SANTA FE – The state of New Mexico slashed revenue projections for this year and next by a quarter of a billion dollars because of low oil and natural gas prices, and took initial steps Saturday toward reducing general fund spending next year.
A somber Senate Finance Committee unveiled budget amendments that would shave spending across state agencies this fiscal year and cut funding to all but a handful of government departments starting in July.
Under a revised $6.2 billion budget, some spending increases next year would be preserved for state prisons, the Department of Public Safety, public schools, Medicaid and child protective services.
Most agencies will have to trim spending. Funding to state colleges and universities would decrease by nearly $20 million.
State analysts announced estimated revenues would drop by $125 million both this year and next. Since December, the state has lowered revenue expectations for next year by $350 million.
Sen. Sue Wilson Beffort, R-Sandia Park, said that no layoffs or furloughs were planned at this point.
“That doesn’t mean forever, but we’re trying,” she said.
Oil-dependent states across the country are reeling from sustained low oil prices.
New Mexico relies on energy-related revenues to float about 16 percent of its operating budget, though that share is shrinking. The state initially drew next year’s budget based on oil prices of $49 a barrel – a far cry from current prices hovering near $30.
In recent days, Senate Finance Committee Chairman John Arthur Smith issued repeated warnings about the state’s declining revenue outlook.
“If the seriousness of the situation hasn’t been convincing so far, the adoption of this budget will show how serious a situation we are in the state of New Mexico with what’s happening to our oil and gas industry,” said the Democrat from Deming.
The Senate committee budget plan would give executive agencies new authority to shift funds among programs to cope with funding reductions. It moves next to the Senate floor for consideration, before changes are sent back to the House of Representatives.
Next year’s general fund budget would decrease by $7 million – a tiny fraction below current spending.
To avoid more significant cuts, the state is drawing down reserves and has scoured agency accounts for cash, and come up with $88 million in one-time relief.
The budget includes some pay increases for prison guards and State Police that were top priorities for Republican Gov. Susana Martinez, along with about $6 million for merit-based pay for educators.
In a concession to Senate Democrats, the budget increases minimum salaries for veteran teachers by $2,000.
Medicaid spending would increase by $21 million, forcing significant cost-saving measures as New Mexico next year begins paying a 5 percent portion of costs for the federally backed expansion. New Mexico’s expansion-related costs have been estimated at $40 million for the coming fiscal year.