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Wednesday, October 22, 2008

N.M. Budget Woes Will Continue Into 2010 Fiscal Year

By Barry Massey
Associated Press
      SANTA FE — New Mexico's financial woes won't end if lawmakers and Gov. Bill Richardson plug a budget shortfall estimated at more than $200 million this year.
    The revenue outlook for the upcoming budget year also appears bleak.
    There's essentially no new money projected to cover potential increases in operating costs next year for public education, health services for the poor and general government operations ranging from courts to prisons, lawmakers were told Tuesday.
    That's spells trouble for public school teachers, college faculty and state employees hoping for salary increases next year. The budget squeeze also poses problems for Richardson's proposal for universal health care, which had met with opposition in the Legislature even before the latest drop in revenues.
    The very real possibility of back-to-back years of shrinking and flat budgets for agencies and programs stands in contrast to the robust growth of government that's occurred recently. State spending increases have averaged about 6 percent over the past decade.
    Members of the Legislative Finance Committee received the grim budget news as the administration's top tax and budget officials briefed lawmakers on the latest revenue projections for this year and the fiscal year that starts in July 2009.
    Revenues are sharply lower than expected — down $344 million this year and $372 million next year — because of falling energy prices and a national economic downturn that's also hurting New Mexico.
    "The good news is that New Mexico still may be better off over the next two years than most of the nation," Finance and Administration Secretary Katherine Miller told the committee.
    Some states, for example, confront budget shortfalls of billions of dollars and are laying off state workers and cutting programs.
    She said the latest revenue forecast "reflects a healthy state economy that is weathering a worldwide recession."
    The Legislature convenes in January for a 60-day session. One of its top assignments is drafting an operating budget for state government, including public education, in the 2010 fiscal year. The LFC previously has estimated it could take slightly more than $200 million of increased spending for a "bare bones" budget next year, including covering expected enrollment growth in programs such as Medicaid and to maintain current inflation-adjusted services.
    However, the immediate problem is the current budget year, which began in July and continues through June 2009. Revenues are expected to fall about $250 million below the spending approved in the state's $6 billion budget. Legislators and administration budget officials disagree over the precise shortfall amount.
    To help offset the shortfall, Richardson last week proposed 5 percent cutbacks in budgets for executive branch agencies under his control and he ordered a freeze on hiring and pay increases. Some critical operations, such as public safety and human services, will be protected from cutbacks, Miller said.
    Medicaid, which provides medical services to more than 400,000 needy New Mexicans, is "off the table at the moment" and won't be subject to immediate cuts, Miller said.
    Richardson also has proposed repealing some capital improvement projects that were previously approved but aren't moving forwarded, possibility because there's not enough money to pay for the entire project. The administration estimated that $200 million to $300 million could be saved by scrapping capital projects, which can't be done without the approval of the Legislature. Richardson hasn't offered a list of specific projects that might be candidates for cutting. However, the governor's suggestion troubled several LFC members.
    "We've got to be real careful when we're trying to put a lot of the burden on capital outlay dollars," said Rep. Edward Sandoval, an Albuquerque Democrat who is the leader of a committee that assembles a yearly capital financing package. He contended that money for capital improvements will create construction jobs, which helps the state and local economies.
    The state has cash reserves of about $695 million — equal to about 12 percent of general government spending — but Richardson doesn't want to tap those to balance the budget.
    "The executive strongly recommends that in these uncertain economic times, we should maintain general fund balances at 10 percent of current year appropriations," Miller said.

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