Stalled NM capital funds may help plug budget gap

Copyright © 2020 Albuquerque Journal

SANTA FE – When New Mexico lawmakers begin the difficult task of downsizing a state budget bill next month, they could turn to a familiar funding source to reduce the need for spending cuts.

Rep. Javier Martínez

The state had about $1.2 billion in unspent funding for approved capital outlay projects earlier this year, and at least some of that money could be pulled back by legislators to help offset a huge drop in projected revenue.

Rep. Javier Martínez, D-Albuquerque, co-chair of the House Taxation and Revenue Committee, said lawmakers could scrutinize infrastructure projects from previous years that have been stuck in neutral.

“With some of these projects, maybe they’re not moving the way they’re supposed to be moving,” Martínez told the Journal.

However, he said, lawmakers should leave funding in place for shovel-ready projects that could help bolster the state’s beleaguered economy.

Meanwhile, the top budget official in Gov. Michelle Lujan Grisham’s administration, Finance and Administration Secretary Olivia Padilla-Jackson, said last week that legislative and executive staffers were working together to make recommendations about clawing back approved capital outlay funding from certain projects, including those for which work has not started.

Padilla-Jackson, who is stepping down at the end of this month, did not detail the criteria for identifying projects or a target amount for total budget savings. But she said any projects pulled back would be those funded by general fund dollars.

Lawmakers approved roughly $933 million worth of capital outlay projects last year, when the state’s coffers were flush due in large part to an oil drilling boom in southeastern New Mexico.

As of March, only about $88.7 million – or about 9.5% – of that amount had been spent, according to the Legislative Finance Committee.

Among the large unspent capital outlay appropriations from 2019 are $4.1 million for a new museum of contemporary art in downtown Santa Fe, $6 million for security cameras and fire suppression systems at the University of New Mexico and $5.4 million for a road extension between Sunland Park and Santa Teresa.

Meanwhile, the $1.2 billion in total unspent capital outlay funds was appropriated for 2,212 projects statewide, according to the LFC.

The majority of those unspent funds were approved in 2019, though some of the projects date back further.

Lujan Grisham said last week that a special session focused on revising state spending plans in light of an estimated revenue drop of up to $2.4 billion will start June 18. The revenue decrease is due to the coronavirus pandemic and a collapse in oil prices.

During the special session, the governor said, approved spending increases will have to be slowed but federal stimulus funds and state cash reserves could help the state avoid layoffs and furloughs of state workers and teachers.

Money from stalled capital outlay projects could also be part of that mix.

New Mexico’s capital outlay system for funding improvements to roads, bridges, dams and water systems has come under scrutiny in recent years for its secrecy and lack of efficiency.

But attempts to overhaul the system, which allows each lawmaker to appropriate a designated amount of money for infrastructure projects, have been unsuccessful at the Roundhouse.

Under the current system, capital outlay funds are sometimes doled out in increments, and Martínez said such piecemeal funding for certain large projects could be targeted for budget savings, because lawmakers may not be able to fully fund the projects in the coming years due to the state’s revenue situation.

“We might be better off retrieving that money,” Martínez told the Journal.

Not all targeted projects might have to be scrapped, as it’s sometimes possible to shift projects’ funding source from general fund dollars to new bonds backed by future state tax dollars.

That process, referred to as a capital outlay “swap,” has been used in recent years to help plug previous budget holes.

Capital outlay funds typically revert automatically if they are not spent in five years, though project funding can be reauthorized by the Legislature.

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