This fall's expected special session of the New Mexico Legislature could be a repeat of the regular session earlier this year, at least in terms of the need to slice state spending.
While Gov. Bill Richardson's office said the possibility remains that there won't be a special session, key legislative leaders say it's hard to imagine balancing this year's budget without one.
Senate Finance Committee Chairman John Arthur Smith, D-Deming, said the state is likely to face a shortfall for the current fiscal year of between $300 million and $400 million.
"We're going to need to look at methods we used before to try and bridge that gap," he said. Agencies and programs have seen spending reductions, and state employees' take-home pay shrank when workers were required to contribute more to their own retirement funds.
While the latest budget gap's exact size isn't certain — Smith called it a "moving target" — he said it's clear that more cuts are needed. During the regular session, lawmakers had to whittle off roughly $450 million.
"Personal and corporate taxes are down," he said. "Gross receipts are tanking, and natural gas prices are still very anemic. At this stage, I don't think we can avoid it (a special session)."
Updated revenue projections are expected in August. Richardson is waiting to see that forecast, as well as to get a better sense of how federal stimulus spending is affecting the economy, before deciding when or whether to call a session, spokesman Gilbert Gallegos said. The governor met with legislative leaders on the issue about three weeks ago, Gallegos said, and many agreed the state should wait and see what the needs will be.
Rep. Lucky Varela, D-Santa Fe, said the estimates are crucial for both the current fiscal year and the one that ended June 30. He's heard recent estimates that there could be a shortfall for the 2009 fiscal year of as much as $200 million.
"We'll look at that, and then we'll have to also look at 2010," said Varela, who chairs the Legislative Finance Committee.
"If we do have a shortfall in 2009, we're going to have to close it out with reserves, otherwise we won't have a balanced budget."
While New Mexico is feeling a pinch, most states across the country seem to be in worse shape, said Smith, who attended a meeting of the National Conference of State Legislatures in Philadelphia this week.
According to CNNMoney.com, a June study by the Center for Budget Policy and Priorities found that at least 12 states and the District of Columbia are dealing with shortfalls totaling $23 billion in budgets that have already been adopted.
Still, Smith is worried about tapping too far into New Mexico's reserves. He predicted reserves this fiscal year could drop as low as 2 percent of the state's roughly $5.5 billion budget. Lawmakers in the past have been able to keep the reserves at around 10 percent.
And, even though other states, such as California, are in much more serious crunches, that doesn't make the choices any easier.
Smith said he will consider every alternative before laying off or furloughing state employees.
"I hate to go that far," he said. "The last thing I want to do is layoffs and furloughs, I want to look at all other options ... but obviously that's a big option."
State government has held about 1,200 jobs open since last November as part of a hiring freeze. Overall, the state's seasonally adjusted unemployment rate in June was 6.8 percent, up from 6.5 percent in May, the state said Thursday. Last June, it was 4.1 percent.
Contact Kate Nash at 986-3036 or knash@sfnewmexican.com. Read her blog at www.greenchilechatter.com.
