Hurting From Low Oil Prices, New Mexico Slashes Spending

by | March 2, 2016

By Justin Horwath

Gov. Susana Martinez on Monday signed into a law a $6.2 billion budget that cuts state government spending from current levels as New Mexico's sagging economy continues to take a hard hit from low oil prices.

Martinez told a gathering of real estate professionals in Albuquerque that in the face of the state's revenue crunch, the spending plan appropriately focuses on public safety but does not raise taxes.

"We held the line to ensure that we are spending only what is necessary," Martinez said at a luncheon at the Albuquerque Marriott sponsored by the New Mexico chapter of the Commercial Real Estate Development Corp.

In the middle of the Legislature's recent 30-day budget session lawmakers were forced to slice some $200 million out of an initial spending plan after new estimates showed the state collecting less revenue as oil and gas prices continued a worldwide free-fall. Martinez noted Monday that New Mexico is not alone in its reliance on the oil and natural gas industries.

The state will spend $31 million less than what it is budgeted to spend for the current fiscal year, which ends in June. Martinez said in a statement Monday that the base budgets for state agencies in her administration will be reduced by $53 million.

Education and public safety are among the few areas of state government scheduled for spending increases. Lawmakers put new money toward pay hikes for state police officers, corrections officers and teachers.

Medicaid, the state-federal program that provides health insurance for low-income New Mexicans, saw a budget increase as the federal government steps down the amount it contributes to the program. Martinez's 2013 decision to expand the program in New Mexico added millions to the state budget and, according to economists, has also helped boost jobs in the healthcare sector.

Higher education will see a spending cut, which could mean tuition increases. Martinez also line-item vetoed a $100,000 allocation for The University of New Mexico to plan and design a master's program in Native American Studies. In her veto message, the governor said that creating degree programs through legislative earmarks "is not the proper approach."

Martinez on Monday reiterated that her budget priorities are job creation, education and public safety. She called a Rapid Workforce Development Fund a "new recruitment tool" that will help new companies train employees in cooperation with colleges.

"It allows us to better close recruitment deals when a prospective company wants to move to New Mexico," she said.

She criticized lawmakers for trying to put strings on the Job Training Incentive Program. Also Monday, Martinez signed a bill by Reps. Jason Harper, R-Rio Rancho, and Stephanie Garcia Richard, D-Los Alamos, to allow more local projects to become eligible to economic development funds.

Brian Egolf, D-Santa Fe, the House minority leader, said in an interview Monday that he is concerned that "the budget that House Republicans initially created uses far too much one-time money to balance this budget, and it's similar to the problems that the city of Santa Fe is facing where nonrecurring revenue is used to pay for recurring expenditures."

Egolf said he looks forward to Democrats regaining the majority in the House, which has 37 Republicans and 33 Democrats. All 112 seats in the House and Senate, where Democrats hold the majority, will be on the November election ballot.

"The main problem we face in New Mexico is that the governor and now Republicans in the House have failed to address or even talk about the biggest issue and problem confronting our state," Egolf said, "which is we are leading this nation in unemployment and population loss. Yet neither the governor or the House Republicans are talking about concrete steps to diversify our economy or create jobs."

Kevin Yearout, a board member of the Commercial Real Estate Development Corp. and a Martinez campaign donor, said in introducing the governor that she "has been instrumental in positively changing the state's position on some pro-business lists." Yearout's company, Yearout Mechanical, was listed as a $10,000 sponsor of the lunch on Monday.

"Through Gov. Martinez's leadership, we can now see the beginnings of the evolving of the state's economy from a federal-government-based economy to a market-driven, private-sector economy. Rome was not built in a day and our economy will not change overnight either. Under Gov. Martinez's leadership we will continue to make significant steps forward to enhance our economy for the betterment of our citizens and our businesses."

Martinez also vetoed language that would have triggered automatic cuts to state spending if revenue falls any further. She said in a veto message that in such an event "across-the-board cuts would be both unwise and likely insufficient, and I believe the more responsible approach would be for the Legislature and Executive to work together on a more targeted plan to reduce spending..."

Sen. John Arthur Smith, D-Deming, who chairs the Senate Finance Committee, said Martinez also had vetoed language in the 2012 budget that would have given her more authority to make across-the-board budget adjustments -- authority the Legislature previously had given to Gov. Bill Richardson.

In discussions during the 2016 legislative session, which adjourned Feb. 18, Smith said the governor was again reluctant to take that on, wanting lawmakers to participate in any further spending reductions.

But lawmakers asked that the triggers for automatic cuts be included to avoid the expense of convening a special session in Santa Fe if revenues continue to deteriorate.

"If we have to go in and do that, it would force us into special session," said Smith. "The battle all along was reliability of that revenue stream, and we still have that problem."

(c)2016 The Santa Fe New Mexican (Santa Fe, N.M.)