Copyright © 2017 Albuquerque Journal
SANTA FE – A new revenue tracking report shows New Mexico is on pace to take in $55 million more in revenue than projected for the budget year that ends in June, some rare good news for a state that’s faced two consecutive years of spending cuts.
Union leaders and top Democratic lawmakers say the improved revenue outlook shows there’s no need for Gov. Susana Martinez to implement unpaid employee furloughs between now and July, but top Martinez administration budget officials say there’s still reason for concern.
“I don’t think we’re out of the woods yet,” Finance and Administration Secretary Duffy Rodriguez said Monday. “It’s not like we’re trying to invent the crisis or bluff.”
Rodriguez also said overall state revenue collections are still down significantly from a year ago, while adding that a steep drop in assets overseen by the state Treasurer’s Office has state officials on edge.
However, top Democratic lawmakers have accused the Martinez administration of exaggerating the budget situation – there’s also a separate dispute over next year’s budget – and being punitive toward state workers.
“I feel very comfortable saying we can complete this year without furloughs,” Senate Finance Committee Chairman John Arthur Smith, D-Deming, said Monday.
The Legislative Finance Committee revenue tracking report released last week said year-over-year revenue collections were up by $55 million through February over the most recent projections, due primarily to an increase in gross receipts tax collections and an apparent rebound in the oil and natural gas industry.
Plummeting oil and natural gas prices were the main reason the state took in less revenue than expected for the past two years, but New Mexico oil production for February was up by 4.1 percent from just over a year ago, in January 2016.
In addition, the state added eight active drilling rigs in February, bringing the statewide total to 48 rigs. Oil prices have inched upward in recent months, though the price of West Texas Intermediate crude oil has dipped in the past several days.
Carter Bundy, the political and legislative director of the American Federation of State, County and Municipal Employees union in New Mexico, cited the new revenue report as evidence short-term austerity measures aren’t needed.
“Furloughs were not necessary a few weeks ago, and (the improved revenue outlook) makes furloughs even less defensible now,” Bundy told the Journal .
He also said budget savings from a state employee hiring freeze Martinez enacted last month should translate to more cash on hand, and he said state law allows for some flexibility in how state funds are expended.
Lawmakers have already had to make two revisions to this year’s budget, as lower-than-expected revenue led to the state’s cash reserves being largely depleted and its top credit rating being downgraded.
A solvency package signed into law in January, which included taking money from school district reserves, left the state with a projected total of about $90 million in reserves, or roughly 1.5 percent of annual spending. Some state economists say that might not be enough to ensure the state is able to pay its bills for the next two-plus months.
In response, Martinez, the state’s second-term Republican governor, last week directed Cabinet secretaries in her administration to come up with employee furlough plans.
Although the plans have not been rolled out, Martinez administration officials have previously indicated they are considering ordering most rank-and-file state workers to take at least five unpaid furlough days between now and June 30, which would save an estimated $8 million.
Such a move could mean temporary closures of state parks, museums and Motor Vehicle Division field offices around the state.
Meanwhile, a Martinez spokesman said Monday that the LFC report is proof that the state’s sluggish economy – New Mexico has had the nation’s highest jobless rate for two consecutive months – will rebound and that lower oil and gas prices are to blame for the recent downturn in revenue.
“The answer is not to raise taxes and continue spending. That will ensure the next crash hurts the state even more,” Martinez spokesman Michael Lonergan said. “Instead, we need to reform the tax system to let New Mexicans keep more of their money and protect the state from oil and gas crashes in the future.”