SANTA FE, N.M. (AP) - New Mexico Gov. Michelle Lujan Grisham on Wednesday urged lawmakers to tap state reserves and federal recovery money to preserve some state spending increases, including a 2% pay bump for public school personnel and state workers.
State lawmakers are considering an even smaller pay hike or none at all as New Mexico confronts a harrowing decline in annual state government income linked to the economic fallout from coronavirus pandemic, including faltering local oil production. The Democrat-led Legislature meets next week to rewrite a spending plan for the fiscal year starting July 1.
State government economists on Wednesday revised estimates for state government income downward by $439 million for the current fiscal year ending on June 30 and by just under $2 billion for the coming fiscal year.
Estimated revenues for the coming fiscal year are estimated at $5.9 billion. The budget signed in mid-March would have increased state general fund spending by nearly 8% to $7.6 billion, with 4% pay increases at schools and state agencies.
Lujan Grisham is recommending budget revisions that scale back increases at most state agencies by 4%.
To sustain some increased spending, Lujan Grisham proposed tapping $750 million in federal coronavirus recovery act funds - despite current restrictions that prohibit using those dollars to backfill lost state revenues. The state would tap half of its financial reserves, which stand at roughly $1.8 billion.
Lujan Grisham said it was important to resist the temptation to reduce government spending and services dramatically and run the risk of aggravating problems of poverty and public safety.
“That’s why you have reserves, so that you don’t collapse your entire operation system,” she said. “I feel like legislators are going to feel like this is responsible investing in our futures.”
The Legislature is considering its own solvency plan that would eliminate spending on the governor’s fledgling initiative to provide tuition-free college to full-time students pursuing two-year certificates of associate degrees.
The plan also contemplates a more modest 1% average pay increase for state and public school workers - just enough to offset increases in health insurance premiums and preserve take-home pay. State agencies are under a hiring freeze, with an exception for the hiring of about 200 coronavirus contact tracers under a federal grant to help contain outbreaks.
The state is likely to borrow money to refinance infrastructure projects that were approved with cash from a general fund - money that is now dwindling. Some projects will be canceled outright.
Proposed budget changes would preserve about $865 million in financial reserves for the future fiscal year starting in July 2021. That’s unlikely to cover that year’s looming budget deficit of nearly $1 billion, according to projects by state economists.
“We’re going to have some very serious problems going into 2022, maybe even more serious than we have this year,” said Republican Sen. William Burt of Alamogordo.
Some immediate state savings are likely come from the decision to cancel programs this summer that would have extended the school year by as much as five weeks for elementary schools as a precaution against the coronavirus.
Those so-called extended learning opportunities are a cornerstone of efforts by Democratic lawmakers to improve academic achievement and childhood well-being, responding in part to a court order to address a failure to provide basic educational opportunities.
Lujan Grisham said her administration still hopes to add five days to the upcoming school calendar year. She described her proposal for 2% teacher pay increases as a “stabilization investment to make sure that teachers are no worse off in a less-safe, more difficult environment.”
Charles Sallee, deputy director of the Legislature’s budget and accountability office, said the Legislature is encouraging schools to expand learning time when classes resume - a move that can boost teacher pay by 5% with additional work.
Many schools are tentatively scheduled to resume classes in August, as the state Public Education Department devises safety protocols.
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