Experts agree that New Mexico’s budget woes are serious. State government has been limping along for some time while officials struggle to reach an agreement on how to address the situation.
But the degree of urgency is a matter of debate. The Legislature ended its 2017 regular session last week after sending Gov. Susana Martinez a budget plan that includes tax increases she’s unlikely to sign. Martinez’s administration is complaining about a “do-nothing Senate” they say “wasted 60 days debating things like holiday songs instead of working on a balanced budget that doesn’t raise taxes on our families.”
The governor, a Republican, is promising to bring lawmakers back for a special session and says she’s considering a partial government shutdown to save money. Her office says that could include reduced hours at state museums and parks, employee furloughs, “and, God forbid, fewer days our kids spend in the classroom.”
House Speaker Brian Egolf, D-Santa Fe, is accusing the governor of “brinkmanship” he says is “completely irresponsible.” The Legislature’s top budget expert, Sen. John Arthur Smith, D-Deming, says it’s about time the governor takes the state’s financial woes seriously.
At issue, at least in the immediate future, is how to ensure there’s enough money to pay the state’s bills in the current 2017 fiscal year, which ends June 30. Beyond that, there’s the 2018 budget year that begins July 1.
Lawmakers have met twice since the current fiscal year began last July to address shortfalls in that budget that were caused largely by falling oil and gas prices. Both times, legislators approved cuts and fund sweeps but not tax increases — and both times, Martinez vetoed some of the approved measures. Lawmakers also rejected some of her proposals to help balance the budget.
Duffy Rodriguez, secretary of the state’s Department of Finance and Administration, says she and other Martinez administration officials are “anxious” about whether the state will make it to June 30 in the black.
A March 10 report projected that the state will have $77 million in the bank at the end of the current fiscal year on June 30. That’s just 1.3 percent of the state’s budget, “so the margin of error is slim,” said state Treasurer Tim Eichenberg, an independently elected Democrat who doesn’t work for the Martinez administration.
With the risk that estimated revenues could drop again before June 30, “that leaves us pretty much at zero,” Rodriguez said — and there’s “potentially” a risk that the state will be writing hot checks.
“Here’s the problem with waiting too much longer: It’s the end of March, we’re still paying February’s bills, and we’re seeing a cash problem,” Rodriguez said. “If we don’t slow down spending now, we won’t be agile enough, so to speak, to address the cash-flow problem in the remaining months of the fiscal year.”
“That’s why you have the governor saying she will take action if she has to,” Rodriguez said.
Smith pointed out that he was warning about the state’s fiscal woes a year ago. He said the governor didn’t take the issue as seriously back then and was too slow to call the Legislature into special session. So, he said, he believes there’s “some legitimacy” to the concerns Martinez Administration officials are now raising. One worry: Some cash the state is counting on is “slow-materializing,” Smith said, including approximately $70 million owed to the state by the U.S. Bureau of Land Management that “is being delayed for whatever reason.”
Still, Smith said, based on the information the Legislature has been given, he believes the state should be able to finish the current fiscal year in the black.
“I’m encouraged that they’re finally acknowledging the financial dilemma that we’re in. I’m not going to sit here and say they’re absolutely wrong,” Smith said, “…but I still think we have a thin margin to work with for ’17.”
Eichenberg didn’t take a position on whether the state has the cash to get through June 30. “I feel that we will have a clearer picture once April tax receipts are collected,” he said.
What about the 2018 fiscal year? Smith said many of the governor’s proposals to address recent shortfalls were one-time fixes. He noted that the tax increases the Legislature approved with bipartisan support last week would raise approximately $350 million a year in new, recurring revenue.
“The governor better start looking at that revenue package that we presented to her a little bit harder,” Smith said.
The governor hasn’t acted on the legislation, but she has criticized it.
“I will never allow lawmakers to raise taxes on our families to bail out big government,” Martinez said Saturday. She hasn’t yet announced dates for a special session.
Rodriguez said DFA officials are monitoring the state’s fiscal situation daily so the governor can act immediately if the need arises.