Copyright © 2020 Albuquerque Journal
SANTA FE – New Mexico Senate budget guru John Arthur Smith said Wednesday that hefty state cash reserves and federal stimulus funds could alleviate the need for deep spending cuts during next month’s special session.
Smith, chairman of the Senate Finance Committee, told members of an Albuquerque commercial real estate group that the depth of the spending cuts will depend largely on how much flexibility the state is given in spending roughly $1.1 billion from a federal relief package.
“I wouldn’t think they would be too painful” if that flexibility is provided, Smith said during the online webinar hosted by NAIOP.
However, Smith expressed concern about New Mexico’s budget outlook for future years, saying some experts have predicted that oil prices will not bounce back for at least two years and that state employment levels could take even longer to return to previous levels.
He also said that many cities and counties are in “deep, deep trouble” due to their reliance on gross receipts tax revenue and that lawmakers may need to overhaul the state’s tax code during the 2021 legislative session, which starts in January.
That could prompt the Legislature to reexamine the 2004 repeal of the tax on food and grocery items, Smith said, though such an effort would likely face stiff political opposition.
Overall, New Mexico is facing an estimated revenue decline of between $1.8 billion and $2.4 billion for the budget year that starts in July, due to the double whammy of economic disruptions related to the coronavirus pandemic and a collapse in oil prices.
Gov. Michelle Lujan Grisham said last week that she will call lawmakers back to Santa Fe for a special session starting June 18 to make budget adjustments and possibly pass a virus aid package for restaurants and other businesses affected by the economic downturn.
Smith, a Deming Democrat, said at least some reductions will have to be made to a $7.6 billion budget bill that lawmakers approved in February so that the state’s cash reserves – currently estimated at $1.9 billion – are not depleted by June 2021.
He also said that reverting some stalled capital outlay funds – including more than $110 million approved during the 2019 session – could be “low-hanging fruit” to help offset the state’s revenue decline.
But he said the timing is not right to increase New Mexico’s gasoline tax or approve other tax hikes, as some lawmakers have proposed.
“When you’ve got strong headwinds to your economy, I don’t think that’s something you should be doing,” Smith said Wednesday.
The budget-balancing special session is expected to be a short one and last for just a matter of days. It’s unclear whether the public will be allowed to attend due to concerns about the possible spread of COVID-19 within the Roundhouse.