Committee recommends cutback in state budget

BARRY MASSEY | The Associated Press

1/12/2009 - 1/12/09

State spending would drop by 2.4 percent next year, including cutbacks in public education, under a nearly $5.9 billion budget recommended by a legislative committee.

The spending blueprint released Monday by the Legislative Finance Committee calls for almost $146 million in budget cutbacks next year because of a dismal revenue outlook for New Mexico.

To ensure the budget is balanced, the committee recommends tapping the state's cash reserves to provide $94 million to help cover the cost of government operations and assumes about $26 million in new revenues.

Most of the revenues are expected to come by improving tax collections, such as through auditing of tax returns, but also by delaying the implementation of a recently approved tax credit for hospitals.

In the current budget year, which runs through June, the state faces a projected $450 million deficit because revenues have fallen short of what had been expected when the budget was approved during the last legislative session. The state's revenue outlook has deteriorated because of the slumping national economy and declines in oil and natural gas prices.

The Legislature convenes next week for a 60-day session and one of the most immediate assignments for lawmakers and Gov. Bill Richardson is to erase the projected deficit in this year's budget.

Lawmakers are assembling a plan to balance the budget by cutting spending, repealing money for capital improvement projects, raising more revenues and dipping into cash reserves.

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

Here are highlights of the budget recommendations of the LFC for the 2010 fiscal year, which starts July 1.

—Almost $2.6 billion for public schools and other educational programs. That's a reduction of $41 million, or about 1.6 percent less than the current budget before any reductions that may be needed to eliminate this year's deficit. About $17 million of the reduction comes from a proposal to change the funding formula that distributes state aid to schools. Currently, the formula provides extra money for small schools in communities with populations of more than 14,000. The committee recommends eliminating that provision, however. Despite the overall cutbacks, the committee recommends increased spending of about $2.6 million to raise minimum salaries of educational assistants. An increase of $3 million is proposed for pre-kindergarten programs — with some of the money coming from a federal grant — and more than $2 million for a program that extends the school year for children in kindergarten through third grade in high-poverty schools.

—About $753 million for Medicaid, a program that pays for health care for the poor and uninsured children. That's a 5.6 percent drop from this year. The committee assumes savings can be found from the managed care companies that administer Medicaid services without cutting enrollment and coverage. The program is jointly financed by the state and federal governments and the committee expects the amount of federal matching money will increase, leaving total money for Medicaid — federal and state — roughly the same as this year.