Senate approves budget bill after outcry over stripped-out salary increases

SANTA FE — The Senate signed off Monday on a $11.1 billion spending plan that would fully fund a landmark universal child care initiative announced last year by Gov. Michelle Lujan Grisham.

But bill sponsors faced questions — and suggestions of backroom dealing — over a decision to strip out 1% salary increases for New Mexico teachers and state workers for the budget year that starts in July.

The proposed pay raises had been included in a previous version of the bill that passed the House earlier this month. But the money to pay for them was removed to create space for additional food assistance funding for elderly residents, said Sen. George Muñoz, D-Gallup, the chairman of the Senate Finance Committee.

He also pointed out the budget bill includes $74 million to increase how much money the state pays toward educators' health insurance premiums — similar to a policy shift benefitting state employees enacted last year.

That change, which will flow through to school districts through a state funding formula, could end up meaning an extra $1,000 per month in teachers' paychecks, Muñoz said.

"If that's not taking care of New Mexicans, I don't know what is," he added. 

However, the move to strip out the pay raises in the final days of this year's 30-day legislative session has angered labor unions and their allies in the Legislature.

Whitney Holland, the president of the American Federation of Teachers union in New Mexico, said some educators and higher education employees would not benefit from the stepped-up insurance assistance since they already receive it.

She also said the removal of the proposed salary increases comes as many New Mexicans are struggling with rising costs.

"It's not a zero-sum game and we're leaving people behind," Holland told the Journal.

Meanwhile, Sen. Bill Soules, D-Las Cruces, said legislators who do not serve on the budget committee had little time to review the budget. He also said the salary increases were removed last week with little input or opportunity for public testimony.

"That doesn't feel like an open process for many of us," Soules said.

But Soules ultimately voted in favor of the bill, which passed the Senate on a party-line 23-16 vote, with Democrats voting in favor and Republicans voting in opposition.

State spending slows after rapid growth

In all, the Senate version of the budget bill would increase year-over-year state spending by about $277 million — or 2.6% — over current levels.

That would represent a smaller increase than in recent years, as state spending has increased by more than 70% since 2019. It would also leave about $3 billion in unspent cash reserves in case projected revenue levels do not materialize.

But Republican senators argued spending growth would still be too steep amid uncertainty over global oil prices and a gradual state revenue slowdown.

"This is a bloated budget," said Sen. Candy Spence Ezzell, R-Roswell, during Monday's debate. "All we're doing here is growing government." 

But Muñoz said the spending plan would meet current statewide needs while also providing future stability, adding, "this is a balanced budget that proves we can meet the moment." 

One of the biggest spending increases in the budget would be targeted at expanding the state's child care assistance program, after Lujan Grisham announced last year New Mexico would become the first state to offer state-subsidized child care to all working families, regardless of income.

Specifically, the budget bill would provide the entire $160 million in additional funding sought by the Lujan Grisham administration to keep the universal child care initiative in place for the coming year.

That money would come from an early childhood trust fund created in 2020 that has seen its value grow exponentially — from $300 million to nearly $11 billion — due to record-high oil production levels in southeast New Mexico. Taking more money from the fund would hinge on legislative approval of a separate bill codifying universal child care in state law.

Lujan Grisham spokesman Michael Coleman said Monday the governor was pleased with the child care funding levels included in the Senate version of the budget bill.

But he also said the Governor's Office was still working to review the overall spending plan.

What happens next? 

After winning approval in the Senate, the budget bill now returns to the House with just three days left in the 30-day session that ends Thursday.

If the House signs off on the changes to the bill made by the Senate, it would advance to the governor's desk for final approval. She would have until March 11 to act on the bill.

But if the House balks at the changes, it could lead to appointees from both legislative chambers meeting in a legislative conference committee to try to hammer out a compromise. Such conference committee meetings on spending bills are rare but not unprecedented, with lawmakers last using such a process to hash out a final budget bill in 2022.

Dan Boyd covers state government and politics for the Journal in Santa Fe. Follow him on X at @DanBoydNM or reach him via email at dboyd@abqjournal.com