Las Cruces slows spending due to budget 'math problem'

LAS CRUCES — Less than halfway into the fiscal year, the city of Las Cruces has put the brakes on spending, with City Manager Ikani Taumoepeau admitting that the city’s general fund balance had been “overstated.”

“We have a math problem at the end of the day,” Taumoepeau told the City Council on Monday. “The city has been very methodical and they’ve been very prudent, so we have a fund balance that has been helping us through these past years and so we will be able to get through this year.”

Taumoepeau addressed the issue after being pressed for an explanation by City Councilor Bill Mattiace, vowing to “get control of this, to really understand what we’re doing with this budget.”

“There is no risk of the City defaulting on any of our financial obligations,” the city said in a statement issued Wednesday. “We have a healthy reserve that is double the amount required by the State. We are making these adjustments to ensure that we continue to operate as a fiscally responsible organization with a balanced budget.”

In May, the council approved an amended 2025-26 budget including $612.2 million in spending, of which $175.3 million would come from the general fund, comprising 21% of proposed expenditures, according to a budget presentation to the council.

At that session, the city finance department estimated a general fund balance of $76.1 million to start the fiscal year, which began on July 1, and an ending balance of $32.7 million, including a required reserve.

The budget included 30 new full-time positions, including new positions in the police and fire departments and nine positions within the Parks and Recreation Department; a 5% general wage increase; and increases in retirement and health insurance costs. Personnel expenses accounted for 69% of general fund spending. An additional 11 positions were paid for outside of the general fund.

At Monday’s meeting, landing five months since the start of the 2025-26 fiscal year, Mattiace asked Taumoepeau to address the budget imbalance; and while the general public was hearing of it for the first time, city leaders and staff had been notified weeks earlier.

On Nov. 18, Taumoepeau sent an internal email to city staff — newly obtained by the Journal — announcing a freeze in hires and reductions in cash transfers that support the city airport, roads and other city funds, excluding debt-service transfers. The email also announced new travel restrictions to take effect in January, reduced use of temporary staffing services and other measures to slow spending.

The email advised staff that the budget had overstated the general fund balance and that spending was outpacing the city’s income.

“While revenues have increased by $17.2 million (11%) since (the 2023 fiscal year), expenditures have increased by $18.8M (14%) and transfers $10.7M (40%) have grown at a significantly faster rate than expected,” Taumoepeau’s email stated.

In that same time frame, the email reported salaries had increased by $20.6 million, or 25%, while operating expenses increased by $12.7 million, or 39%.

One vector that decreased significantly, according to the email, was capital expenses, decreasing by $14.5 million or 83%; yet Taumoepeau attributed this change to “a required change in accounting method.”

Taumoepeau responded to Mattiace’s question Monday with an acknowledgement the discrepancy had been identified by the city’s new finance director, Lesley Doyle. Doyle started in the position in January. Taumoepeau told the council that Doyle identified “an overstatement that affected our budget reserves.”

The city did not make Taumoepeau or Doyle available for an interview, but confirmed that Doyle “discovered a probable discrepancy” at the end of July. A subsequent investigation confirmed what the city described as an “$8.33M duplication error.”

The City Council was notified of the issue on Nov. 18, the same date as the internal staff email, in a memo the city provided to the Journal. In that document, Taumoepeau described the measures as “a more fiscally conservative approach that will allow us to create a more sustainable budget for the coming years, ensuring it remains balanced while keeping our current staffing and operational commitments.”

At Monday’s meeting, Taumoepeau balked at providing dollar amounts for the overstatement, saying the city had reported the issue to the State Auditor’s office and offering to share “some draft numbers with you offline.”

City spokesperson Mandy Leatherwood told the Journal, “...Final audited numbers are not to be disclosed to the public until the Office of the State Auditor has released the financial statements. The final amount of the overstatement is dependent on final, audited numbers.”

As to financial consequences, the city manager assured the council that the budget was not running at a deficit and vowed to bring it into balance by the end of the fiscal year, which is June 30.

The city told the Journal that reductions in cash transfers would not result in changes to operations to the municipal airport or road services. Spokesperson Mandy Leatherwood said, “To accomplish the reductions, we have analyzed other funding sources, including unused or underutilized sources that could be used to ensure funding remains consistent.”

Taumoepeau told the council, “We’re not hiring more personnel at this time; we’re freezing.” However, Leatherwood said no full-time employees will be converted to part-time, while some staff may be asked to shoulder additional responsibility.

“Each department director has been asked to optimize their current staffing model and look for areas where savings can be captured,” she said, adding that temporary staffing and current vacancies were being evaluated “as we work to right-size our workforce.” Promotions would be addressed on an individual basis, she said.

“There isn’t a deficit,” Taumoepeau told councilors and the public. “This was an overstatement but we have reserves that have been able to pay for these dips and these ebbs that we find in our budget years.”