Most of state reserves used to balance 2016 budget
Legislature faces $69 million deficit for 2017 fiscal year
SANTA FE — New Mexico finally closed the book on its 2016 budget year Tuesday, but it took authorizing $594.5 million in state reserve funds — or nearly 10 percent of total state spending — to accomplish the task.
As a result, the state’s backup funds are nearly wiped out at a time top state budget officials and lawmakers are facing a fresh budget challenge — a projected deficit of $69 million for the current fiscal year, which started in July.
“We’re all in this togeth- er,” state Treasurer Tim Eichenberg said during Tuesday’s meeting of the state Board of Finance at the Roundhouse. “And we’re only going to get out of it together.”
New Mexico’s Constitution requires an annual balanced budget, but a precipitous drop in oil and gasoline prices and its ripple effect on New Mexico’s economy caused the
state’s tax collections to end up falling far short of what had been expected for the 2016 budget year, which ended June 30.
In basic terms, the state overspent its available revenue by just under $600 million for the year, state Controller Ron Spilman said Tuesday.
That meant drastic action had to be taken to meet the balanced budget requirement.
As a first step, members of the Board of Finance voted unanimously Tuesday to authorize $485.4 million in cash reserves to be used to backfill appropriations for the 2016 budget year. Then, they authorized using $109.1million from a tobacco settlement fund — nearly half the fund’s total value — that’s historically been off-limits for general state government spending.
Lawmakers had signed off on raiding the fund, created in response to a 1999 settlement with big tobacco companies, as part of a solvency package approved during a special session held this fall.
The money from the tobacco fund, which is invested by the State Investment Council, is expected to be freed up and made available to the state Treasurer’s Office at the end of this month, SIC spokesman Charles Wollmann said Tuesday.
While some Democratic lawmakers have criticized Gov. Susana Martinez for failing to show leadership during the state’s ongoing budget crunch, several members of the Board of Finance, which includes both elected officials and gubernatorial appointees, suggested the Legislature was largely to blame for the state’s predicament.
Board member Robert Aragon, a former state lawmaker and a Martinez appointee, said state government spending has grown too rapidly during the past several decades and accused legislators of refusing to “right-size” government.
“Clearly, these numbers are indicative of something not working in New Mexico,” Aragon said during Tuesday’s hearing, referring to the amount of money being transferred from reserves.
New Mexico had entered the 2016 budget year in seemingly sound financial shape, with more than $613 million available in various accounts generally described as reserves.
However, the ongoing revenue downturn led to sweeping budget cuts and a downgrade of the state’s bond rating, and there will likely be more belt-tightening to come.
Martinez and lawmakers from both political parties have said the state’s budget crunch shows the importance of diversifying the state’s economy so that New Mexico is less reliant on the energy industry, but there’s been disagreement on how to go about doing so.