New Mexico Budget Problems Continue for Next Year (NM)
December 7, 2010
Public schools and governmental programs likely will escape additional spending cuts this year because the state’s revenue outlook has improved, but reductions loom for next year to deal with a projected budget shortfall, according to a new financial report issued Thursday.
Revenues are forecast to be about$56 million or 1 percent higher than previously expected in the current fiscal year, mostly because of stronger sales tax collections.
New Mexico’s reve nues had been deteriorating because of the sputtering economy and there was a prospect of another round of budget cuts this year. The state already has trimmed spending by 3.2 percent, or $151 million, to balance the budget.
Finance and Administration Secretary Dannette Burch told a legislative committee that no additional cutbacks are needed for now. Lawmakers and governor will get an updated revenue report after the Legislature convenes next year.
A budget provision requires the governor to automatically roll back spending on most programs if revenues and cash from the state’s reserves won’t cover spending this year. Burch said part of this year’s cutbacks about 0.7 percent could be restored because of the improved revenue outlook.
However, she and members of the Legislative Finance Committee agreed that shouldn’t happen because any spending increase this year will only shrink the state’s cash reserves and add to next year’s budget problems.
New Mexico expects to collect nearly$5.4 billion in its main budget account next year. That’s about $42 million, or0.8 percent, higher than a revenue forecast issued six weeks ago. Gross receipts taxes account for much of the improvement and Burch said the new revenue report reflects "continuing albeit slow improvement in the New Mexico economy."
However, serious budget problems loom for the Legislature and Gov.-elect Susana Martinez, who takes office on Jan. 1.
Based on the latest revenues, the LFC estimates a shortfall of at least $215 million next year for a no-growth budget to maintain current services. That assumes passage of legislation to continue more than $70 million in budget-balancing steps used this year, such as allowing the state to trim its pension contributions while workers offset that by paying more.
However, the shortfall could be more than $400 million if those cost-cutting steps aren’t continued and budget increases are provided for Medicaid, schools and other programs to deal with inflation and expected growth in demand for services.
New Mexico faces a shortfall next year mostly because the state has been financing education and health care programs with temporary federal aid, which is drying up. State revenues are projected next year to be about 4 percent higher than this year.
The difficult task for lawmakers and Martinez is to figure out how to balance a more than $5 billion state budget without nearly $370 million in federal economic stimulus money that’s paying this year for public schools, higher education and Medicaid, which provides health care for the poor and uninsured children.