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.”