New leader, new challenges
Lujan Grisham is inheriting budget surplus, but state faces plenty of liabilities that could put dent in it
Michelle Lujan Grisham calls herself lucky. But talking to the governorelect in the days after an overwhelming victory, you get the sense luck might not be the right word.
Yes, the Democrat from Albuquerque won by a decisive 14 points. And she will take office in January with what could be a surplus well over $1 billion and a Democratic majority in the House of Representatives that could include as many as 46 of the chamber’s 70 seats.
Surely, that is lucky given the state’s past budget woes and political deadlock. But Lujan Grisham is a realist, and as Gov. Susana Martinez ends her term by touting the projected surplus and a declining unemployment rate, the next occupant of the Roundhouse’s
fourth floor is all too aware of the potential pitfalls she’s about to inherit.
“The governor talks about, ‘I’m leaving the new governor with the biggest surplus ever,’ ” Lujan Grisham said in a wide-ranging interview last week. “Well, we have huge vacancy rates in state government. We had a huge liability in public education.”
Lujan Grisham’s list goes on. New Mexicans have been hearing about much of it for years: a lawsuit from Texas over water rights, tax credit payments the state has shoved into the future.
“I would say the potential for this administration to have created the largest liabilities ever is there,” she said.
That’s just part of the unknown territory
for Lujan Grisham.
There is the state Senate, where conservative Democrats still hold sway and could be her foil on issues such as gun control or using a bigger share of revenue from the Land Grant Permanent Fund to finance education.
So, after running a two-year campaign, eventually defeating Republican Steve Pearce in early November and two Democratic rivals in the June primary, Lujan Grisham has won. Now comes the hard part.
“The state economy has improved considerably over the last year,” said Jim Peach, a longtime professor of economics at New Mexico State University who is now retired. “As a result, state revenue has increased substantially, but the governor-elect is correct that the state faces significant liabilities and challenges.”
Peach noted much of the improvement
in New Mexico’s finances is linked to a boom in the oil industry around the Permian Basin at a time of relatively high oil prices.
“Oil prices can be highly volatile, and the state surplus could disappear in a hurry,” Peach warned.
In early October, a barrel of crude was selling for around $70 a barrel. Now, it is fetching around $56.
A study by the New Mexico Tax Research Institute found about 31.5 percent of the state’s general fund revenue comes from oil and gas.
And Peach said that is probably a low number today.
“While we can all hope that oil prices do not fall further, there is no guarantee and the state should plan on continued oil price and revenue volatility,” Peach said.
No matter what happens financially, however, there will be a big change in the political dynamics at the Capitol.
For years, relations between the Governor’s Office and majority party in the Legislature have been strained, making governance more difficult.
Having a governor who will huddle with the majority party in the Legislature will
be a significant change in and of itself.
“We have a governor who will talk to us,” Senate Majority Leader Peter Wirth said one recent afternoon on his way into the Capitol.
But conversation does not always lead to collaboration, even among those in the same party. Consider that Republicans in the state Senate led an effort in 2017 to override one of Martinez’s vetoes.
And this time around, there is already skepticism that enough Senate Democrats would give their support to pass legislation such as legalizing marijuana or using a bigger share of the permanent fund for education.
Citing the state’s projected surplus, Senate Finance Committee Chairman John Arthur Smith recently remarked: “I
can’t understand why people think they need additional money to spend.”
Still, Smith, D-Deming, pointed to the areas where even budget hawks could work with the new governor, such as rebuilding state departments where critics say declining staffing during the Martinez administration cut the size of government to the point where some basic services were threatened. “We have common ground,” he said. In any event, Lujan Grisham views herself as coming with something of a mandate.
“When you’re not sure what your constituents want, if you have a more conservative approach, or you have a wait-andsee approach — boy, voters were pretty clear about what they expect,” she said.