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SANTA FE – With New Mexico rolling in a budget windfall, both Gov. Michelle Lujan Grisham and a key legislative panel released plans Thursday that would boost state spending to more than $8.4 billion – a record-high level – and provide 7% salary increases for teachers and state employees after planned pay raises were scaled back one year ago.
The budget plans would both increase spending levels for the budget year starting in June by about $1 billion over current levels amid an unprecedented revenue surge driven by increased oil and natural gas production in New Mexico and an uptick in consumer activity.
They could also allow for a cut in tax rates or rebates for taxpayers, though such proposals would have to be approved in separate bills.
“New Mexico has the opportunity for generational change with the amount of money we have,” said Senate Finance Committee Chairman George Muñoz, D-Gallup, during a Thursday news conference at the Capitol Annex.
At least some of the proposed budget increases would be targeted at replacing one-time funding – such as a higher federal matching rate for Medicaid spending that’s set to expire in April.
But the budget plans would also provide more money to hire additional law enforcement officers around New Mexico, reduce a waiting list for a state program for individuals with developmental disabilities and expand early literacy initiatives.
“These are investments that take us beyond the status quo, beyond decades of unnecessary austerity – these are investments that carry our state and its people into a future that lifts up every New Mexican,” Lujan Grisham said in a statement.
However, while the proposed spending levels are similar there are some key differences in the plans released by Lujan Grisham, a Democrat who is running for reelection this year, and the Legislative Finance Committee. Both plans will be used as spending blueprints of sorts once a 30-day legislative session gets underway this month.
For instance, the governor’s plan would appropriate $85 million for an opportunity scholarship program in an attempt to cover tuition costs for an additional 22,000 New Mexicans attending higher education institutions.
The Legislature’s plan, in contrast, would provide only about half that much money for the scholarship program, which has faced skepticism from some lawmakers since it is not based on financial need.
In addition, the legislative spending recommendation would require all New Mexico schools to provide an additional 10 instructional days during the coming year, though districts would have some flexibility in how to implement the mandate.
The governor’s budget plan would also provide additional funding for extended learning in an attempt to address academic losses during the COVID-19 pandemic, but would allow districts to decide whether to seek out the funding and participate.
Meanwhile, the legislative budget proposal would actually cut state funding for the state Corrections Department by about $1.6 million amid a recent drop in New Mexico’s inmate population. The governor’s spending plan would slightly increase funding for the agency.
Investing in education
Much of the proposed spending growth under both budget plans would go toward higher pay for teachers and state workers.
Under Lujan Grisham’s plan, about $277 million would go toward raising starting teacher pay in New Mexico to $50,000 annually – minimum pay levels for more experienced educators would also be raised – and providing salary increases for teachers and school administrators.
The legislative plan would set starting teacher pay even higher – at $51,000 per year – though that pay level would reflect the proposal for a longer school year.
LFC Director David Abbey told Albuquerque business leaders last month the spending increases should be targeted in large part at restoring public services impacted by the COVID-19 pandemic.
That could include training new teachers and trying to keep more educators from leaving amid a recent 40% jump in teacher retirements.
“If we can’t return the people we have, public services are going to suffer,” Abbey told members of the Greater Albuquerque Chamber of Commerce during a presentation.
For state workers, the legislative budget plan would provide 3% salary increases in April – and an additional 4% pay raise starting in June.
The governor’s budget plan would also earmark funding to boost state worker pay in order to establish a $15 minimum wage for state employees, a Lujan Grisham spokeswoman said.
Hikes in both plans
Both budget proposals released Thursday call for significant overall spending hikes.
If approved, the budget plans would represent nearly 50% state spending growth over the last 10 years, as New Mexico’s budget was at $5.7 billion for the 2013 fiscal year.
The governor’s plan would increase spending levels by $998 million – or 13.4% over current spending – while the Legislative Finance Committee’s plan would boost spending by slightly more than $1 billion – or roughly 14%.
But top-ranking Democratic lawmakers said the spending increase is still financially prudent, pointing out both plans call for roughly $2.6 billion – or more than 30% of state spending – to remain in cash reserves in case projected revenue levels don’t materialize.
“At this point, we feel it’s just right,” said Rep. Patricia Lundstrom, D-Gallup, the LFC’s chairwoman.
In part, that’s due to a 2017 law that has bolstered New Mexico’s “rainy day” fund by taking a certain percentage of oil and gas tax revenue in cash-flush years and setting it aside for future use.
House Minority Leader James Townsend, R-Artesia, expressed unease Thursday about the proposed spending growth.
“I think every one of us should be concerned about the sustainability of these spending levels,” Townsend said, adding he believes some of the state’s revenue bonanza should be used to lower tax rates on senior citizens and veterans.
In addition to state funds, lawmakers also have roughly $728 million in federal pandemic relief funds that New Mexico received last year but has not yet allocated.
While the legislative session does not begin until Jan. 18, a House budget committee is expected to begin its work crafting a new spending plan next week.