With uncertainty on horizon, Senate panel approves changes to $10.8 billion spending bill

SANTA FE — After weeks of study and closed-door meetings, a key Senate committee on Tuesday rolled out its changes to a House-approved $10.8 billion state spending bill.

The revised budget bill for the fiscal year that starts in July would boost recurring state spending by $618 million — or about 6% — over current levels.

But Sen. George Muñoz, D-Gallup, the chairman of the Senate Finance Committee, warned funding levels could have to be reduced if federal budget cuts to Medicaid and other programs are enacted.

“Don’t plan on asking for more money, because we’re going to start tightening,” Muñoz said during Tuesday’s hearing.

But he also said revenue distributions from state trust funds that are invested by the State Investment Council are on track to outpace oil and natural gas revenue by 2030, at least partially buffering New Mexico from industry ebbs and flows.

“If you want to diversify the economy, that’s how you do it,” Muñoz quipped.

In all, the budget plan approved Tuesday by a 9-2 vote in the Senate Finance Committee increases recurring spending levels by $23 million from an initial version of the bill passed last month by the House.

It also adds $100 million as a “down payment” for a new behavioral health trust fund signed into law last month by Gov. Michelle Lujan Grisham.

However, the Senate version of the bill leaves intact many of the spending provisions included in the initial spending plan.

That includes boosting starting New Mexico teacher pay to $55,000 per year and providing average 4% pay raises for state employees.

Under the revised spending plan, roughly $3.3 billion would be left unspent in cash reserves and could be tapped in the case of federal budget cuts to Medicaid or other programs.

But several lawmakers expressed concern that money could be depleted quickly if Congress votes to reduce federal Medicaid spending.

Another sticking point in the budget bill is funding for the state’s Children, Youth and Families Department, as the governor and CYFD Secretary Teresa Casados repeatedly called on lawmakers to increase proposed funding levels for CYFD.

However, the budget bill approved Tuesday largely leaves CYFD recurring funding flat, while providing additional one-time funding to the agency if it meets certain goals. That includes money to hire 100 new caseworkers over the next three years.

New Mexico state spending has increased steadily in recent years, as revenue levels have surged to record-high levels due largely to an oil production boom in southeast New Mexico’s Permian Basin.

“We’re in the midst of a production boom the likes of which we’ve never seen before,” Legislative Finance Committee Director Charles Sallee said Tuesday.

The state is the second-largest oil producer in the nation — behind only Texas — and oil and gas revenue make up about 35% of the state’s total revenue collections, according to legislative data.

The spending bill, House Bill 2, now advances to the Senate floor with just four days left in this year’s 60-day legislative session.

Both the Senate and House must agree on the same version of the budget bill before the session ends Saturday in order to send it to the governor’s desk. Lujan Grisham would then have until April 11 to act on the bill.

Sens. Jeff Steinborn, D-Las Cruces, and Pat Woods, R-Broadview, cast the only two votes against the spending plan, with Steinborn saying the bill changes should have been publicly posted before Tuesday’s hearing.

“I think we can do better than that in the budget process,” Steinborn said.