Come January, members of the Legislature in Santa Fe will look back on their October special session as little more than a preview of the difficult spending and tax decisions confronting them in the next budget year.
Lawmakers left the special session without completely erasing a $650 million revenue shortfall in the current budget year. They fell at least $125 million short of that assignment and need to revisit the issue in next year’s session.
But there are more problems.
The Legislature and Gov. Bill Richardson have a nearly $380 million revenue hole to fill in the upcoming 2011 fiscal year to maintain a no-growth budget, according to the Legislative Finance Committee.
That’s partly because next year’s revenues are projected to come in lower than current spending, even after cutbacks approved during the special session. The state also is using federal economic stimulus money to pay for education and health care services.
About $250 million of federal money will dry up next year, which means New Mexico must decide how to replace it or roll back spending.
However, there are financial risks not reflected in the $380 million estimate: Medicaid costs are rising because of increased demand for health care services during the recession. Unless steps are taken to hold down costs, the program could need an extra $200 million or more in the next fiscal year, according to preliminary estimates by the Human Services Department.
And then there’s the economy. If it worsens, the state’s revenues could deteriorate and widen the budget gap.
When the Legislature adjourned, legislator after legislator — Democrats and Republicans — acknowledged the severity of the budget problems ahead.
“We can’t walk away from here … pounding our chests thinking we’ve fixed this because we have not fixed it,” said Sen. John Arthur Smith, a Deming Democrat who is chairman of the Senate committee that handles the budget. “In many cases, we have aggravated it. We have pushed it on down the road for a couple of months.”
When the Legislature convenes Jan. 19, members must decide whether to cut spending, raise taxes or do some combination of those to deal with next year’s looming budget problems.
Unlike in the special session, the Legislature’s budget repair kit of temporary patches will be nearly empty. It’s still possible to free up one-time revenues by canceling previously approved capital improvement projects.
Get content from The Daily Lobo delivered to your inbox
That wasn’t done during the special session, but deciding which projects to scrap will be politically painful. Capital improvement money was handed out by the governor and legislators for projects in communities across the state and on tribal lands.
Tax increases were not considered during the Legislature special session, but those will be among the budget-balancing options that lawmakers propose next year.
Even Richardson appears to have softened his previous opposition to tax increases. Richardson said during the special session, “Given the fiscal realities facing the state I am prepared to consider a comprehensive, well-reasoned revenue package” for the 30-day legislative session in January.
But it won’t be easy finding enough votes in the House and Senate to raise taxes and further cut budgets.
Just imagine members of the House as they run for re-election next year on a platform of having made the tough decisions in balancing the budget: Raising taxes, cutting spending on government services and eliminating local capital improvement projects.
Barry Massey has covered state government and politics in New Mexico for The Associated Press since 1993.
