The state’s general fund is likely to close out the 2016 fiscal year, which ended June 30, in the red.
The Legislative Finance Committee’s revenue forecast for the current fiscal year is also dire, with the state on track to exhaust reserves and maybe still fall short of the revenues needed for the current operating budget.
The outlook for the 2018 fiscal year is also “gloomy.”
Those are among the conclusions of a presentation Legislative Finance Committee (LFC) Director David Abbey made at a Senate Democratic caucus meeting on Sunday.
The outlook has state Sen. John Arthur Smith, a Deming Democrat who chairs the Senate Finance Committee, and state Treasurer Tim Eichenberg calling for a special session in August, The Santa Fe New Mexican is reporting. Smith was quoted as saying the 2016 shortfall would be at least $150 million. There’s no way to address that except with reserves because it’s already in the past.
Smith wants to take money from the state’s $230 million fund from settlements with tobacco companies — money that is supposed to combat smoking and improve public health — to instead pay the 2016 bills. The state has tapped into the fund for fiscal emergencies in the past.
The state is required to balance is budget. There are questions about how long the state can operate in the red and what happens if it doesn’t balance its budget.
As for the current, 2017, fiscal year, Abbey’s presentation notes that, despite an increase in oil and gas prices, general fund revenues were down 9.6 percent from July 2015 to April 2016 compared with the same period in the previous fiscal year. During that time period, gross receipts tax (GRT) revenue was down 7.5 percent statewide, and corporate income tax revenue was down more than 50 percent.
GRT revenue was up in some counties — including Bernalillo, Doña Ana, and Santa Fe — but the situation was much worse in counties heavily dependent on the oil and gas industry. In Lea County, GRT revenue was down 39 percent, according to Abbey’s presentation. In Eddy County it was down 24.9 percent. And in San Juan County it was down 7.2 percent.
Overall, GRT revenues from the mining, quarrying, and oil and gas extraction industries were down 45.9 percent through April 2016 compared to the same time period in the previous fiscal year. The manufacturing, transportation and warehousing industries also saw decreased GRT revenues of more than 28 percent during that time period.
The options to address the current-year budget situation, officials including Smith say, including cutting spending further or raising taxes or other revenues. Sweeping money from existing funds is also a temporary measure that may help.
Gov. Susana Martinez has repeatedly refused to consider raising taxes as the state’s revenues have declined. Her office didn’t respond to requests for comment from The New Mexican on Wednesday and didn’t immediately respond to questions sent by NMPolitics.net on Thursday morning.
The statewide budget woes come as local governments are also feeling squeezed — higher education in particular, whose funding was cut by the Legislature and governor earlier this year. Several state universities, including the University of New Mexico, have raised tuition in response. At New Mexico State University, the Board of Regents rejected a proposed tuition increase, and the university has been making cuts to meet an estimated $12.1 million shortfall.
The state’s long-term fiscal outlook isn’t getting any better. Abbey’s presentation says the 2018 fiscal year outlook “is gloomy because of uncertain revenue prospects, the need to replace $75 million of sweeps used to prop up FY17 spending, requirements for Medicaid growth and risks related to public school litigation.”