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Legislators fear additional budget cuts may be needed

SANTA FE – New Mexico’s shaky budget situation is generating concern among state lawmakers – and talk about legislators possibly having to return to the state Capitol later this year to make additional cuts or spending adjustments.

“We’re on fumes,” Legislative Finance Committee Director David Abbey told members of a legislative interim committee Monday, referring to state revenue collections that are 10 percent less – or roughly $454 million – for the current fiscal year than they were a year ago at this time.

Senate Finance Committee Chairman John Arthur Smith, D-Deming, said lawmakers could have to go back to Santa Fe for a special legislative session by as soon as August if the state’s revenue picture doesn’t improve.

“Right now, it doesn’t look very good,” Smith told the Journal after Monday’s hearing. “If things don’t turn around on the revenue side, there could be additional belt-trimming.”

Gov. Susana Martinez would have to call lawmakers back to the Roundhouse for such a session, something she has done twice since taking office in 2011. Neither of those previous special sessions was called for budget-balancing reasons.

But the two-term GOP governor does not currently plan to call a special session. A Department of Finance and Administration spokeswoman said Monday that the Martinez administration has taken steps to limit nonessential spending, including cutting back on state employee travel.

“As we’ve done in years past, we’re going to continue practicing fiscal responsibility to help us deal with the persistently low energy prices,” DFA spokeswoman Julia Ruetten said.

As things currently stand, the $6.2 billion budget for the fiscal year that starts July 1 calls for state spending to decrease for the first time in five years. That’s largely due to plummeting oil and natural gas prices that have led to a slowdown in drilling and a corresponding downturn in tax and royalty collections.

New Mexico’s budget crunch has already prompted plans for Medicaid provider rate cuts for hospitals, doctors, and dentists around the state, and increased admission fees at state-run museums and historic sites.

But those cost-saving measures might not be enough.

The state is on pace to have just $63.1 million – or about 1 percent of state spending – in its primary cash reserve for the coming budget year. Cash reserves are generally used as a buffer in case the state takes in less revenue than expected.

The primary cash reserve was at $319.8 million last year but has been drawn down by the Legislature to avoid even steeper budget cuts.

Meanwhile, several Republican lawmakers signaled Monday that they’re open to at least weighing tax increase proposals – an idea that would go against the “no tax increase” stance held by Martinez since she took office.

Rep. Jason Harper, R-Rio Rancho, chairman of the interim Revenue Stabilization and Tax Policy Committee, said reimposing the gross receipts tax on grocery items and increasing the state’s gasoline tax – set at 17 cents per gallon – might be among the options he would consider.

“I think it’s naive to say no new taxes or no changing taxes,” Harper told the Journal, adding that any tax increases could be offset by tax cuts in other areas. “As our economy changes, we’ve got to change our tax structure.”