LFC budget proposal sets up clash with governor

by Andrew Oxford, Santa Fe New Mexican
January 12, 2017

The chairman of the New Mexico Legislature’s budget-writing committee said Wednesday that, unlike the governor, he will not push to close the state’s current deficit by requiring public employees pay a greater share of their salaries into their pension accounts nor drain about $125 million in cash reserves from local school districts.

The comment by Sen. John Arthur Smith, D-Deming, came as the Legislative Finance Committee unveiled its proposals for covering a projected revenue shortfall in the current fiscal year and for further squeezing of already tight finances for the budget year that starts July 1.

Legislative leaders propose a $6.05 billion budget for 2017-18 that would trim the spending of state agencies by an average of 0.4 percent and count on lawmakers to either raise taxes or find additional cuts to balance New Mexico’s books when they gather Tuesday in Santa Fe for a 60-day session.

The proposal met swift criticism from the office of Gov. Susana Martinez, who reiterated her longstanding opposition to raising taxes when she unveiled her own budget proposal earlier this week, signaling that bipartisan compromise with the Democrat-controlled Legislature may not come easily.

Legislators will not be tasked with just passing a budget for the fiscal year that begins in July when they gather next week at the Capitol. They also will have to resolve an ongoing deficit while trying to build up the state’s nearly depleted reserves.

Smith rejected several proposals the governor offered earlier this week to fill the current fiscal hole. Perhaps most controversially, Martinez called for legislators to cut the state’s contribution to two pension plans, which would slice take-home pay for tens of thousands of public employees.

The senator said the pension formula “won’t be touched.”

Whittling away at the compensation for public employees, he argued, would make it harder for the state to recruit qualified staff.

“We’ve got phenomenal rates of vacancies [in state government] that are a direct result of low compensation,” he said, pointing to data that show the salaries of public employees in New Mexico have slid below their counterparts in neighboring states in recent years.

Instead, he said the Legislative Finance Committee will recommend balancing the current fiscal year’s budget by holding off on awarding funds for certain bricks-and-mortar projects, accelerating collection of insurance taxes and sweeping up unspent money sitting in accounts around state government. Smith said that while lawmakers will consider drawing some funds from the savings accounts of school districts, they would not siphon off the $125 million Martinez has proposed.

The Legislature’s plan for the next fiscal year would shave funding for public schools by $22.5 million, about 0.8 percent.

But the Legislature’s budget would not cut universities as deeply as the governor has proposed.

The Legislature would increase funding for the state’s courts as well as the Law Offices of the Public Defender while the governor’s budget would not provide more funding for either.

Both budget proposals would boost funding for the Corrections Department while leaving budgets for the Department of Cultural Affairs as well as the Children, Youth and Families Department largely untouched.

The Legislature’s budget also calls for cutting spending on Medicaid but includes an emergency appropriation only if lawmakers pass a tax on health services or find additional cuts.

The panel’s spending plan for next fiscal year and its proposal for covering the state’s current spending gap, expected to total about $67 million, highlight the dour outlook for New Mexico’s finances and the difficulty of bridging partisan divides.

Oil prices are rising, buoying revenues for a state government heavily reliant on fossil fuel extraction, but rates are not expected to reach levels seen just a few years ago. Meanwhile, New Mexico’s economy remains sluggish, with the state’s unemployment rate consistently ranking as second highest in the country. The state is expected to raise about $100 million less next year than it is spending this year. But earlier this week, Martinez signaled she would reject any proposals to raise taxes, even those with bipartisan backing.

The Governor’s Office accused the Legislative Finance Committee of trying to take “away millions of dollars in classroom spending and programs that help struggling students learn, and at the same time makes families pay more on gas, groceries, and medicine.”

“The governor believes it’s up to state government to tighten its own belt — not our hardworking families,” spokesman Mike Lonergan said in an email. “Her plan doesn’t raise taxes and it protects classroom spending, economic development efforts, and public safety.”

The Legislature’s budget proposal relies on legislators finding about $123 million in other cuts, tax revenues or both to balance the state’s finances.

That the committee and governor both proposed lean budgets this week seems likely to embolden advocates for tapping the Land Grant Permanent Fund to finance programs such as early childhood education.

Groups such as New Mexico Voices for Children have urged lawmakers for years to use a larger share of the money that flows into the $15 billion investment account from oil, gas and mineral extraction on state lands.

“While we’re pleased that neither budget cuts programs for preschool-age kids, it’s disappointing that those programs are still covering just a fraction of the children who would benefit most from them,” James Jimenez, the organization’s executive director, said in an email. “… Resources in the general fund budget either aren’t adequate or simply aren’t prioritized for this common-sense prevention, even though those investments will pay off for years to come.”

Republicans and many Democrats staunchly oppose the idea.

Copyright 2017, Santa Fe New Mexican (http://www.santafenewmexican.com/news/legislature/lfc-budget-proposal-sets-up-clash-with-governor/article_d5f8be63-2cbd-59c4-87bd-0db16ad75081.html)