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Governor calls for more budget cuts, use of reserve funds

Gov. Susana Martinez with Education Secretary Hanna Skandera, left, and Children, Youth and Families Secretary Monique Jacobson. (Greg Sorber/Albuquerque Journal)

Gov. Susana Martinez with Education Secretary Hanna Skandera, left, and Children, Youth and Families Secretary Monique Jacobson. (Greg Sorber/Albuquerque Journal)

SANTA FE – With New Mexico still reeling from a prolonged revenue slump, Gov. Susana Martinez outlined a spending blueprint Tuesday that relies on more state government belt-tightening – and no tax increases – to fix a projected $69 million deficit for the current budget year and carry the state through the fiscal year that starts in July.

“It’s up to New Mexico state government to tighten its belt – not New Mexico families,” Martinez said while unveiling the plan at an Albuquerque charter school.

Specifically, the two-term Republican governor’s plan would trim take-home pay for state workers and teachers, divert money from school district reserves and various government accounts, and halt a “hold harmless” state subsidy for cities and counties that enacted the maximum-allowed tax increase under the terms of a 2013 tax package.

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It would also extend for another year sweeping spending reductions enacted last fall by the Legislature, and enact even deeper cuts for New Mexico colleges and universities and the legislative branch.

Top-ranking Democratic legislators and union leaders quickly criticized several parts of the governor’s solvency plan, most of which would require legislative approval during the 60-day session that starts next week.

Carter Bundy, the political and legislative director for the American Federation of State, County and Municipal Employees union in New Mexico, said the union will fight the proposal to require more than 20,000 state workers – plus teachers – to funnel more of their paychecks into their retirement plans. Taxpayer-funded contributions would decrease by 3.5 percentage points.

“She is proposing taking money out of the pockets of middle-class and poor New Mexicans and giving it directly to big out-of-state corporations and billionaires,” Bundy told the Journal.

Martinez has stuck to a “no tax increase” stance since she first took office in 2011, and she vowed Tuesday to veto a proposal to make online retailers collect gross receipts taxes or other tax hike bills sent to her desk by the Democratic-controlled Legislature.

“We have many, many options to solve the budget deficit,” the governor said. “We don’t have to raise taxes. We don’t have to penalize families.”

Plunging revenues

New Mexico revenue levels have plummeted in the past two years, largely because of decreasing oil and natural gas prices, and state cash reserves have been all but wiped out. That has led to a downgrade of the state’s top bond rating and prompted the Legislature to approve a mix of spending cuts and one-time budget fixes during a special session last fall.

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However, Martinez accused the Legislature on Tuesday of not going far enough during the 2016 special session, saying lawmakers from both political parties took the easy way out in a year in which all 112 legislative seats were up for election.

“I won’t sugarcoat it – difficult decisions were avoided in an election year,” Martinez said, referring specifically to her administration’s proposal to take, or “sweep,” up to $120 million in reserve funds from school districts statewide.

Such a move would still leave more than $130 million in school reserves available, top administration budget officials said.

Lawmakers considered dipping into the school district reserves during last fall’s special session, but the then-GOP-controlled House ultimately backed away from a Senate-approved plan that called for $25 million to be diverted. Democrats won back control of the House in the November general election.

Incoming Senate Majority Leader Peter Wirth, D-Santa Fe, said Tuesday he was concerned by the governor’s proposal, adding it was “disheartening” for the governor to refer to the school reserves as a slush fund.

But he said he was glad to see Martinez put forward a solvency plan, as she had faced criticism from Democratic lawmakers for not doing so before last fall’s special session.

Medicaid boost

In all, the plan unveiled Tuesday by Martinez would generate an estimated $268.5 million in one-time savings, and roughly $59 million in year-over-year savings. That would be enough to backfill the budget deficit for the fiscal year that ends in June and provide for a nearly $6.1 billion budget for the coming year.

However, the $6.1 billion budget would be roughly $137 million less than the original appropriation level for the current budget year – before lawmakers signed off on 5.5 percent spending cuts for most agencies during the special session.

Under the governor’s budget plan for the coming year, one of the few proposed spending increases would be for Medicaid, the joint federal-state health care program that covers more than 880,000 New Mexicans, the funding for which would go up by about $26 million.

Some other agencies, including the Department of Public Safety and the Corrections Department, would avoid budget cuts but would receive little or no additional funding.

“Our budget shortfalls are not as large as several other oil-producing states,’ ” Martinez said Tuesday. “However, we have a lot of work to do, and I’m committed to continue fighting to rein in state government spending.”

Going into the budget year that starts in July, the governor’s plan would leave the state with about $230 million in cash reserves – or about 3.8 percent of total state spending – that could be used as a budget buffer if state revenue levels continue to sag.

The Legislative Finance Committee is expected to unveil its own budget recommendation today. Both proposals will then be weighted during the coming session, which begins Tuesday.


Highlights

Gov. Susana Martinez’s $6.1 billion budget plan includes solvency measures that would:

  • Divert $120 million from school district reserves.
  • Take roughly $12.5 million out of a legislative retirement account.
  • Make state workers and teachers pay more into their retirement funds, allowing the state to reduce its contribution rate.
  • Eliminate or reduce state subsidies for cities and counties that enacted “hold harmless” tax increases.
  • Extend 5.5 percent spending cuts for most state agencies, while cutting more from the legislative branch and higher education institutions.


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