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Senator asks gov. to freeze the hiring of state workers

SANTA FE – New Mexico’s budget problems could be going from bad to worse.

The influential chairman of the Senate Finance Committee on Wednesday called on Gov. Susana Martinez’s administration to implement a state employee hiring freeze and a ban on nonessential travel in response to plummeting oil and natural gas prices.

“There’s going to be a lot of pain out there,” warned Sen. John Arthur Smith, D-Deming, the Finance Committee’s chairman. “These are not fun times in state government.”

Other energy-reliant states – including North Dakota, Wyoming and Oklahoma – are facing gaping budget shortfalls due to the plunge in oil prices, and New Mexico could be next in line.

Over the first five months of the current fiscal year, the state took in $358 million less in tax collections than it had during the same time period in the previous year, according to Legislative Finance Committee figures.

Several lawmakers have said in recent days that could mean a budget shortfall of as much as $800 million for the current fiscal year ending June 30 if the trend continues.

Were that to materialize, the state’s cash reserves alone would not be sufficient to bridge the gap, which would likely mean steep spending cuts or raise revenue.

State Land Commissioner Aubrey Dunn told the Journal this week lawmakers should take quick action to address the situation.

“To me, they’re going to have to do both – they’re going to have to cut expenses and they’re going to have to figure out a way to raise revenue,” said Dunn, a Republican serving his first term.

“If we realize we have a problem now, let’s admit it and work on solutions rather than delay it another two months,” he said.

Martinez, who is also a Republican, is sticking to a “no tax increase” stance she’s held since taking office in 2011. Her administration has held off on taking drastic cost-cutting steps.

A Department of Finance and Administration spokeswoman said Wednesday that state agencies are being told to prioritize their spending on core state services and functions but said it’s not yet clear whether the state is facing a budget shortfall for the current year.

“We are considering whether additional budget modifications are required to preserve solvency,” said Julia Ruetten.

State tax collections typically spike during the final quarter of a budget year – the state’s fiscal year ends in June – and a full-year revenue decrease of about $174 million has already been factored into a $6.3 billion spending plan for next year that was approved in the House last weekend.

Bipartisan alarm

Lawmakers from both political parties have been sounding the alarm on the state’s budget situation in the past several days.

Senate Minority Whip Bill Payne, R-Albuquerque, said Tuesday that lawmakers may have to return to Santa Fe before July to address the state’s budget woes.

“I suspect we’re going to have to have a special session for this year’s budget, let alone next year’s,” Payne said.

Meanwhile, Senate Majority Leader Michael Sanchez, D-Belen, pointed out that state lawmakers have a constitutional duty to balance the budget.

“Our state is in trouble, and folks need to know it’s in trouble,” Sanchez told the Journal . “Who knows if we have that intestinal fortitude to raise money and pay for the services that are necessary.”

Already, the House has passed and sent to the Senate a bill that would take about $74 million from various state government accounts to help bolster spending in both the current and coming fiscal years.

The Senate Finance Committee is expected to take action on that bill and the House-approved spending plan for next year in the coming days.

‘Canary in the mine’

New Mexico relies heavily on the energy industry to pay for day-to-day government operations, and the downturn in oil and gas prices has been drastic.

In the first seven months of the current budget year, the State Land Office took in about $338.7 million in royalties and leases, primarily from the oil and gas industries – down about 32 percent from the $500 million collected during the same period last year.

“We’re kind of the canary in the mine,” Dunn said. “If the Land Office is experiencing this, it’s going to flow through (the rest of state government).”

The plunging oil and natural gas prices have already caused state revenue estimates to be pared back twice in the past six months.

In addition, the fall in energy prices is having a negative impact on the state’s gross receipts tax collection efforts, largely due to a slowdown in drilling.

About 12.5 percent of the state’s direct general fund revenue stems from the oil and natural gas industries, according to the Department of Finance and Administration, although the figure is much higher when indirect revenue is factored in – including annual distributions from the state’s Land Grant Permanent Fund. A drop of $1 in the price of a barrel of oil generally means about $10 million less in revenue to the state.