by Andrew Oxford, Santa Fe New Mexican
Jan. 5, 2018

Republican Gov. Susana Martinez and Democratic legislators agree on one point: Teachers and state workers are due for a raise. The question is how big.

Martinez on Friday unveiled her proposed budget, which calls for a 1 percent pay increase for state employees and 2 percent for teachers.

The Legislative Finance Committee also released its proposed budget Friday, recommending a 1.5 percent raise for all employees.

A percentage point may not seem like much. But the proposals signal that the process of cobbling together a budget will be less painful than in the recent past, when New Mexico faced a financial shortfall that led to cuts across government, drained reserves and dented the state’s bond rating.

Oil prices have improved, buoying the finances of a state government that is still heavily reliant on fossil fuels for tax revenue. And the state’s economy has shown signs of improvement, with a high unemployment rate inching downward during the last year.

The governor is calling for $6.23 billion in general fund spending for the budget year that starts in July. The Legislative Finance Committee is recommending a bit more at $6.26 billion. Last year’s budget was about $6.1 billion.

The proposals come ahead of the 30-day legislative session that starts Jan. 16. It will be the last regular session for Martinez before she leaves office in December.

As in past years, it remains unclear whether the narrow differences between the two budget proposals will lead to cooperation or will be doomed by other political hazards in an election year.

Still, there was cautious optimism on Friday.

“Through a relentless commitment to fiscal responsibility, by prioritizing spending and focusing government to live within its means, we started here today with a strong economy and nearly $200 million in additional funds to put toward our priorities,” Martinez told reporters during a news conference at EXPO New Mexico in Albuquerque.

At the least, a key lawmaker said, this year’s session should be easier.

“I became chairwoman of the

[House Appropriations & Finance Committee] last year, and the very first meeting we had to start dealing with cutting and sweeping,” said Rep. Patty Lundstrom, D-Gallup.

Unions representing teachers and state workers applauded the call for modest raises. They pointed to high vacancy rates in many areas of government, and they said services have been negatively affected in everything from public safety to health care.

“This is an important recognition that we are struggling to deliver those services, whether it’s income support or corrections or at the [Children, Youth and Families Department] or even the Department of Transportation,” said Miles Conway, a spokesman for the American Federation of State, County and Municipal Employees Council 18.

The state has not increased pay for all employees since 2014, though some workers, such as corrections officers, have received raises.

Advocacy groups praised plans to increase funding for Medicaid and early childhood education.

“These two programs are not only critical for the well-being of New Mexico’s children and hardworking families, but they are also important to the state’s economy,” said James Jimenez, executive director of New Mexico Voices for Children, a liberal advocacy group.

The Martinez administration says its budget would boost the state’s reserves to nearly 10 percent, while the Legislature’s plan calls for reserves of 8.4 percent.

That is a big rebound after the state depleted $700 million reserves in recent years to balance the budget.

But some lawmakers say New Mexico needs a big financial cushion to be prepared for fluctuations in the oil and gas markets.

“This is a very cautious budget,” said Rep. Larry Larrañaga, R-Albuquerque.

“Oil right now is $62 a barrel. We may be in for an increase in revenues,” he said.

But, Larrañaga said, if that’s the case, much of that new money would go into a revenue stabilization fund, which was created last year, and would not be available for immediate spending.

Even with a brighter financial outlook, the governor and legislators seem poised to clash over other issues, including tax reform.

Martinez renewed calls for overhauling the tax code but told reporters her administration is still weighing specific proposals.

Though she opposed raising taxes, she also said: “I am not opposed to closing loopholes.”

Her administration, for example, is proposing to charge nonprofit hospitals the state’s gross receipts tax.

Democrats have cast doubt on whether legislators can pull off substantial tax reform in a 30-day session.

And a leading House Republican was quick to say his caucus wants a broader overhaul of the state’s tax code, not piecemeal proposals, signaling that getting to an agreement could be no less unwieldy this year than last.

“Our members continue to overwhelmingly oppose any tax increases, including an increase on nonprofit hospitals, that are not part of a meaningful tax reform package,” said House Republican Whip Rod Montoya of Farmington.

Could these issues be enough to cause another political crisis like last year, when Martinez vetoed funding for New Mexico’s universities amid an impasse with Democratic legislators?

Asked if she would veto a budget without tax reform, Martinez said: “Of course I’m going to sign a budget.”

“The people of New Mexico,” she said, “deserve to live with some certainty.”

Steve Terrell contributed to this report.

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