Copyright © 2023 Albuquerque Journal
SANTA FE – A key legislative panel on Thursday rolled out a bipartisan $9.4 billion spending proposal that calls for slightly larger state worker and teacher salary increases than a dueling plan released earlier this week by Gov. Michelle Lujan Grisham.
The plan proposed by the Legislative Finance Committee also only partially funds a governor-backed initiative to cover educators’ health care costs, which along with other differences could emerge as a friction spot during the 60-day session that starts next week.
In all, however, the two budget plans feature similar proposed spending growth amid an unprecedented state revenue explosion driven by record-high oil production levels and inflation-spiked consumer spending.
Specifically, the legislative budget plan would increase state spending during the fiscal year that starts in June by about $1 billion – or roughly 12% – over current levels.
“The more money there is, the higher the pressure,” said Rep. Patricia Lundstrom, D-Gallup, the LFC’s chairwoman, who added members of the budget committee would resist the urge to spend money like “drunken sailors.”
Given the state’s revenue bonanza, the legislative budget plan would earmark up to $1.5 billion for possible tax rebates and changes to the tax code, which could include reducing the gross receipts tax rate that’s levied on most purchases New Mexicans make.
It also calls for $1 billion to be deposited back into a state permanent fund that has seen its growth stymied in recent years by inflows being diverted to fund public works projects – along with as much as $800 million that could be used to set up new state trust funds.
One such savings account might be an environmental trust fund that could be tapped when New Mexico faces wildfires or other natural disasters, said Sen. George Muñoz, a Gallup Democrat who is the LFC’s vice chairman.
Last year, Lujan Grisham issued dozens of executive orders authorizing nearly $60 million in emergency funds for firefighting efforts in seven different counties as the two largest fires in state history – the Black Fire in the Gila National Forest and the Calf Canyon/Hermits Peak Fire near Las Vegas – burned about 660,000 acres, or more than 1,000 square miles.
“New Mexico has the opportunity to really set itself up” for the future, Muñoz said during a Thursday news conference in the Capitol Annex.
But he also said lawmakers should be nervous about the scope of the budget windfall, citing a revenue roller-coaster ride over the last decade that has caused lawmakers to alternate spending increases with budget cuts.
As for Lujan Grisham, a spokeswoman indicated the Governor’s Office is focused on the similarities between the two budget plans, not the differences.
“We’re glad to see that the Legislature shares many of the same priorities as the governor’s recommendation released earlier this week,” said Lujan Grisham spokeswoman Nora Meyers Sackett, who cited teacher pay raises as one example of common ground.
Revenue bonanza
The spending plan released Thursday comes as lawmakers are readying for the start of a 60-day legislative session next week.
While hundreds of bills dealing with crime, the economy, public schools and more will be filed during the session, the state’s revenue bonanza will be at the forefront of many Roundhouse debates.
Senate Majority Leader Peter Wirth, D-Santa Fe, said the creation of new state endowment funds could help diversify the state’s revenue base – tax collections from the oil and natural gas industries currently make up about 40% of direct state revenue – and prepare the state for the possibility of cash-lean future years.
“I am incredibly encouraged by this budget, because it has spending but also fiscal responsibility,” Wirth said.
In addition, the revenue situation could lead to financial relief for state residents, as Lujan Grisham has indicated support for rebates of $750 per taxpayer.
The legislative spending plan does not specifically call for rebates or tax cuts, but leaves up to $1.5 billion available for such efforts – the same amount proposed in the governor’s budget blueprint.
Meanwhile, the Legislative Finance Committee’s budget plan unveiling marks the culmination of months of hearings around the state that included funding requests from Cabinet officials in the Lujan Grisham administration.
A final budget bill will be crafted and debated during the upcoming session, but it’s typically difficult for initiatives not included in either the governor’s or the legislative spending plans to end up being included.
Public schools
Like the governor’s spending plan, the LFC’s budget blueprint calls for an infusion of additional spending for public schools, which currently make up about 45% of state spending but have seen student test scores decline since the start of the COVID-19 pandemic.
Much of the new funds would be targeted at extending New Mexico’s school year to require a minimum of 1,140 instructional hours per year – or about 190 days of classroom learning.
However, the state’s 89 school districts would have some flexibility to determine how to adopt the requirement.
As for teacher pay, the spending plan released Thursday calls for average 5% pay raises that would kick in for the budget year that starts in July. State workers would get the same size pay increases, though agencies would have the ability to give larger increases to some employees and smaller raises to others.
The proposed pay raises in the legislative budget proposal are slightly larger than the ones put forward by the governor, whose spending plan would provide 4% pay raises for all state workers, teachers and other education workers in New Mexico.
In addition, the governor’s plan calls for $100 million to be earmarked to cover the cost of health care premiums for education employees.
The LFC spending plan, in contrast, calls for $32 million to be spent to boost the state-paid share of educators’ health care costs, so that employee-paid premiums would align with those paid by other public employees.
The two budget plans are more in lockstep when it comes to Medicaid spending, as both call for increasing provider rate reimbursements and boosting state spending to offset a possible drop in federal Medicaid funding if a pandemic-related public emergency is lifted.
“Much of New Mexico is short on health care providers and this is especially true in rural areas,” said Rep. Gail Armstrong, R-Magdalena. “Increased rates will help recruit doctors and keep them in the state, which is critical to improve access for everyone.”
The 60-day session begins Jan. 17 and goes until March 18.
