Solvency bills aimed at ‘perfect storm’ advance at Roundhouse
SANTA FE — Solvency bills aimed at absorbing a projected $2 billion New Mexico revenue drop were on the move at the Roundhouse on Friday, after winning preliminary approval from the House and Senate.
The solvency proposals call for using a mix of federal funds, cash reserves and one-time budget maneuvers to limit the need for deep cuts, though some lawmakers argued more spending reductions should be considered in light of the revenue downturn.
But backers described the approach as a prudent budgetary course correction with less than two weeks left before the start of a new state budget year.
“This budget is a framework to recovery,” Rep. Patricia Lundstrom, D-Gallup, the chairwoman of the House Appropriations and Finance Committee,
told reporters during a Friday news conference.
She also said New Mexico’s economy had been hit by a “perfect storm” caused by the coronavirus pandemic and plummeting oil prices.
Some Republican lawmakers argued recent increases in state spending — including a 12% increase last year — had put New Mexico on dangerous financial footing.
“I just think this is a crisis of our own making that we could have avoided,” said Rep. Jason Harper, R-Rio Rancho, during Friday’s debate on the House floor.
But majority Democrats countered such increases were necessary after years of limited budget growth, and defended House Bill 1, the bill to pare back state spending levels.
The bill passed the House on a party-line 46-24 vote, with majority Democrats voting in favor and Republicans in opposition.
“This is the best budget we could hope to get, given everything,” said Rep. Melanie Stansbury, D-Albuquerque.
Under the solvency bill, all new Mexico teachers and school employees — but not school administrators — would get 1% salary increases starting in July.
State employees making less than $50,000 annually would also get 1% pay raises.
Teachers and state workers were slated to get 4% pay increases under a $7.6 billion budget bill passed by lawmakers in February.
But the state’s revenue situation has dramatically changed over the last three months and lawmakers say that spending bill is no longer viable.
Sen. John Sapien, D-Corrales, questioned the wisdom of giving pay raises to teachers and state workers — even smaller ones than initially proposed — at a time many private sector workers are unemployed due to the COVID-19 outbreak.
“I don’t know how fair that is,” Sapien said. “I think our state government side of the game is getting out of this pretty good.”
In addition to pared-back pay raises, the solvency bill would also reduce proposed spending increases for state agencies and public schools, though core education funding would actually go up slightly in the coming budget year.
It also relies on $750 million in federal dollars that New Mexico received under the Coronavirus Aid, Relief and Economic Security Act and using about half of the state’s $1.7 billion in cash reserves.
Capital projects
Another solvency bill, Senate Bill 5, would generate an estimated $141 million in savings by canceling stalled capital outlay and road projects, among other provisions.
It passed the Senate via a 36-6 vote on Friday and was headed to the House, which had already debated a similar bill.
Some legislators warned about the impact of canceling some infrastructure projects, with Rep. Randal Crowder, R-Clovis, saying, “I think we really need to keep our focus on our roads — They stink. They’re lousy.”
And lawmakers on both sides acknowledged more budgetary belt-tightening might be necessary during the 60-day regular session that starts in January.
“By the time we get back into session, we’re going to have post-COVID numbers,” Lundstrom said Friday, referring to a typical lag in state tax collections.
If the two solvency bills are signed into law by Gov. Michelle Lujan Grisham, state spending would remain at roughly $7 billion for the fiscal year that starts next month — about the same as current levels — and furloughs and layoffs of teachers and state employees would be avoided for now.
The plan also calls for some funding for an expanded college scholarship plan pushed by Lujan Grisham to remain intact, though the amount of money for the so-called “Opportunity Scholarship” program would be pared back from $17 million to $5 million for the coming budget year.
Financial aid
In addition to solvency proposals, the Legislature is considering bills dealing with tax penalty forgiveness and financial aid for businesses and municipalities — via low-interest loans — during its special session that started Thursday.
Lujan Grisham on Friday said she was encouraged by the Legislature’s progress in the special session, which is taking place behind closed doors due to the coronavirus outbreak.
“Lawmakers are making headway on the essential business of election accessibility, tax relief, assistance for small businesses and local governments that have been ravaged by the COVID-19 pandemic, civil rights and public safety reform — and of course ensuring the state’s finances are on steady footing through January and beyond,” the Democratic governor said.
It’s unclear how long the special session will last, though House Speaker Brian Egolf, D-Santa Fe, said Friday he was optimistic the Legislature could finish its work by late Saturday.
The governor will have 20 days after the session’s end to act on all bills sent to her desk for final approval.