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Panel’s Budget Proposal Would Cut State Worker Take-Home Pay

ALBUQUERQUE, N.M. — Legislative Finance Committee wants government workers to contribute more to their pensions

SANTA FE — A legislative committee proposed Friday to balance next year’s budget in part by requiring government workers to contribute more to their pensions.

The pension change, which the panel said would save nearly $50 million, will mean a drop in take-home pay for state workers, public school employees and college faculty.

The Legislative Finance Committee wants to cut state spending by an average of 3.5 percent. It recommended spending $5.4 billion next year on public schools, higher education and general government programs ranging from prisons and courts to health care for the needy.

No tax increase would be needed to balance the budget under the committee’s plan, which serves as a starting point for the Legislature when it convenes on Jan. 18.

Under the pension change, government workers and educators would contribute an extra 1.75 percent of their salaries. That means a drop in take-home pay, which would average about 1.4 percent for a single worker earning about $41,000 a year or about a $22 reduction in each paycheck.

A similar 1.5 percent pension shift was enacted in 2009 despite the objections of state workers, and the committee’s budget assumes that will continue next year.

Lawmakers said the pension contribution change — intended to be in effect for just one year — would be less painful to workers than unpaid furloughs, layoffs or a permanent salary cut.

Sen. John Arthur Smith, a Deming Democrat and committee vice chairman, said the budget “certainly is not going to be pleasing to many, many in the state of New Mexico but is realistic given the economic situation that we’re in.”

In the current budget year, which ends in June, the state is spending $5.6 billion. That includes about $380 million in federal economic stimulus money, which won’t be available in the next fiscal year and has created the prospect of a budget shortfall in the coming year.

Most of the federal money went to pay for public schools and Medicaid, which provides health care for about a fourth of the state’s population. The committee’s budget largely replaces the federal money with state revenues.

Medicaid spending would increase under the committee’s budget but not enough to cover all projected growth in enrollment and other costs. Committee members acknowleged that Gov. Susana Martinez’s administration will need to find additional cost savings in the program next year.

The committee proposed about a 3 percent, or nearly $80 million, reduction for public education. The budget would provide about $2.3 billion for schools and education-related programs next year, and higher education would be cut more than 6 percent.

Other government programs would see a 4.6 percent reduction.

The committee had projected a budget gap — the difference between next year’s anticipated revenues and this year’s spending — of about $215 million although former Gov. Bill Richardson’s administration calculated the shortfall differently and pegged it at about $400 million.

The committee’s budget assumed nearly $100 million in temporary cost savings would be continued next year. That’s something the Richardson administration didn’t do in its budget shortfall estimate.

The committee didn’t provide about $100 million in Medicaid increases that the Richardson administration had included in its deficit projection to cover growth in health care services.