Copyright © 2019 Albuquerque Journal
SANTA FE — After years of budget austerity, New Mexico is tapping an oil drilling boom to fuel a massive spending increase.
Gov. Michelle Lujan Grisham signed into law Thursday a $7 billion budget plan that will boost state spending levels to an all-time high – with most of the additional funding going to public schools – and give the largest pay raises to state workers in more than a decade.
It will also provide a big cash infusion for the state’s aging road system and allow for long-vacant jobs across state government to be filled.
“Our budget is thoroughly responsible and yet bold in ways that will significantly boost New Mexico families,” Lujan Grisham said Thursday. “As we begin the essential work of rebuilding our economy, education system and government, this budget provides a solid foundation, with healthy reserves, well-earned raises for diligent workers and sizable investments in our children, families and their quality of life.”
The first-term Democratic governor used her line-item veto authority more sparingly than her predecessor, former Gov. Susana Martinez, often did, though she did ax $42.5 million from the bill.
Those vetoes struck a duplicate appropriation for the State Engineer’s Office and spending that would have been authorized in a separate public-private partnership bill that failed to pass the Legislature during the 60-day session that ended last month.
Lujan Grisham also on Thursday signed a broad tax package passed by lawmakers during the session’s final hours that could provide tax relief to some state residents while increasing the tax burden on others – including the highest-earning New Mexicans.
The tax changes, which were opposed by most Republican legislators, are expected to generate an additional $71 million in state revenue during the coming fiscal year.
As for the budget, its final version authorizes a state spending increase of $663 million – or roughly 11 percent – over current spending levels for the fiscal year that starts July 1.
However, it also calls for 20 percent of state spending – or about $1.4 billion – to be set aside in cash reserves in case projected revenue levels do not materialize.
Finance and Administration Secretary Olivia Padilla-Jackson, the governor’s top budget official, said that amount would be sufficient to cover the state in the event of a major economic downturn.
She said that spending the cash infusion authorized by the budget bill will be a challenge but that state agencies are already preparing.
“The governor is adamant about getting that money out the door,” Padilla-Jackson said.
New Mexico has an unprecedented budget surplus due to skyrocketing oil production levels in southeastern New Mexico – the state produced nearly 246 million barrels of oil last year.
The trend is expected to continue for at least the next several years, although state economists have warned about the historically volatile nature of oil and natural gas prices.
Sen. Carlos Cisneros, D-Questa, vice chairman of the Senate Finance Committee, said the revenue windfall gave lawmakers the ability to target funding at state agencies with high vacancy rates.
“It was an opportunity we haven’t seen in many years to fund state government the way we did,” Cisneros told the Journal.
New Mexico’s recent revenue surge – the state is expected to take in more than $7.4 billion in the coming budget year – has come after several dismal budget years at the Roundhouse.
Just two years ago, lawmakers were forced to cut spending and take money from various state funds in response to a steep revenue downturn.
“We needed to recover from that and ensure solid footing into the future,” Cisneros said.
The spending bill also authorizes a big chunk of one-time spending from a projected $1.2 billion surplus for the current fiscal year.
That includes up to $75 million for a state economic development “closing fund” that’s intended to help lure out-of-state businesses to New Mexico and aid local businesses in expanding.
New Mexico roads are also in line for a big cash infusion, as the budget authorizes $389 million in spending for highway repairs and construction. Several projects in the Albuquerque area are among those to get funding – including $2 million for Rail Runner commuter rail improvements and $3 million for Paseo del Volcan.
Pay hikes, schools
Overall, roughly two-thirds of the additional spending will go toward New Mexico’s public school system, after a landmark court ruling last summer found that the state was failing to meet its constitutional requirement to provide an adequate education to all students, especially Hispanics, Native Americans and English-language learners.
The $446 million spending increase on education – a 16 percent increase – will be used to expand pre-kindergarten programs, funnel more money to districts with high populations of low-income students and provide pay raises for teachers and school administrators.
Some Republicans have argued it will be difficult for the state’s 89 school districts to absorb the spike in funding. They have also warned about future budget cuts if oil production levels plummet.
“I want to make sure we’re not putting ourselves in the position in the future where we’re having to cut, take back or raise taxes,” Rep. Jason Harper, R-Rio Rancho, said during a House floor debate on the budget bill in February.
All state teachers and administrators will get a 6 percent salary increase, although some could receive even larger pay raises, because a separate education bill signed by Lujan Grisham increases the minimum pay level for starting educators to $41,000 annually.
New Mexico judges, who are paid less than many of their counterparts in other states, will also get 6 percent raises, while rank-and-file state workers, higher education employees and legislative branch workers will get 4 percent raises. Such raises will still represent the largest across-the-board pay increases since 2007.