Gov. Bill Richardson proposes to scrap $263 million in previously approved capital-improvement projects to help close a budget shortfall this year.

Richardson on Monday outlined his plan for resolving a projected $450 million budget shortfall in the current fiscal year and released his administration's budget recommendations to the Legislature for financing government operations and public education next year.

The Legislature convenes next week for a 60-day session, and Richardson described it as "the year of fiscal restraint."

"Having a strong, responsible, balanced budget is going to be our main objective this session," Richardson said at a news conference.

In the current budget year, which runs through June 2009, revenues are projected to fall $450 million short of covering spending in the current $6 billion budget. The state's revenue outlook has deteriorated because of the slumping national economy and declines in oil and natural gas prices.

Lawmakers and Richardson are looking at plans to balance the budget by cutting spending and eliminating some capital improvement projects, which will free up one-time money. The governor and Legislative Finance Committee also propose to pick up more revenues, mainly by speeding up when corporations must pay their estimated income taxes to the state.

The LFC meets later this week to consider proposals for closing this year's budget gap. One of the biggest differences between lawmakers and the governor is how much capital spending should be scrapped. Lawmakers are looking at eliminating a possible $150 million in capital-improvement projects — significantly less than Richardson proposes.

"This will be contentious," Richardson said of scrapping capital-improvement projects.

The governor did not release a detailed list of the projects his administration proposes to eliminate. That won't be available until next week when the Legislature convenes.

Overall, the governor's plan for dealing with this year's budget shortfall calls for nearly $109 million in cuts for agencies and programs and $79 million in extra revenues. Richardson also proposes $48 million in one-time savings, including repealing about $32 million that the Legislature approved during a special session last fall for health services and expanding Medicaid.

Once the Legislature plugs this year's budget gap, lawmakers still must keep the lid on spending because revenues aren't expected to rebound for several years.

"Clearly, the budget decisions we make this year are going to have an impact for many years down the road," LFC Vice Chairman Rep. Luciano "Lucky" Varela, D-Santa Fe, said in a statement. "We have to be even more cautious than usual. There is no room for error."

Neither the governor nor the Legislature is recommending salary increases for government workers. The governor's budget assumes the state can pick up an additional $33 million in revenues next year by improving tax collections.

Public schools and higher education will be cut under the budget recommendations of the governor and LFC.

Richardson proposed not quite $2.5 billion to pay for public-school operations next year — about $40 million less than the LFC. The governor's budget calls for a net reduction of nearly $80 million for public school support from last year's budget. The governor recommended total cuts of $125 million in public schools, but the net amount is less because the administration's budget includes some spending increases for education, such as to cover enrollment growth.

The governor's budget assumes public schools will save $30 million by allowing a temporary increase in maximum class sizes — giving schools more flexibility in how many teachers are needed to meet the state's classroom-size mandates — and save $14 million by eliminating one school day. The Legislature recently provided money to pay for one more day in the school year, but the governor proposes to suspend that next year.

Richardson also proposes that schools be allowed to temporarily pay for property and liability insurance costs — about $50 million — by using money that otherwise is earmarked for school maintenance. That represents a cutback in school spending from the state's main budget account.




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