A key legislative panel released a preliminary proposal Thursday for fixing a projected $991 million state budget gap for the next fiscal year.

The Legislative Finance Committee is recommending New Mexico cut spending by 5 percent.

Public education spending might see a smaller reduction, which would cause budgets at some state agencies to be chopped by an even greater amount, said Charles Sallee, the committee’s deputy director, during a hearing Thursday in Cloudcroft.

Lawmakers and Gov. Michelle Lujan Grisham already mended the budget hole for the current fiscal year during a special legislative session last month. But that effort didn’t address an impending shortfall for the 2022 budget, which will be crafted at the legislative session starting in January.

“We’re in the midst of both the public health emergency crushing our budget, but more importantly the bust in oil production and prices that has occurred,” Sallee said.

Sallee told members of the committee the state’s projected deficit for the next fiscal is $991 million.

“So that’s the budget gap you have to close,” he said.

The 5 percent cut to recurring spending would around $350 million, Sallee said.

“We would recommend reductions in almost every agency,” he said.

Under the proposal, the deficit also would be addressed by “one-time, nonrecurring budget maneuvers,” such as using agencies’ surplus cash balances and money from capital outlay projects approved with general fund allocations, Sallee said.

A third way of plugging the budget hole, according to the proposal, would be for legislators to explore new measures that could raise revenue.

For instance, the legalization of recreational marijuana, which has previously been considered by the Legislature, would bring in $30 million to $40 million per year, Sallee said.

“It’s not the be-all, end-all to solve the budget, but it would be some amount of money that could be pieced together,” he said.

Sallee added that the Legislative Finance Committee is recommending the state not tap its reserves to address the shortfall and keep its cash reserves at between 10 percent and 15 percent of spending levels.

The budget fixes made in June cut reserves to around 11 percent from 25 percent.

There’s still a long way to go until the Legislature starts debating the budget in January. Lawmakers will review the preliminary proposal, which was drafted by Legislative Finance Committee staff, and will release an official budget recommendation before the regular session begins.

During the hearing Thursday, legislators were pessimistic about the state’s economic outlook.

Sen. John Arthur Smith, chairman of the Senate Finance Committee, reiterated his previously expressed view that the state should have cut more last month to avoid having to make drastic reductions next year.

“We’ve got huge problems,” said Smith, who is leaving the Senate at the end of the year after losing his primary election. “There’s a lot of heavy lifting that’s going to have to be done.”

Reporter

Jens Gould covers politics for the Santa Fe New Mexican. He was a correspondent for Bloomberg News in Mexico City, a regular contributor for TIME in California, and produced the video series Bravery Tapes.

(10) comments

Andrew Lucero

It's important to note that this is a "Projected 991 million dollar Deficit"... When all is said and done, I fear the actual numbers will be significantly more than a billion dollars. And for a poor state like New Mexico, that's devastating. It will take decades to recover from this.

Daniel Valdez

NM will continue to reap what it has sewn for years. Democrats and their policies will be the State's demise. #walkaway

Robert Bartlett

All of this points towards further erosion of the services that the people of New Mexico need and rely on. Policing, schools, hospitals and the rule of law. If the democrats remain in control it will be impossible to turn around.

Lee DiFiore

Woops, a grey cloud appears on mlg's horizon. Don't fret, it's one she and the legislature caused themselves with overspending the oil revenue and ruining New Mexico's economy. Even beloved lefty social programs will feel the sting.

Mike Johnson

Sorry socialists, the gravy train you had been counting on to allow massive expansion of government to do everything in our lives for us has been wrecked and destroyed. Good opportunity to restructure, reformat, refocus, and reorganize how government should be done, and look at all the corruption, waste, duplication, and incompetence that has metastasized and grown like a cancer on our state. Use this opportunity wisely.

Emily Koyama

Fat chance of that. ...they will use this as an excuse to increase taxes, and then increase taxes again.

Raquel Casillas

Let's just go back to Reagan who, for just one of several examples, eliminated the interest deduction on credit cards which resulted in a huge tax increase. Then double digit inflation, then he had to raise taxes 8 times, then the recession arrived...next up, Clinton. He left office with a surplus and the books were balanced. Then Bush....OMG the great recession...then Obama had to step into a real mess...that took a long time and a comprehensive historic plan to repair the economy. Years! Now we have a Pandemic. It pains me to state that our country, the USA was not prepared, careless, reckless and still has no national leadership. The number are going up with Covid and now the Econ numbers will go down (again)...We should have been prepared both for a treatment plan and pandemic economic plan nationally. But nooooo. The states had to keep the ship afloat. Some will be okay, like our state but it will take work and thinking outside the Econ Box. It will take our Governor and another Democrat in the future to step into another long term mess to clean house. If you think education is expensive, try ignorance. No truer words spoken. The Dominant Stupid is rampant and it's costly.

Joseph Tafoya

Yes, education is expensive especially if you are last in about every metric used to gauge how the urchins are doing. No bang for the buck. The first thing the Gov did was to give everybody in government a big raise. How is that going to work out? Now that oil and gas royalties have tanked and the tourist industry is tanking, that doesn't leave much room for generating money to support the utopia democrats keep telling us about without raising taxes.

BOB SCHWARTZ

THeir management plan is to beg the feds for money

Joseph Tafoya

Cuts to a democrat are what water is to oil. It doesn't mix. No democrats will use taxes to boost the budget. They will tax and put the kibosh to business looking for a place to bring companies and money.

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