When members of the state's Poverty Reduction Task Force set out in May to come up with ideas for the 2009 legislative session, the state's wallet was fat with cash.

Helping the needy with housing, food and financial security was a priority, Gov. Bill Richardson said when he named the panel.

Now, like those the group hoped to help, the state finds itself a bit tight on money, too.

Some recommendations may be too expensive to consider as state government grapples with a budget shortfall and tries to trim spending by 5 percent in many agencies.

The governor in October outlined a plan to immediately shave $114 million from state spending, which must be cut by at least $200 million in the current fiscal year to avoid a deficit. Revenue from oil and natural-gas production — key contributors to the state budget — has slid dramatically.

Agencies are trying to identify more cost savings ahead of a legislative session that starts Jan. 20.

Richardson has yet to endorse any of the anti-poverty group's recommendations, which include more money for low-income housing, additional cash for student work-study jobs and more spending on food warehouses for the poor.

"The governor appreciates the hard work and innovative ideas from the poverty reduction task force," Richardson spokesman Gilbert Gallegos said. "While state agencies were instructed to consider the recommendations as they develop their budget plans for next year, they will be forced to balance those ideas against the need to cut spending and balance the budget."

Allen Sanchez, executive director of the New Mexico Conference of Catholic Bishops and the CEO of St. Joseph's Community Health, acknowledged that the measures aimed at helping poor people with the best chance of passing next year are the ones that won't cost much.

But, he said, other work can be done. "Just because we can't make the financial investments now doesn't mean we can't make the policy changes," he said. "I'm very optimistic on policy issues."

Among other reductions that Richardson said in October could bring spending cuts to a total of $440 million are a plan to eke out $2 million in energy savings and a proposal to nix capital outlay projects that are funded but "are not moving forward."

He said New Mexico's government won't need to dip into reserves or reduce services.

While state agencies since then have made proposals as to what they would cut, Gallegos said none has been finalized.

Meanwhile, legislative leaders are fretting about how the state will manage, and what the real shortfall will be.

"The revenues, when you look at them, we're in a real wreck," Senate President Pro Tem Tim Jennings, D-Roswell, said.

"My personal belief is that it's not going to stop at 500 million," he said of what he projects the shortfall could be this fiscal year.

Jennings also has predicted no new revenue for the 2010 fiscal year.

House Speaker Ben Luján, D-Nambé, said the situation is "going to take some bold decisions on behalf of us legislatively, but the executive also."

"We recognize it's not going to be rosy," he said, "and that we need to take some fiscal responsibility to address our constitutional mandate that we can't spend more than we take in."

Holding the line

One area that might be particularly hard to cut is education, which accounts for about half of the state's budget.

Richardson has said he's "making every effort to ensure that funding for education stays in the classroom," but warned "public schools and higher education institutions are advised to develop a strategy for reducing next year's budget."

Another area the governor has said should be curtailed is non-essential overtime.

But that task could prove tough. Of the top 125 state government employees who earn overtime, a majority are in the Department of Corrections and the Department of Public Safety, records show. A few others are in the Department of Health and the Children, Youth and Family Department. Those highest earners cost the state $3.6 million in the past year, records show, and all overtime wages together cost the state almost $28 million from early October 2007 to October of this year.

A good chunk of the overtime earned at the Department of Public Safety is funded by federal grants, a spokesman said, while all of the overtime for the Department of Corrections is state money.

The work done by the correctional officers and state police is in general considered essential, Gallegos said, but it is up to each agency to decide what is essential.

While some workers will have to cut back on overtime hours, others hope to land an hourly pay increase.

Union leaders say they're asking for a one-time $1,500 "cost of living" payment, plus a raise of between 25 cents and $1 an hour.

The initial contract proposal for employees represented by the American Federation of State, County and Municipal Employees also calls for more sick leave, a boost in health care benefits and additional cash for multilingual employees.

Contract negotiations with the state began in August, and the current contract, which covers about 6,500 employees, expires Dec. 31. The union has yet to see a counterproposal from the administration, a leader said.

Union leaders say they hope state employees don't bare the brunt of the budget burden. "It's inappropriate, in the face of a budget crisis, to put the solution on the backs of state employees at the expense of their health and welfare," AFSCME negotiator Shane Youtz said in a statement. "An across-the-board hiring freeze forces state agencies to accept high vacancy levels on the long term. A more measured approach allowing those agencies to tailor the way they implement budget savings could better preserve basic services for the citizens of New Mexico."

Richardson on Oct. 17 announced a hiring freeze, although the State Personnel Office said 421 employees were added to the payroll before the freeze took effect Nov. 15.

Richardson also asked state employees to cut back on travel.

Choices to make

The Governor's Office said Monday there is no list of Legislature-approved capital-outlay projects slated to be "deauthorized," but administration officials were working with local and state agencies to identify some.

House Minority Leader Tom Taylor, R-Farmington, said the state has some serious work to do this session — months after it handed out tax rebates based on what was originally expected to be a budget surplus.

"When you factor in the rapidly declining prices of oil and gas coupled with the expansive growth of state government spending over the last several years," Taylor said, "it is clear that we are going to have to put partisanship aside and work together this legislative session to make the hard decisions to cut unnecessary spending and unproductive programs."

A key factor in the state's revenue crunch is the downturn in oil and gas prices, a staple of the state's checkbook.

Taylor points out that in July, oil went for $147 a barrel but on Tuesday was trading at $54.39 a barrel.

"The decline in oil prices deservedly gets a lot of the attention, but it is only half the story," Taylor said in a statement. "Natural gas brings in more severance tax revenue, but the latest numbers show its prices are suffering an even bigger drop. All of this means that our number one focus this session is going to be to get the state's financial house in order."

Contact Kate Nash at 986-3036 or knash@sfnewmexican.com. Read her blog, Green Chile Chatter, at www.santafenewmexican.com.