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Governor signs budget solvency fix, vetoes some cuts

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Rep. Patricia Lundstrom, D-Gallup, and Legislative Finance Committee Director David Abbey, lower left, answer questions about a budget solvency bill during a recent legislative special session. Gov. Michelle Lujan Grisham signed the bill into law Tuesday. (Eddie Moore/Journal)

Copyright © 2020 Albuquerque Journal

SANTA FE – On the day before the start of the state’s new fiscal year, Gov. Michelle Lujan Grisham on Tuesday signed into law a budget fix that will keep New Mexico state spending levels roughly flat – at least for now – amid the coronavirus pandemic.

However, the Democratic governor used her line-item veto authority to avoid some funding rollbacks proposed by lawmakers during a recent special session – for public education programs and an expanded college scholarship initiative, in particular.

As a result of Lujan Grisham axing more than $30 million in proposed spending reductions, the state would end up with about 11.3% of total state spending in reserves – or less than half the $1.9 billion that was projected in February.

“We must recalibrate our state’s budget to meet these challenging times,” the governor said in an executive message to legislative leaders. “However, we should not lose sight of the important work that is still needed to create lasting opportunities for all New Mexicans, so that we may be prepared for the challenges that lie ahead.”

The solvency legislation, House Bill 1, relies on a mix of federal funds, cash reserves and one-time budget maneuvers to avoid steep spending cuts.

It was approved during a June special session in response to a projected $2 billion drop in revenue during the budget year that starts Wednesday.

That revenue decline is due to a double whammy of the pandemic and sharply lower oil prices, which have combined to upend the state’s economy and evaporate a projected budget surplus.

However, some state programs will actually receive slight funding increases even with the solvency plan, which keeps state spending at about $7 billion instead of growing it to $7.6 billion as had been planned in February.

That includes public education, as the governor used her veto pen to strike a proposed $8 million reduction for culturally and linguistically appropriate textbooks and curriculums.

She also left $10 million for the Opportunity Scholarship program for college students in two-year programs – up from the $5 million proposed by the Legislature – and voided a proposed $5 million reduction for the fledgling Early Childhood Education and Care Department.

“Given the crisis that has enveloped us and the hard decisions that have had to be made, I’m proud that we have prudently, wisely used all our resources to maintain our forward trajectory, especially for education, while also keeping a clear eye on the future,” Lujan Grisham said.

Some Republican lawmakers have argued that recent increases in state spending – including a 12% increase last year — – have put New Mexico on dangerous financial footing.

And House GOP floor leader James Townsend of Artesia on Tuesday accused Lujan Grisham of “social distancing from reality.”

But top-ranking Democrats have said the recent spending increases were necessary to bolster state programs that had faced cuts or limited budget growth under the administration of Lujan Grisham’s predecessor, former Gov. Susana Martinez, a Republican.

Rep. Patricia Lundstrom, D-Gallup, chairwoman of the House Appropriations and Finance Committee, said Tuesday that this year’s solvency bill attempts to protect state funding in key areas.

“We’ve learned from previous downturns that we cannot kick the stool out from under New Mexicans and expect a strong recovery,” Lundstrom said.

In addition to drawing down state reserves and paring back state spending, the solvency bill relies on $750 million that New Mexico received under the federal CARES Act.

Lujan Grisham used her line-item veto authority to strike down the Legislature’s plan to distribute that money. It’s up to the governor, not lawmakers, to determine how federal funds are spent, Tripp Stelnicki, a spokesman for the governor, said Tuesday.

Sen. Steven Neville, R-Aztec, said Tuesday that deeper cuts could have been mandated under the solvency bill due to the state’s uncertain financial outlook.

But he said the final version of the legislation avoids tax increases and furloughs or layoffs of teachers and state employees.

It also provides pay raises averaging 1% to teachers and other school workers and similar salary increases to state workers making less than $50,000 annually.

“I didn’t like it, but it was the best compromise we could come up with,” Neville told the Journal, referring to the solvency measure.

He and other lawmakers say additional budgetary belt-tightening will likely be necessary when the Legislature reconvenes for a 60-day regular session in January.


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