SANTA FE – A budget battle could be brewing at the Roundhouse, as an influential New Mexico legislative panel on Wednesday unveiled a nearly $6.1 billion spending plan for the coming year that contains some key differences from a budget blueprint released Tuesday by Gov. Susana Martinez.
Although the total spending levels are close, ways to get there differ. The governor’s proposal contains no tax increases, while the Legislative Finance Committee doesn’t recommend them but opens the door to possible increases in such areas as the state gasoline tax – which was last adjusted in 1995 – and online retail sales.
“We both agree on the numbers, but we disagree on how that’s going to be raised,” said the LFC’s chairman, Sen. John Arthur Smith, D-Deming.
One issue that’s already triggered verbal sparring is Martinez’s proposal to reduce take-home pay for state workers and teachers, as the LFC did not include it in its spending plan.
Senate budget guru Smith said the two-term Republican governor’s proposal could exacerbate high job vacancy rates across state government – the statewide vacancy rate was 15.7 percent as of October.
“The governor’s had a real disdain for state employees and teachers, so that doesn’t really surprise me,” Smith told the Journal. “But it’s going to meet some stiff opposition.”
Under the governor’s plan, all state employees – there were nearly 22,000 as of last fall – and teachers would have to divert an additional 3.5 percentage points of their salaries into their retirement funds, so that state-funded contributions could be decreased by a corresponding amount.
For an employee making $40,000 per year, the proposal could mean about $54 less per biweekly paycheck. But workers would be able to get the money back if they left their job and, upon retirement, would not see a decrease to their pension benefits.
The proposal would generate an estimated $100 million annually in state savings, according to the Governor’s Office.
Meanwhile, a Martinez spokesman blasted the Legislative Finance Committee’s proposal to cut funding for public school initiatives overseen by the Public Education Department – current initiatives include pre-kindergarten and teacher stipends – by $25 million. The governor used her line-item veto authority last fall to prevent a similar proposed cut to PED initiatives.
“It’s disappointing that the LFC proposal takes away millions of dollars in classroom spending and programs that help struggling students learn, and at the same time makes families pay more on gas, groceries, and medicine,” Martinez spokesman Michael Lonergan said.
While the Legislative Finance Committee’s budget recommendation does not explicitly call for tax increases, it would rely on roughly $123 million in savings that would have to come either from additional budget cuts or revenue increases.
Potential tax hikes identified in the LFC’s budget plan include increasing the state’s gas tax rate, prodding online retailers to collect gross receipts tax from New Mexico consumers and reinstating a food tax, but only on “junk food” items.
Although the governor’s spending plan has some key differences from the Legislative Finance Committee’s plan, there are also similarities.
Just like Martinez’s proposal, the LFC budget recommendation would extend for another year sweeping spending cuts enacted last fall. Most state agencies were hit with 5.5 percent spending cuts during a special session last fall, though the Department of Public Safety and the Children, Youth and Families Department were among several agencies that were exempted from spending reductions.
New Mexico is facing a projected $69 million deficit for the current fiscal year, and top-ranking lawmakers have expressed a need to address the situation quickly once the 60-day legislative session starts next week.
However, the Legislative Finance Committee proposal released Wednesday did not propose a solvency fix for this year, as did the Martinez administration plan. An LFC solvency proposal is expected to be unveiled later this week.
Meanwhile, lawmakers will also have to pass a budget for the fiscal year starting in July, and more belt-tightening is expected as state revenues are on track to come in roughly $300 million less than original spending levels for that year.
The drop in revenue levels over the past two years – largely due to decreasing oil and natural gas prices – has led to the state’s top bond rating being downgraded and cash reserves being all but wiped out.
After having signed off on deep budget cuts and other one-time fixes in the past year, some lawmakers say state services are suffering.
“It’s important that we ‘right-size’ state services, but we can’t grow a sound economy without some investment in the people of the state,” Rep. Jimmie Hall, R-Albuquerque, the LFC’s vice chairman, said in a Wednesday statement.
Unlike the governor’s plan, the Legislative Finance Committee spending recommendation calls for modest budget increases for the judicial branch. Some state courts would get more funding, as would the cash-strapped Public Defender Department.
However, the LFC plan would keep state spending levels on Medicaid largely flat. Martinez’s proposal calls for spending on the joint federal-state health care program that covers more than 880,000 New Mexicans to increase by $26 million during the budget year that starts in July.
Budget disputes could be a prominent theme in the coming legislative session, as Martinez vowed earlier this week to veto any proposed tax increases approved by the Democratic-controlled Legislature.
“It’s up to New Mexico state government to tighten its belt – not New Mexico families,” Martinez said during a news conference to unveil her own spending proposal.
Both the governor’s plan and the LFC proposal will be considered when lawmakers begin work on next year’s budget. The 60-day session starts Tuesday.
• Spending cuts of 5.5 percent for most state agencies would be extended, while even more would be cut from the University of New Mexico and other higher education institutions. That is similar to the governor’s proposal.
• Unlike the governor’s proposal, the LFC plan calls for a modest funding increase for the judicial branch, though that would not fully offset recent cuts.
• Roughly $123 million would be generated either from additional spending cuts or revenue measures, such as tax hikes. The governor said she would veto any tax increases. The LFC does not specify how it would come up with the $123 million.
⋄ Top-ranking LFC members are opposed to the governor’s proposal to raise about $100 million through increased pension contributions by state employees.
• The LFC did not take a stance on Gov. Martinez’s proposal to divert $120 million from school district reserve funds statewide.