All options must be on the table when it comes to repairing the battered New Mexico state budget.
Between now and some unknown date in June when a special legislative session will take place, the leaders of New Mexico government are charged with finding a way both to reduce spending and to plug holes in the annual budget.
Revenues for the budget year that begins July 1 were expected to come in around $7.9 billion, with the budget set at $7.6 billion. Instead, the state could bring in from $5.5 billion to $6.1 billion, depending on the estimate. That’s a drop of 30 percent amid a financial picture that does not promise to improve anytime soon.
Even though the state must slash spending, it is essential that Gov. Michelle Lujan Grisham and legislative leaders do so strategically. The budget put together with such optimism earlier this year was not one of reckless spending. It was dedicated to investments in New Mexico’s future, whether by putting $320 million in an early childhood trust fund or setting aside $180 million for much-needed road repairs.
Such efforts must not be completely undone.
Otherwise, New Mexico will balance its budget now while restricting future opportunity. The temporary golden period when the oil and gas boom brought in tens of millions in new revenues offered the state a singular moment to improve longstanding deficiencies — boosting education spending, investing in job growth and establishing a foundation for early childhood care that would lift generations out of poverty.
This economic crash, courtesy of the COVID-19 pandemic that has shuttered business activity and the deep plunge in the price of a barrel of oil, cannot be allowed to overshadow this moment.
First, of course, Lujan Grisham has to call a special session, sharing her plans for the budget well in advance. Even setting a date and procedures is complicated in this age of COVID. Large gatherings are banned because they are an opportunity to spread the novel coronavirus that causes COVID-19. The House of Representatives is considering a short gathering to allow approval of its body to meet virtually; the Senate, on the other hand, believes its smaller group can meet safely using protective gear and social-distancing measures.
Obviously, there will be cuts in spending. That is a given. Fortunately, money was set aside for bad times. The state reserve fund has some $1.9 billion in it; a portion of that will be spent to make up the deficit.
Federal relief dollars sent to states because of the pandemic should help, too, and more could be on the way. We encourage Congress and the Trump administration to give states maximum flexibility to use that money as states deem best. Already, New Mexico has received more than $1 billion from the March stimulus package approved by Congress. Those funds are targeted for costs related to the coronavirus, but those restrictions can — and should — be lifted.
The big fight ahead will focus on whether the state should use the vast resources of the Land Grant Permanent Fund to boost the budget — currently the distribution is 5 percent, but that can be increased if voters approve. Fiscal hawks shudder when that is proposed, preferring to cut their way to solvency. While we respect the more prudent spenders in the Legislature, including Senate Finance Committee Chairman John Arthur Smith, the Land Grant Permanent Fund was established not just for rainy days but as a backstop in true times of trouble.
It makes little sense to keep billions in the bank if the state cannot pay necessary operating expenses now and invest for a better future. A temporary increase in the distribution, meaningful cuts in both one-time and recurring spending and use of reserves all could be necessary to navigate New Mexico through this crisis.
And, yes, look for new revenues.
Bring back the proposed tax increase for gasoline during the regular session in January, dedicating revenues to road infrastructure. New Mexico has one of the lowest gas taxes in the nation, and with the price of gasoline at its lowest point in years, adding 10 cents won’t cause the pain it might have when gas prices were soaring.
The issue of legalizing recreational marijuana needs to be revisited — tens of millions in additional yearly revenue would be welcome right now. So would an industry that is not boom or bust in nature. That’s true for the state’s expanding film industry as well. Current film and television subsidies might prove too rich in our current budget reality; still, the state must diversify its economic base and movies are a big part of that picture.
Lt. Gov. Howie Morales, as a state senator, proposed a hefty increase on the tax on cigarettes, both as an incentive to slow smoking and as a way to bring in more money. That’s another way to add to the revenue stream while potentially decreasing health costs. There’s much to consider, both in cutting spending and growing revenues.
First, the governor must set a date for the special legislative session while Senate and House leaders figure out how to meet safely without spreading contagion — we anticipate stations for visitors and legislators to have their temperatures taken before entering the building, for example, and masks required of everyone. The Legislature can establish rules to meet virtually, too. Flexibility would be useful considering this virus isn’t going away. Then, balance the budget, the first step on the road to improving New Mexico’s future. But cuts cannot be the only way out of this fix. Otherwise, our current fiscal pain will doom the state to a bleak future.