Gov. Bill Richardson has ordered state agencies under his control to develop a plan for 15 percent reductions in spending on capital improvement projects.

The goal is to identify projects that could be eliminated by the Legislature to free up money to help cover a budget shortfall this year.

A memorandum was sent this week to agencies directing them to submit plans by Friday to the Department of Finance and Administration for reducing capital outlay appropriations for projects.

Last month, the governor called for cutbacks in state spending, including capital projects, to help offset a projected budget shortfall of more than $200 million. Some lawmakers say the revenue outlook has worsened and the budget shortfall may approach $500 million this year. A new revenue forecast will be issued early next month.

At a meeting of the governor's cabinet Monday, Richardson "directed executive agencies to prioritize and identify a minimum of 15 percent of their respective capital balances for reauthorization of reversion in the upcoming 2009 legislative session," according to the memo from Robert Apodaca, director of DFA's local government division.

The governor's order came after agencies came up short of identifying between $200 million and $300 million in capital projects that could be scrapped to help deal with the state's budget problems.

Richardson had set that target last month when he told agencies to look for 5 percent budget cuts in their operations, such as contracts, grants, travel, office supplies and computer equipment.

Finance and Administration Secretary Katherine Miller was peppered with questions about the memo on capital projects when she testified Wednesday before the Legislative Finance Committee on her agency's proposed budget for next year.

She assured lawmakers the governor had no power to unilaterally eliminate capital projects that the Legislature had approved and financed.

"Nothing will happen until the Legislature takes action and the governor signs the bill," Miller said of the process for deauthorizing or eliminating capital projects.

Miller told the committee that all projects — including those backed by the governor — were on the table for possible cuts. Rep. Henry "Kiki" Saavedra, an Albuquerque Democrat, said lawmakers were concerned that only their projects might be on the chopping block.

According to the memo, agencies are to "identify capital projects that are stalled, ineffective, underfunded, unproductive or legally deficient."

The state has a large balance of money for capital improvements.

About $3.7 billion was approved between 2002 and 2008 for about 19,000 projects. Of that, $1.8 billion for nearly 7,700 projects has not been spent, according to a report in September by the LFC.

Cutting capital projects could provide the state with one-time money to plug part of the projected shortfall between revenues and budgeted spending. Miller said the administration wanted to protect the state's current cash reserves — rather than using the money to cover this year's shortfall — in case of budget problems next year and beyond.

New Mexico faces a budget shortfall because state revenues are lower than what was expected when this year's $6 billion spending blueprint for public education and general government was approved.

Revenues have dropped because of the slumping national economy and lower prices for oil and natural gas.

Key lawmakers this week said it will be difficult to figure out what capital outlay projects to cut.

House Minority Leader Tom Taylor emphasized that it's up to lawmakers, not the governor, to decide what projects get the ax.

"To deauthorize these projects will require legislative action, period," said Taylor, a Farmington Republican.

Halting some projects might be tough for cities, counties and other groups that have grown used to large budgets in the past few years.

"We have had such huge capital outlay budgets, the appropriations have gotten way out of hand," Taylor said.

The move will also prove daunting for lawmakers, many of whom focus on capital projects as a measure of what they do for their districts.

"Our members are used to getting some projects to take home," said House Speaker Ben Luján, D-Nambé.

He said administration and legislative officials are in the process of deciding where capital outlay and other spending can be curtailed but had no immediate list of projects or programs that could be scaled back.

Senate President Pro Tem Tim Jennings said the decisions to be made before and during the session that starts Jan. 20 won't be easy.

"The public needs to be aware it could be a very significant challenge for the state," the Roswell Democrat said.

Already, agencies have submitted proposals of other possible spending cuts to the Department of Finance and Administration, but the Governor's Office has declined to release them.

Staff writer Kate Nash contributed to this story.