NM revenue projections just enough to avoid cuts
But lawmakers, governor will have little margin for error
TAOS SKI VALLEY — New Mexico may take in enough revenue — just barely — to avoid spending cuts next year.
But the budget would have to remain almost flat, and there’s little margin for error if the projections are off.
In fact, only about $25 million in “new money” — or revenue beyond this year’s spending — is expected to be available.
That’s enough for state spending to climb less than half a percentage point, perhaps not enough even to keep up with inflation.
And that leaves the governor and Legislature with little margin for error if projections are off, and nonpartisan economists warned repeatedly Wednesday about the volatility of the forecast.
The prognosis could get worse — depending on federal action on health care, oil and gas production and prices, and the performance of New Mexico’s economy overall.
“It’s razor-thin,” Sen. John Arthur Smith, D-Deming, said of the margin. “There’s a lot of downside risk out there.”
Economists working for the state released the numbers Wednesday as about a dozen lawmakers gathered for a three-day meeting of the powerful Legislative Finance Committee. They met at The Blake hotel in Taos Ski Valley, a mountain resort in northern New Mexico.
Much of Wednesday’s discussion focused on uncertainty in the forecast — including “abnormalities” that legislative economists seen in the state’s tax collection data.
Jon Clark, an economist for the Legislature, said he and his colleagues have seen unusual activity in some categories of state revenue — a risk that could worsen the
forecast if it turns out the state has received more money from taxpayers than it should have. New Mexico is also experiencing increased volatility in its revenue from gross receipts taxes, he said.
“We’re concerned now that there’s this huge variability,” Clark told lawmakers.
John Monforte, acting secretary of taxation and revenue under Gov. Susana Martinez, said he and his staff believe they have an explanation for the unusual revenue in a few line items — perhaps the result of a taxpayer or taxpayers turning revenue over to the state but not actually filing a tax return, or something similar. He said he couldn’t say much more because of the confidentiality rules surrounding taxpayers.
But he suggested the problem may not change the overall revenue figure much: Instead, the money might just have been reported in the wrong account.
Sen. George Muñoz, D-Gallup, said lawmakers have been waiting months for an explanation.
“You can’t have a $130 million guess in the budget,” he said. “… Don’t taxpayers deserve an answer?”
Monforte said that he wasn’t alerted to the question until July and that the department is working on it. He said his staff would work with legislative economists to explain the discrepancy as well as they can without breaching confidentiality rules.
“It’s a genuine issue,” he said, “but I do think we have the resolution to that.”
Rep. Patricia Lundstrom, a Gallup Democrat and chairwoman of the LFC, asked Montforte to report back in October.
In any case, next year’s revenue estimate is good news in one sense: The roughly $6.1 billion projected in revenue is slightly higher than what the state expects to spend this year.
About $25 million in “new money” would be available next year if the forecast holds true, or enough to increase state spending by 0.4 percent.
That follows a tense budget crisis over the past year — in which the state exhausted its reserves, endured damage to its credit rating and imposed spending cuts.
Wednesday’s revenue forecast was issued jointly by economists working for the Legislature and the Martinez administration, though each branch offered its own analysis of what the numbers mean.
The forecast signals the start of a new budget season. The governor and Legislative Finance Committee will each propose budget plans in January, with updated revenue projections, shortly before lawmakers begin a 30-day session dedicated largely to state finances.
The budget itself would cover spending in the year that begins in July 2018.