Lawmakers finalize deficit fix, adjourn session

The Associated Press

SANTA FE — New Mexico lawmakers on Friday wrapped up their special legislative session, sending Gov. Bill Richardson a package of measures to repair a $650 million budget shortfall this year.

“It isn’t pretty. It doesn’t solve the problem; we know that. But it’s a step forward,” Majority Leader Michael Sanchez, D-Belen, said before the Legislature adjourned.

The package includes spending cuts of about $253 million this year in public schools, colleges and other government programs.

Richardson criticized what he said were “excessive” cuts to state agencies, and warned they could result in layoffs and reduced services.

He said until he gets input from the public and state workers, “every possible action, including vetoes, will be on the table.”

Public schools were effectively cut by less than 1 percent, which the governor said was satisfactory.

State agencies were trimmed by at least 2 percent, some by 4 percent. The agencies directly under the governor, however, took a much bigger hit: 7.6 percent.

The Legislature’s plan also requires the governor to eliminate 102 positions held by political appointees. Not all of those are currently filled.

“The drastic cuts to state agencies will likely lead to dramatically reduced critical services, such as Medicaid funding for behavioral health care, children’s health care, and programs for the elderly,” Richardson said in a statement.

Legislators had been at the Capitol for seven days, coming up with a plan that included shuffling state money around and using federal stimulus funds to fill some gaps.
“We’re trying to Band-Aid something together to keep state government moving along as best we can under dire, dire circumstances,” said Senate Finance Chairman John Arthur Smith, D-Deming.
In the end, the combination of fund transfers and cuts would provide nearly $526 million to fill the budget hole.

That means lawmakers will be looking again at this budget year — which ends in June 2010 — when they meet in a regular session in January.

Opponents warned that the plan relied too heavily on one-time money to patch the budget hole. That will just make the situation worse when the Legislature in January has to write a budget for the 2010-11 year, they said.

“We’re leaving here without having taken any serious approach to the budget,” objected Sen. Rod Adair, a Roswell Republican.

The Senate approved the spending cuts 31-9 after nearly six hours of often-rancorous debate that underscored lawmakers’ frustrations with the budget mess and the deep divisions among majority Democrats.

A group of progressive Democrats had pushed unsuccessfully to have tax increases considered as part of a budget fix.

Richardson didn’t want any tax changes during the special session, and the Legislature’s Democratic leadership went along with his wishes.

“We really boxed ourselves in,” said freshman Sen. Eric Griego, D-Albuquerque.

The governor said he will appoint a task force to come up with a package of tax changes before the January session.

The other main components of the plan to fix the shortfall in this year’s $5.5 billion budget:

— Freeing up $136 million by changing the way already approved capital improvement projects are financed. Bond proceeds would replace general tax revenues allocated for the projects.

— Scooping up almost $117 million from cash balances of programs and canceling funding for computer projects.

— Allocating $20 million in federal stimulus money to the state’s main budget account. The money is available for spending at the governor’s discretion.
With teachers’ unions pressing to minimize education cuts, lawmakers inserted protections in the budget cut bill to blunt the effect on classrooms.

Some lawmakers worried that the cuts would end up instead disproportionately affecting the neediest New Mexicans.

Sen. Lynda Lovejoy, a Democrat from Crownpoint, near the Navajo reservation, urged state administrators not to cut services to people in the most remote, depressed areas of the state.

“Begin cutting at the top, not at the bottom,” she said.
Lawmakers also approved and sent Richardson a bill that gives the administration the authority to take $225 million out of the state’s cash reserves to balance the budget for the year that ended June 30, 2009.

A summary of NM Legislature’s special session

The New Mexico Legislature wrapped up a special session Friday after approving measures to partially plug a $650 million revenue shortfall.

A package of spending cuts and one-time fixes will provide almost $526 million for the hole in the budget.

The measures allow the state to operate in the black temporarily, leaving year-ending balances of slightly more than $200 million, which is about 2.8 percent of spending, according to the Legislative Finance Committee. Lawmakers authorized transfers of $115 million from the reserves to balance the books at the end of the year, if necessary.

Reserves stood at about 6.5 percent at the end of the last budget year.

Traditionally, the state has considered it fiscally prudent to maintain reserves of 5 percent to 10 percent to cover unexpected financial problems.

Here is a look at what happened at the session:

SPENDING CUTS

Save about $253 million this year by reducing spending on public schools, colleges and general government operations ranging from courts to prisons.

— Schools face net cutbacks of less than 1 percent in the more than $2 billion in state aid that’s distributed to education through a funding formula. Lawmakers softened the blow to schools by using $45 million in federal stimulus money to replace state aid. In addition, $29 million from a school capital improvement fund will pay for property insurance costs that districts otherwise would have financed with general state aid. The legislation calls for school cuts ranging from 4 percent to 6.5 percent, but the net reductions are less because of the revenue offsets. Smaller school districts can request financial help from a $3 million emergency fund if cutbacks create difficulties for them.

— Cuts will vary by agency. Those under control of the governor will be cut 7.6 percent, although state police will be trimmed no more than 2 percent. The courts, attorney general, district attorneys and public defender are cut 2 percent. Elected officials other than the governor, such as treasurer and secretary of state, will have to cut their budgets by 4 percent.

— State money for Medicaid is cut $16 million, but that is offset by additional federal money and revenue the state receives from a national settlement with tobacco companies.

— There are 2 percent net cuts in state aid for colleges and universities to cover instructional and student services, administrative and maintenance expenses. About $13 million in federal stimulus money offsets cutbacks. Other higher education spending, including for research and athletics, is trimmed 6.5 percent.

— The governor must eliminate 102 political appointees in his administration. The impact is lessened because of vacancies. About 60 appointive jobs are vacant throughout executive branch agencies.

FEDERAL MONEY

— $20 million in federal economic stimulus money is allocated to the state’s main budget account to pay for governmental expenses. It serves as a one-time boost in revenues. The money is from a pool of stimulus aid that went to the governor to use at his discretion.

FUND TRANSFERS

— $115 million is taken from cash balances of programs and agencies and slightly more than $1 million previously allocated for computer projects is pulled back. Of the total, about $68 million is removed from the College Affordability Fund, which provides student scholarships.

CAPITAL OUTLAY

— $136 million is freed up with a financing swap for more than 200 capital improvement projects. Severance tax bond proceeds will replace general state tax revenues used previously. No projects were canceled.

SCHOOL FLEXIBILITY

— Some school districts are allowed to temporarily use a portion of local property tax levy money for operational expenses, except worker salaries. That money has been restricted to capital improvements such as equipment and maintenance and remodeling of buildings. Any money that is borrowed for operating expenses must be repaid.