October 20, 2004
State May Have $290 Million More in '05
By Barry Massey
The Associated Press
SANTA FE Lawmakers and Gov. Bill Richardson can expect nearly $290 million in "new money" to help pay for budget increases and tax incentives next year, according to a new revenue forecast.
The state's revenue outlook, mainly because of high energy prices, has improved significantly for the rest of the current budget year, and lawmakers will find a sizable pot of money available to them in the 2005 session of the Legislature to assemble a blueprint for financing education and government operations.
In the short-term, the revenue windfall this year will mean hundreds of millions of dollars for the governor and legislators to spend on capital improvements and one-time projects when the Legislature convenes in January for a 60-day session.
The updated revenue projections were developed by economists in the Richardson administration and Legislature, and were released Wednesday to the Legislative Finance Committee.
Higher prices for natural gas and oil, stronger corporate income tax receipts and improved revenue collection efforts by state government account for much of the revenue improvement, top budget and tax officials in Richardson's administration said in written remarks submitted to the LFC.
The state collects more tax revenue and royalties from oil and gas production when prices rise.
The so-called new money about $288 million is the amount projected revenues exceed current spending. That's generally considered the revenue pool available to the Legislature and governor for budget increases, to offset the costs of tax cuts or replenish reserves.
In the current fiscal year, the state should collect nearly $220 million more than was projected earlier this year when the current budget was enacted.
The higher-than-expected revenues this year can help pay for one-time spending projects such as capital improvements. Under the new revenue forecast, the state is projected to end the current fiscal year in June 2005 with cash reserves of $708 million an amount equal to 16 percent of spending.
The administration contends it's fiscally prudent to maintain reserves equal to about 9 percent of yearly spending.
Overall, the state expects to collect almost $4.7 billion in the 2006 fiscal year in the main budget account from taxes, royalties on minerals production as well as earnings on state balances.
Revenues are projected to grow by about 1.4 percent next year and 7.1 percent this year.
The projected new money for the 2006 budget year is more than lawmakers had available when they developed the current budget.
When lawmakers prepared for the 2004 legislative, a December 2003 revenue estimate called for $168 million in so-called new money available for budget increases in the current fiscal year. However, the revenue picture improved because of high energy prices and the new money figure was revised to above $200 million by late January.
The final budget as signed into law by Richardson provided for a $264 million increase in spending this year, or 6.4 percent.
Richardson and the Legislature are starting to plan next year's budget, which will be approved by lawmakers during the 2005 legislative session.
Revenue projections are critical for lawmakers because they help answer the question of how much money will be available to cover growth in programs and services. Medicaid, public education initiatives and teacher salary increases will use a large part of next year's revenues, administration officials told lawmakers.