State leaders at odds over cash crunch causes, fixes

Merits of proposed furloughs debated as Martinez warns N.M. is on brink of going broke

New Mexico lawmakers seemed to stave off a budget crisis last fall when they cut spending to narrow a deficit estimated at more than $400 million.

But in January, legislators were back at the Capitol, faced with another hole in the budget, this one for $80 million. They thought they took care of the problem, in large part by sweeping up unspent money from school districts.

Now, less than two months later, Gov. Susana Martinez is warning that New Mexico remains on the brink of going broke. She is preparing to furlough state employees and close down some government services to save cash until a new budget takes effect in July.

Some leading lawmakers say Martinez’s claims of impending financial catastrophe are overblown. No one, however, seems to dispute that the state is running short of cash.

Where leaders disagree is over just how urgent New Mexico’s budget crunch really is, who should pay to shore up the state’s dwindling finances and whether measures such as furloughs would even help or are mere posturing.

Legislative analysts have estimated the state would end the fiscal year on June 30 with about $90 million in cash, about 1.5 percent of total spending. And a report published by the Legislative Finance Committee last week shows the state is collecting the revenue needed to meet that goal. Collection of taxes and fees has proven better than expected

over the past few months, while oil and gas prices and job growth have met expectations.

But one big question hanging over the state’s finances is nearly $70 million the federal government is expected to pay the state for oil and gas leases and grazing and mineral rights.

State officials expected the Bureau of Land Management to turn over the money this month, but the agency now is aiming to pay by June. BLM has blamed staffing problems and challenges by environmentalists for the delay.

Without the money, the state will end the fiscal year with about $20 million, a razor-thin margin for a state with a general fund budget of about $6 billion.

By comparison, the state had more than 10 percent of spending in cash at the beginning of June 2015. New Mexico’s bond rating has been lowered as its reserves have dwindled.

One week of furloughs would save the state an estimated $8.5 million, staff at the Legislative Finance Committee said in response to an inquiry from The New Mexican. That estimate does not include state employees in law enforcement, corrections and child welfare. The estimate also exempts state employees who are not under the governor’s control, such as court personnel. And the estimate exempts staff, such as workers at the Department of Transportation, who are paid with sources of revenue besides the state general fund. Those sources include specific taxes or federal funds.

A spokesman for the governor did not say exactly how much the administration plans to save from furloughs.

“State government is vast and expansive,” spokesman Mike Lonergan said in an email. The Department of Finance and Administration “is currently calculating how much money we could save based on the number of furloughed days and, again, how far and wide this goes. For example, this may mean we have to close down MVDs to just three days a week.”

The savings from furloughs could provide a thicker financial cushion for state government. But state Auditor Tim Keller argues that by the time furloughs were implemented, the financial benefit would be limited because the state would begin operating under a new budget within a few months.

“The further we move in the calendar, the less significant a fix would be,” Keller said.

And Sen. John Arthur Smith, a Democrat from Deming and chairman of the Senate Finance Committee, argued such a step might do more harm than good by hitting the pocketbooks of thousands of workers while also further straining a government where agencies report understaffing as well as high turnover.

Smith said the state should have sufficient funds to make it through the end of the fiscal year in June.

If the Bureau of Land Management money comes through, the state sees a bump from income taxes in April or oil and gas prices rise, New Mexico’s finances could be OK for the next few months, Smith said.

The state also has a few other options, including reallocating about $60 million now set to go to schools.

Martinez has said she wanted the state to end the fiscal year in June with at least twice as much money in cash as it is expected to have even if it gets the Bureau of Land Management payment.

Smith said the governor foiled that plan by vetoing parts of budget fixes that lawmakers passed in the past year and by remaining firm in her opposition to raising taxes.

Demonstrating just how much the budget crunch has turned into an ideological debate over the role of government as much as a disagreement over the options for saving tax dollars, Martinez on Monday described the state’s financial problems as an opportunity to shrink the size of bureaucracy.

So while Democrats urge the governor to sign tax increases to help fund government in the 2018 fiscal year, plenty of conservatives would prefer to see her take a very different tack.

Paul Gessing, president of the conservative Rio Grande Foundation, said the governor should push for structural changes in state government and not only seek to reduce its payroll.

“Given the choices on the table, we’d rather not do further economic harm with tax hikes and instead will fight for the admittedly imperfect solution of furloughs,” Gessing said.