House OKs revised solvency measures

Bills go back to Senate for approval of changes

SANTA FE — The New Mexico House signed off Monday on a revised plan to reduce funding by 2 percent for most school districts statewide, as a package of solvency bills aimed at patching a big budget hole inched closer to Gov. Susana Martinez’s desk.

The gaping $69 million projected deficit for the current budget year has dominated the opening week of this year’s 60-day legislative session, with lawmakers trying to cobble together a budget-balancing package that can put the cash-strapped state on more solid footing.

But the proposed budget fixes — reduced funding for school districts, a state “closing fund” for economic development and more — have led to howls of protest and lengthy closed-door caucus meetings.

One of several painful proposed fixes, the cut in school funds would generate roughly $40 million in savings by targeting school districts with cash balances of at least 4 percent. Districts with less than that would be exempted.

The measure, Senate

Bill 114, passed the House 45-22 but must go back to the Senate for final approval because it was changed in the House.

Martinez, the state’s two-term Republican governor, had previously proposed taking $120 million from school district balances to shore up the state’s budget.

A separate solvency measure taking nearly $89 million from various state government programs and accounts was also approved late Monday on a 37-30 party-line vote in the House.

That came after minority Republicans tried unsuccessfully to spare an economic development initiative backed by the Martinez administration and, instead, take money from a legislative retirement fund.

“Why aren’t we going ahead and putting some of our own skin in the game?” asked Rep. Jim Dines, R-Albuquerque.

But House Democrats described the attempt as politically motivated and cited constitutional concerns about diverting money from the state’s retirement system for public employees.

“I’m not going to fall for political expediency,” said Rep. Stephanie Garcia Richard, D-Los Alamos.

Among other things, the legislation, Senate Bill 113, would take $11.6 million from a state “closing fund” aimed at offsetting the costs of business expansion and relocation.

Business community leaders have argued that taking the money would undermine efforts to diversify the state’s economy.

“I don’t think it’s appropriate in this solvency package to eliminate a program that creates jobs,” said Rep. Paul Bandy, R-Aztec, who led the charge for the amendment, which failed on a party-line vote.

Proponents of taking money from the fund said much of the $50 million appropriated to the program two years ago has gone unspent and should be fair game in an emergency budget situation, but opponents said there are businesses that have expressed interest in New Mexico based on those incentives.

Rep. Bill McCamley, D-Mesilla Park, expressed frustration that tax increases and other revenue-generating measures have not been considered by the Legislature, largely because the governor has said she would veto them.

“There are other options out there as well, and those were not even touched during this whole process,” McCamley said.

Meanwhile, the Senate could vote as soon as today on two other House-approved solvency bills. The Senate Finance Committee approved the two solvency fixes Monday, but altered one of them.

“We’ve robbed every corner of state government we can find,” said Senate Finance Committee Chairman John Arthur Smith, D-Deming.

In the past year, plummeting state revenue has already prompted lawmakers to enact spending cuts, draw down cash reserves and approve other budget-balancing measures. The state’s top bond rating was also downgraded in October 2016.

However, more tough decisions loom as lawmakers must not only address this year’s budget deficit but also pass a budget for the fiscal year that starts in July.

Senate budget guru Smith warned the state is likely facing at least a $300 million budget shortfall for the coming year, and he said it could be even larger —perhaps as large as $500 million to $600 million. An official revenue update will be unveiled next month.