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Senate OKs $262 million solvency package by wide margin

Copyright © 2017 Albuquerque Journal

SANTA FE – On just the second day of a 60-day legislative session, the New Mexico Senate signed off Wednesday on a $262 million solvency package that would patch a projected hole in the state’s budget by taking roughly $50 million from school districts and more money from various government accounts.

Even after spending cuts and other budget fixes were enacted last year, the state is still facing a projected $69 million deficit for the current budget year, and more belt-tightening is expected for the fiscal year that starts in July.

That’s led to some lawmakers expressing concern that the state could soon be unable to pay for basic services and face a second downgrade to its bond rating.

“We need now money – we don’t need far money,” said Senate Finance Committee Chairman John Arthur Smith, D-Deming, during Wednesday evening’s debate.

In all, the Senate approved four solvency-related bills, all by decisive margins.

The bill affecting public schools would generate nearly $50 million by essentially reducing by roughly 2 percent the amount of money school districts get through the state’s funding formula.

Although some smaller districts would be spared, the move would mean a roughly $12.5 million hit for Albuquerque Public Schools, the state’s largest district.

Some of the money could be paid by reserve funds controlled by the districts, but Stan Rounds, executive director of the New Mexico School Superintendents Association, said Wednesday that the funding reductions would be harmful.

“The $50 million cuts will have an impact in classrooms around New Mexico,” Rounds said.

“It’s easy to make an assumption that there’s all this extra money sitting around, but that’s not the case,” said Rounds, who added that superintendents understand the state’s budget predicament and prefer the Senate-approved approach to a proposal by Gov. Susana Martinez’s administration that would take $120 million out of school reserve funds.

Sen. Steven Neville, R-Aztec, said that cutting school funding was a last resort but that lawmakers have already exhausted other budget-fix options.

“We have cut and trimmed as much as we can,” Neville said.

The solvency package could be sent to the governor’s desk soon, as a House budget-writing committee also passed a similar solvency package Wednesday – albeit on largely party-line votes.

The full House could vote on the solvency bills by the end of this week, and they would take effect immediately if signed by Martinez.

As currently constructed, the proposed solvency fix would plug the budget deficit and leave the state with about $180 million in reserves – or about 3 percent of state spending.

However, it puts lawmakers in the position of having to cast painful votes that could lead to less money going to schools and programs in their districts.

“There are no good choices here – they are all bad choices,” said Rep. Paul Bandy, R-Aztec.

Other solvency provisions included in the Senate-passed package are opposed by the Governor’s Office, putting the Legislature and the governor on a possible collision course just days into the 60-day session.

One area of disagreement involves taking $11.6 million from a state “closing fund” that’s intended to offset the costs of business expansion and relocation.

The fund has been used to help entice Facebook to build a massive data center in Los Lunas, among other projects, but recently had an unspent balance of more than $34 million, according to the Legislative Finance Committee.

During her State of the State address Tuesday, Martinez urged lawmakers not to take money from the fund as part of a budget-balancing fix and some House Republicans tried Wednesday to squash the proposed funding diversion.

“Companies trying to expand would not take us seriously that we’re in the economic development game (if available funding is reduced),” said Rep. Larry Larrañaga, R-Albuquerque, the committee’s former chairman.

And a Martinez spokesman said late Wednesday that the proposal could hurt the state’s ability to attract businesses.

“The governor is still hopeful that there will be a serious solvency package that does not gut classrooms or economic development initiatives,” Martinez spokesman Michael Lonergan said.

But Democrats said no programs or funds should be off-limits to help with budget-balancing.

“We all have to give a little bit, even of our sacred cows, to make this budget work,” said Rep. Liz Thomson, D-Albuquerque.

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