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Budget picture brightens for state

SANTA FE – What a difference a few months make.

After facing a bleak budget outlook as recently as this summer, New Mexico lawmakers are on track to have $199 million in “new” money available in the coming fiscal year, according to new revenue estimates unveiled Monday.

That could allow for increased spending on health care and child welfare programs, after several consecutive years of spending cuts and other budget-balancing maneuvers left such programs struggling to stay afloat.

A steady uptick in New Mexico oil production and income tax collections have been the driving forces behind the state’s improving revenue picture, after legislative and executive economists had projected in August that there would be just $25 million in available “new” money – or the difference between current spending levels and projected revenue – next year.

However, some influential lawmakers responded to the new estimates on Monday with a healthy dose of caution.

“We’ve robbed every corner in the state of New Mexico that had money in it … and that money is gone,” said Sen. John Arthur Smith, D-Deming, the vice chairman of the Legislative Finance Committee. “We have a lot of rebuilding of foundation still to do.”

In addition, the state is still facing uncertainty about whether the projected revenue will materialize, due largely to volatile energy prices and the potential impact from a federal tax overhaul bill.

Jon Clark, the LFC’s economist, told lawmakers during Monday’s hearing at the state Capitol that there is reason for “cautious optimism” about the revised revenue projections.

However, he said New Mexico still has a smaller workforce than it did before a steep economic downturn in 2009 and is more reliant on oil and natural gas – at least from a revenue perspective – than ever.

“There is no silver bullet (to solidifying the state’s economy),” Clark said. “New Mexico can’t flip a switch and have its problems solved.”

But other state budget experts described the new estimates as “happy” news, after several gloomy years at the Roundhouse.

New Mexico is now on track to finish the current budget year in June 2018 with roughly 9 percent in cash reserves – or about $550 million. That’s after lawmakers were forced to largely deplete reserves in recent years to balance the budget. Also, the state’s bond rating was downgraded last year.

At least one national credit rating agency has suggested New Mexico would need cash reserves of 17 percent to withstand another severe recession, and legislators approved the creation of a new state rainy-day fund during a special session this summer in an attempt to guard against revenue volatility.

“The ups and downs of the New Mexico economy over the recent years have been driven by forces outside our control,” acting state Taxation and Revenue Secretary John Monforte said Monday.

The revenue estimates released Monday will guide budget-writing decisions in the coming 30-day legislative session, which begins next month.

Even with extra money – should it materialize – the state will face tough budget choices. Two departments alone are seeking more than $100 million in additional funding next year.

The Human Services Department says New Mexico will need about $82 million next year to cover rising Medicaid costs – partly because Congress has not reauthorized funding for the Children’s Health Insurance Program, or CHIP.

The Children, Youth and Families Department, meanwhile, is asking for $26 million more next year. Most of that money would go toward child care assistance programs that allow a parent to work while his or her child is cared for.

Meanwhile, Gov. Susana Martinez, a Republican whose second term in office ends next year, has stuck to a “no tax increase” stance since taking office, a position that has put her at odds with top-ranking Democratic lawmakers. Martinez has advocated for an overhaul of the state’s gross receipts tax system, but legislative leaders say that’s unlikely to happen during the coming session.

Journal staff writer Dan McKay contributed to this report.


••Current state budget – $6.1 billion.
••Amount of “new” money projected for next year – $199 million.
• Increase in new money estimate since August – $174 million.