The first part of a package to erase a $450 million budget deficit won final approval in the Legislature on Monday and headed to Gov. Bill Richardson.

The measure cuts spending by about $165 million in the current budget year, although another piece of the deficit reduction package will soften the hit on public schools and Medicaid, which provides health care for the poor and uninsured children. Net spending cuts total about $100 million.

Cutbacks vary from agency to agency, ranging from 1.4 percent for courts to as much as 5 percent for the Environment Department and the Energy, Minerals and Natural Resources Department.

Other parts of the budget-balancing package are moving ahead in the Legislature, including a proposal that will free up about $94 million in one-time money by canceling capital-improvement projects.

The House Taxation and Revenue Committee on Monday unanimously endorsed the capital-outlay measure, which was a product of negotiations between lawmakers and the governor. House Speaker Ben Luján, D-Nambé, said the full House could debate and vote on the bill as early as today.

Lawmakers hope to complete work on all parts of the package this week and send the bills to Richardson. The goal is to erase the deficit and leave the state with cash reserves of slightly more than $600 million or the equivalent of about 10 percent of spending. The reserves serve as a rainy day fund to safeguard the state against unexpected financial emergencies.

New Mexico faces a deficit because revenues are falling well below what had been projected when this year's budget was approved. The revenue outlook has deteriorated as oil and natural-gas prices plummeted in the past six months and the nation's economy soured.

The spending reductions won final approval Monday when the bill unanimously passed the Senate. The bill cleared the House last week.

Public schools, colleges and universities, the court system, general government agencies and health care programs will be cut in the 2009 fiscal year, which started last July and runs through June.

Majority Leader Michael Sanchez, D-Belen, said the cuts were difficult to support.

"We have been flush with money for many years and now we find ourselves in a situation that is somewhat unbearable. ... None of us really wanted to make the cuts that were made," said Sanchez. "There's a lot of people ... that are going to have many, many difficult days and nights before this economy is back."

Sen. John Arthur Smith, D-Deming and chairman of the committee that handles the budget, said, "All New Mexico shared in the benefits of the windfalls that oil and gas brought to this state. All New Mexico is going to share in the pain. ... It's not a good day for New Mexico, but it's an absolutely necessary day."

The capital-outlay bill saves $94 million by canceling appropriations of general tax money that went to 89 projects. However, not all of those projects will be scrapped. The legislation uses $48.7 million in severance tax bond financing to replace general tax money for more than a dozen projects.

Lawmakers obtained the bond money by scrapping 45 bond-financed projects worth $25.7 million and using $23 million from this year's available bond financing capacity.

Capital-improvement projects backed by Richardson were not immune from cuts.

For example, about $11 million was eliminated for a proposed equestrian center that Richardson has advocated for rodeo events and horse shows. However, there's still about $12 million left for the facility — all of it from bond financing.

The state's deficit is in the general budget account, which relies on revenues from income and sales taxes as well as taxes and royalties from oil and natural-gas production. Bond financing is separate.

Other parts of the deficit reduction package will:

u Speed up estimated corporate income-tax payments to provide a one-time boost in revenues this year. The Senate-passed measure is headed to the House floor after it was endorsed by the Appropriations and Finance Committee on Monday.

u Dip into the state's reserves and take money from cash balances maintained by some agencies and programs. The transfer legislation will offset some spending cuts for public education and Medicaid. General tax dollars, which are being cut for those programs, will be replaced with other revenues. The measure also picks up $58 million from balances of public school capital outlay projects. The Senate-passed bill is going to the House. The tax committee approved it Monday.




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