving energy and reducing waste.
    n Putting the brakes on more than $200 million in stalled capital outlay projects.
    n A 5 percent cut in state agency budgets for contracts, travel and office supplies.
    Richardson made the moves after receiving confirmation that revenue for the ongoing fiscal year will be more than $340 million less than previously projected and at least $200 million less than was budgeted.
    In July, state budget experts projected a revenue windfall of $400 million, but that number has all but disappeared due to declining oil and natural gas prices. Much of New Mexico's revenue stems from taxes and royalties on oil and natural gas production in the state.
    "We will balance the state's budget," Richardson said in the statement. "And we will do it without raising taxes, without tapping into the $600 million in cash reserves, and without reducing services for New Mexicans."
    Two prominent state senators, Senate President Pro Tem Tim Jennings, D-Roswell, and Legislative Finance Committee Chairman John Arthur Smith, D-Deming, had called for restraint on state spending.
    Smith, who was among the senators branded as "Dr. No's" this summer by Richardson for their pessimistic views of the economy, told the Journal on Friday that the plan should preclude the need for a second special legislative session before lawmakers' regularly scheduled 2009 session.
    "I'm pleased he's finally recognizing the severity of the situation," Smith said of Richardson. "I'm sure when Dr. No diagnosed the problem, he wanted a second opinion and that was the reason for the delay."
    Other veteran lawmakers had mixed reviews of Richardson's plan when contacted Friday afternoon.
    "This is a plan that needs to be worked out in detail," said Rep. Luciano "Lucky" Varela, the co-chairman of the Legislative Finance Committee. "We can't just start throwing numbers out there."
    Varela said he believes state reserves might have to be used to help pay for the costs of initiatives approved during this summer's special legislative session, which took place in August. That session approved $56 million in cost-of-living tax rebates for most New Mexicans.
    On the Republican side, Rep. Don Bratton, R-Hobbs, who also sits on the LFC, said Richardson's plan to save $440 million might not be enough.
    "It may be far short of what's going to be required," Bratton said.
    In addition to the declining revenue, the state's permanent and pension funds have suffered losses of more than $7 billion since June 30 as the implications of a global market crisis have deepened.
    Richardson's office said the governor will make every effort to avoid education cuts. However, public schools and universities were advised Friday to prepare strategies for reduced budgets in the upcoming fiscal year.