SANTA FE, N.M. (AP) — New Mexico expects strong enough revenue growth to allow for a possible 5 percent budget increase next year for public education and other government programs, according to a financial forecast Monday that will guide spending decisions during the upcoming legislative session.
Economists for the Legislature and Gov. Susana Martinez’s administration prepared the latest revenue projections, which call for the state to collect nearly $6.2 billion in the fiscal year that starts in July. That’s about $293 million higher than current spending.
The $293 million represents the pool of new money that lawmakers and the governor can use for spending increases, to replenish the state’s cash reserves and to offset the cost of any new tax cuts they may approve during the legislative session that convenes Jan. 21. If all of the money is added to the budget it would provide for about a 5 percent spending increase.
Finance and Administration Secretary Tom Clifford told lawmakers that spending increases should be kept in the 4 percent range next year to protect the state against volatility in its revenues and in case growth is less than expected.
The current budget provided for a slightly more than 4 percent spending increase.
Historically, lawmakers have funneled close to half of annual revenue growth into public schools, which account for the largest share of New Mexico’s yearly operating budget.
Top budget and tax officials in the Martinez administration outlined the latest revenue forecast to the Legislative Finance Committee, which will make budget recommendations to the Legislature.
According to the report:
—Revenues in the current fiscal year will be about $84 million greater than projected in August when the last financial update was prepared. Revenues will be higher because of strong oil and natural gas receipts, personal income tax growth and lower than anticipated costs for a business tax credit. The additional money will flow into the state’s cash reserves, providing a cushion against unexpected financial problems. Lawmakers also can dip into the state’s cash balances for one-time supplemental budget increases when programs face shortfalls.
—The revenue forecast of $6.2 billion for next year is down just $3 million from what had been estimated this summer.
Clifford said the revenue outlook is generally positive but he cautioned that the latest financial forecast could prove to be too optimistic if oil prices end up lower than economists predict. State taxes on energy production will drop if oil and natural gas prices fall.
He also cautioned that continued federal spending cuts could hurt New Mexico’s income and sales tax collections, and the state’s energy revenues also are potentially volatile
Clifford recommended the state maintain cash reserves equal to at least 10 percent of spending to provide a prudent financial safety net. With the additional revenues expected in the current budget year, the administration estimates reserves will be about $548 million at the end of June — representing about 9.3 percent of spending.