Local governments eye surplus state revenue
Pork barrel is full, but spending guidelines may change
District 6 N.M. Sen. Bobby Gonzales delivered cautiously optimistic news regarding the state’s latest windfall in surplus cash to members of the Enchanted Circle Intergovernmental Council on Monday (Dec. 19), cautioning local officials that the model for awarding infrastructure and capital improvement requests may change next year.
Gonzales, who sits on the Senate Finance Committee, also confirmed that legislators are already discussing Gov. Michelle Lujan Grisham’s proposal to send another $750 rebate to all New Mexicans.
Counties, municipal governments and other political subdivisions typically have high hopes for the top five projects on their ICIP wish lists, which often contain very basic items like public safety vehicles and roof repairs for public buildings, but also contain ambitious, multiphase projects that sometimes don’t get completed.
Eagle Nest Mayor Jeff Carr told council members that local governments may be able to request their “top 10” infrastructure capital improvement project (ICIP) requests this year instead of the traditional top five.
“We probably have $3.1 billion in new revenue, and with that, the floodgates are open,” Gonzales told the council, referring to yet another in a string of years that the state has seen in which unprecedented surplus amounts of cash are being collected, in large part, from oil and gas leases, and fees related to New Mexico’s section of the Permian Basin.
Local governments may want to temper their hopes for presenting expanded infrastructure capital improvement plan lists, because legislators are discussing different rules for distributing the annual pork barrel.
“Working with all 112 legislators,” Gonzales said, the Finance Committee is thinking about rules that would require “everyone to come up with five-to-ten projects that are still on the books. Projects that maybe weren’t fully funded and are not complete.”
Because, Gonzales said, “Henceforth, we’re changing the way we do capital outlay; we’d only fund projects 100-percent moving forward” instead of in multiple phases. “We can’t just keep adding to the list and not finishing projects.”
“This is something that should have happened 15 years ago,” Gonzales told the Taos News.
“Will they raise the cap for capital spending?” Carr asked. “There’s so much money available.”
“There is a possibility to have stronger amounts, but we have to see if we can’t finish these projects that are already started,” Gonzales said. “And they’ll get swept if they don’t get finished.”
District 5 Taos County Commissioner Candyce O’Donnell asked if funding that is swept back would “remain in the district” of the representative or senator to which it was allocated
“That’s a good question,” Gonzales said. “I imagine the money remains within the district.”
Village of Taos Ski Valley Administrator John Avila asked if it “would be wise to ask for reauthorizations on construction” related to capital outlay spending, to which Gonzales replied, “As long as you can show evidence and documentation that you’re working on it, that’s OK.”
Gonzales acknowledged that the Legislative Finance Committee is discussing how to govern the distribution of more funds to municipalities, counties and other entities that are eligible to apply for capital outlay appropriations, but said the state needs cash, too. A push to raise pay for state workers may get some play during the upcoming 60-day legislative session, which begins Jan. 17.
“Everything is compressed and tense,” Gonzales said. “We still have the process we have to work
with. Every agency that presented to us last week and the month before are indicating they have a high level of vacancies. Part of that is our salaries are too low statewide — individuals are moving elsewhere to make a better salary and I can’t blame ‘em.”
Gonzales noted that the state already has “an additional $1.4 billion going to education” in order to comply with the Yazzie-Martinez v. New Mexico decree.
The Yazzie-Martinez v. New Mexico decision found that a lack of school funding and resources in impoverished school districts is not an excuse for inequality in education. The court ordered all public schools to offer students equal learning opportunities regardless of race, language, income level or disability, which put the state in the position of delivering more dollars to schools.
In November, New Mexico voters approved an additional 1.25 percent annual distribution from the state’s Land Grant Permanent
Fund, revenue for which is derived from land leases and oil and gas industry fees and royalties. Based on Permanent Land Grant Fund’s current $25.5 billion balance, the 1.25 percent funding increase would increase education spending by at least $245.7 million each year. Sixty percent of the additional allocation, an estimated $126.9 million per year, would go to early childhood education, while 40 percent would go to public education.
Gonzales also pointed to a trend that state and local governments have all noticed over the past several years: state spending, capital outlay awards and state grant funds aren’t going as far as they used to because of rising costs in project materials and labor, plus the expense of delays caused by pandemic-related supply chain issues.
“Every department, statewide, is short because of high inflation,” Gonzales said, hinting that “the state does not want to go into selling any bonds this year” to pay for capital outlay and may instead solely “use general funds to fill the volume of capital outlay.”
Gonzales told the Taos News he envisions adding another column to capital request spreadsheets that calculate inflation and rising materials and labor expenses into a project’s total cost.
“What I am visualizing is we’re going to have to come up with another column with projected inflation of 15-30 percent or more, so you know what you’re facing,” he said. “That’s very real these days.
“And the other part is, from last year to this year, within two years, we added 26 percent in additional recurring revenue” on state spreadsheets, Gonzales added. “That’s a big volume.”
“If something were to happen, we need to be prepared,” he said, adding that the increased volume of recurring funding “is dangerous. We had a strong discussion on that; we’re working on that.”